Wind and solar costs will continue to decline

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The latest IRENA studies show how the costs of renewables are expected to continue to drop dramatically until 2030. We all know how these costs have fallen over the past decade. Going forward, the weighted average cost of electricity in G20 countries from offshore wind could drop nearly 50% by 2030 from 2019 levels, with onshore wind of around 45%. %, large-scale photovoltaic solar energy up to 55% and concentrated solar energy up to 62%.

The main drivers – technological improvements, economies of scale, competition and growing experience – are well established and should spark global ambitions for fast and clean electrification. IRENA emphasizes that these trends will depend significantly on the rate of deployment acceleration in China, given the current and future size of this market.

The cost of electricity from solar PV, concentrated solar power (CSP), and onshore and offshore wind is not only decreasing, but at historically low levels. Indeed, not only are renewables the cheapest source of new electricity in the majority of countries around the world, but the prices are getting so low that they even reduce operating costs by a proportion. growing number of coal-fired electric power plants in the world.

Electricity costs from renewables have fallen sharply over the past decade, thanks to improved technologies, economies of scale, increasingly competitive supply chains and growing experience developers. As a result, renewable energy generation technologies have become the cheapest option for new capacity in almost all regions of the world.

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Inexpensive renewable energies at the scale of public services

In 2019, 56% of all newly commissioned utility-scale renewable power generation capacity provided electricity at a lower cost than the new, cheapest fossil-fuel option. Nine-tenths of the newly commissioned hydropower capacity in 2019 is cheaper than the new, cheapest fossil-fueled option, as are three-quarters of the onshore wind capacity and two-fifths of the solar PV power at home. utility scale. The latter value is remarkable given that in 2010 solar PV electricity cost 7.6 times the cheapest fossil fuel option.

The results of auctions and tenders tell us that the costs of solar and wind technologies will continue to decline until 2021/23 and beyond. For example, data from IRENA Auction and the PPA database indicate that solar PV projects that have won recent auctions and power purchase (PPA) processes – and will be commissioned in 2021 – could have an average price of just 0.039 USD / kWh. This is more than a fifth less than the cheapest competitor to fossil fuels, namely coal-fired power plants.

With auction data suggesting that the global weighted average LCOE (discounted cost of electricity) of large-scale solar PV and onshore wind is expected to fall to $ 0.039 / kWh and $ 0.043 / kWh in 2021, new renewable energy projects are also cheaper. as the marginal operating costs of a growing number of existing coal-fired power plants. Comparing these costs with Carbon Tracker (Carbon Tracker, 2018) data on marginal operating costs for more than 2,000 GW of coal-fired power plants suggests that 1,200 GW of coal-fired power plants could have operating costs. higher than the average price of a new utility ladder. solar PV in 2021, while for the slightly higher average price of electricity for onshore wind, it would be 850 GW of coal capacity.

Cost reductions will continue unabated until 2030 and beyond

IRENA is updating its analysis of the cost reduction potential until 2030 for solar and wind technologies. This analysis is an update of the IRENA analysis conducted in 2016, and the global trend of this new analysis has already been discussed in IRENA’s reports on the Future of Wind and Future of Solar reports.

However, the analysis is based on a detailed analysis for each of the G20 countries using a mix of techno-economic analysis and learning curve to highlight the potential for cost reductions by 2030.

The results are striking, the weighted average cost of electricity from offshore wind in G20 countries could drop just under half by 2030 from 2019 levels, that of onshore wind by around 45%, that of large-scale solar PV up to 55% and CSP by 62% (Figure 1). The weighted average trends will depend significantly on the rate of deployment acceleration in China, given that it is today the country’s largest market for solar PV and onshore wind.

By 2030, new large-scale solar PV and onshore wind projects will not only reduce the cost of new fossil fuel-powered projects by substantial margins, but will be on average cheaper than operating nearly 1,700 GW of capacity. existing coal.

