Report: Renewable energy now price-competitive with fossil fuels
New research has found that renewable energy systems can now compete with fossil fuels on price, thanks to falling installation costs and maturing technology.
According to the Renewable Power Generation Costs 2014 report from the International Renewable Energy Agency (IRENA), biomass, onshore wind, geothermal and hydropower can all produce electricity in the same cost range or better than fossil fuels.
Onshore wind is currently the industry leader, consistently delivering electricity for USD 0.05/kWh without financial support. Even the more expensive forms of generation, such as solar PV, saw its levelised cost of electricity (LCOE) halved between 2010 and 2014. Despite its relatively high LCOE, solar PV is the favoured renewable source for businesses, thanks to its easy installation and maintenance.
Concentrated Solar Power (CSP) and offshore wind are still typically more expensive than fossil fuel-fired generation options, but these technologies are in their infancy in terms of deployment, with only 5GW of CSP and 8GW of offshore wind installed worldwide at the end of 2014. IRENA predicts that both technologies will play an increasing part in the future energy mix as costs come down.
The report dismisses the idea that the falling oil prices will curtail this success, saying: "Renewables are likely to remain the most economic off-grid electricity solution, despite the recent drop in oil prices.
"Oil prices remain volatile, so for an investment with a lifetime of25 years or more, today's oil prices are not an accurate measure on which to base an investment decision in electricity generation."
In fact, as edie recently explained, oil price turmoil could encourage investment in clean energy generation.
The report also cautions that the story of increased competitiveness remains a nuanced one, as different projects face different cost-factors around the world, such as grid-connection costs or local labour rates. China, for instance, offers a significantly lower LCOE for renewables than Europe, which is reflected in the record amount of money invested in clean energy in the Asian markets.
Figures for 2014 are still not finalised, but new capacity additions for both solar PV and wind are projected to exceed 40GW each. The Economist Intelligence Unit recently predict that demand for renewable energy will increase by 13% in 2015 as 'dirty coal goes out of fashion' and global governments impose tighter environmental rules.
Solar PV, CSP and wind could be the most attractive technologies for future installations as hydropower, geothermal and most biomass-combustion technologies are now largely mature, with limited cost-reduction opportunities.
IRENA suggests any future reductions will hinge on non-equipment factors, such as balance-of-project, operations and maintenance and finance costs.
The report concludes: "Our goal is to reduce uncertainty about the true costs of renewable power generation technologies, so that governments can be more ambitious and efficient in their policy support for renewables.
"As this comprehensive report clearly demonstrates, any remaining perceptions that renewable power generation technologies are expensive or uncompetitive are at best outdated, and at worst a dangerous fallacy."