The cost of generating power from renewable energy sources has reached parity or dropped below the cost of fossil fuels for many technologies in many parts of the world, according to the International Renewable Energy Agency (IRENA) in a new report.
The report, Renewable Power Generation Costs in 2014, finds that biomass, hydropower, geothermal and onshore wind are all now competitive with or cheaper than coal, oil and gas-fired power stations, even without financial support and despite falling oil prices. Solar photovoltaic (PV) is leading the cost decline, with solar PV module costs falling 75% since the end of 2009 and the cost of electricity from utility-scale solar PV falling 50% since 2010.
“Renewable energy projects across the globe are now matching or outperforming fossil fuels, particularly when accounting for externalities like local pollution, environmental damage and ill health,” said Adnan Z. Amin, Director-General of IRENA. “The game has changed; the plummeting price of renewables is creating a historic opportunity to build a clean, sustainable energy system and avert catastrophic climate change in an affordable way.”
The report considers the ‘levelized cost of electricity’ (LCOE), which for a given technology is the ratio of lifetime costs to lifetime electricity generation. For fossil fuels, the adopted LCOE is in the range US$0.045-0.14/kWh. Taking into account damage to human health from fossil fuels in power generation along with the cost of CO2 emissions, the LCOE rises to US$0.07-0.19/kWh.
LCOEs for renewables
Key findings of the report are as follows:
● In many countries, onshore wind power is now one of the most competitive sources of new electricity capacity available. The average cost of wind energy ranges from US$0.06/kWh in China and Asia to US$0.09/kWh in Africa. North America also has competitive wind projects, with an average cost of US$0.07/kWh. Individual wind projects are consistently delivering electricity for US$0.05/kWh without financial support.
● The most competitive utility-scale solar PV projects are now delivering electricity for US$0.08/kWh without financial support, and lower prices, down to US$0.06/kWh, are possible with low financing costs. The cost range in China, North America and South America has now fallen within the range of fossil fuel-fired electricity.
● The LCOEs of the more mature renewable power generation technologies – biomass, geothermal and hydropower – have been broadly stable since 2010. However, where untapped economic resources remain, these mature technologies can provide some of the cheapest electricity of any source. For example, in Asia biomass and hydro both have an average LCOE around US$0.04/kWh and projects can deliver as low as US$0.03/kWh.
● Concentrating solar power (CSP) and offshore wind are both still typically more expensive than fossil fuel-fired power generation options, with the exception of offshore wind in tidal flats. But these technologies are in their infancy in terms of deployment, with 5GW of CSP and 8GW of offshore wind installed worldwide at the end of 2014.
Renewable energy developments
The report finds that at the end of 2013 renewable power generation capacity globally had risen to around 1,560 to 1,580 GW, excluding pumped storage hydro, accounting for 22% of global electricity generation. Europe accounted for 30% of this capacity (473GW), China for 24% (377GW) and North America for 16% (258GW).
2013 was also notable for a record 120GW addition of renewable energy to the global energy mix, almost all of it hydro, solar PV and wind. Similar additions are also expected for 2014, with wind also expected to bounce back after a dip in 2013 as policy uncertainty delayed projects, notably in the US.
Renewables cost reductions
Looking ahead, IRENA expects further cost reductions of renewables into the future. However, with equipment costs reaching low levels, future cost reductions will increasingly need to come from balance of system costs or balance of project costs, lower operations and maintenance costs and reduced financing costs.
The technologies with the largest cost reduction potential are CSP, solar PV and wind. Hydropower and most biomass combustion and conventional geothermal technologies are mature and their cost reduction potentials are not as large.