Figure 1: Weighted average level cost of the G20 electricity reduction potential, 2019-2030; Source: IRENA

The drivers of cost reduction will continue

The cost reduction drivers of this decade are expected to continue into the 2020s, with significant cost reductions through continued…

  • Technological improvements: Solar and wind energy technologies are constantly evolving from a mature knowledge base that incorporates incremental innovations which are:
    • Reduce installation costs, by increasing the efficiency of the solar PV module, which not only reduces the input of materials to the module, but also the costs in categories strongly related to the zone (for example, wiring, shelving, assembly, installation, etc.) . Innovations in manufacturing also reduce costs, reducing material inputs, while increasing the scale of wind turbines can reduce specific costs.
    • Reduce operating and maintenance costs: improving the reliability of the technology reduces downtime, maintenance and component replacement costs. At the same time, digitization unlocks performance data that can be used to enable preventive maintenance to reduce forced outages.
    • Improved performance and efficiency: Higher operating temperatures through the use of new heat transfer fluids in CSP plants increase the efficiency of power supplies, while larger wind turbines with higher hub heights and larger swept areas exploit more electricity for a given resource, on land or at sea.
  • Economies of scale: These act on the manufacturing side and in some cases at the project level. The growing scale of regional wind and solar energy markets enables the growth of regional manufacturing centers that create localized economies of scale while minimizing transportation costs. The growth in the size of projects, or more frequently in recent times, the bundling of projects into successful auctions or auction rounds, allows developers to improve their purchasing power and achieve economies of scale.
  • Continuous competition: The competitive procurement of renewable capacity has, and will continue to, sharpen the competition that sees project developers, suppliers and manufacturers of renewable energy production equipment all looking for ways to cut costs to win. the next offer. When combined with increasing economies of scale, supply chain cost reductions can be an important cost-cutting factor.
  • Greater developer experience, mature technologies and increased operational experience: All of them are doing important things to reduce costs. Greater experience reduces the need for contingency funds, reduces working capital requirements and, combined with increasing technological maturity and operational experience with large portfolios of assets, can reduce funding costs, which are so crucial. to achieve low electricity costs.

The impacts of these drivers on different technologies and, indeed, in different countries, vary, so the importance of analysis at the G20 country level is of significant importance to inform policy makers in different member states of the world. ‘IRENA. This becomes clear when one examines how utility-scale solar PV and offshore wind cost structures differ from country to country today and how different drivers of technology and of local content will play until 2030 (Figures 2 and 3).

(Figures 2 and 3).

Figure 2: Weighted average total cost of solar PV installations at utility scale by country, 2018 to 2030

Figure 3: Weighted average total installation costs of offshore wind at the scale of public services by country, 2018 to 2030 / From… = Development, Tu… = Turbine, Fo… = Foundations, Elect… = Electrical connection, Ins… = Installation, Contin… = Contingency

We shouldn’t be surprised

IRENA will release the full analysis in the first quarter of 2021, but in many ways the detailed analysis of the techno-economic drivers of cost reduction is just an extension of the crystal ball that we can already see from the years of cost reduction that have unfolded in the last decade and we see into the future from the auction results for the next three to five years. That renewable energies can economically decarbonize the electricity sector and open up the electrification of end-uses as a decarbonization strategy is nothing new.

However, the analysis clearly shows that continued reductions in solar and wind energy costs are creating quite remarkable economic opportunities to retire not only old and inefficient coal-fired power plants, but increasingly more. new and relatively efficient coal-fired capacities. .

Crucially, within a few years – in regions with excellent solar and wind resources – existing natural gas power plants will also increasingly be able to be economically retired. In doing so, we cannot simply reduce the environmental damage caused by local and global pollutants linked to the combustion of coal and gas, but save consumers billions of dollars a year on their electricity bills.

About the Author

Michael taylor is a senior analyst at IRENA

This article originally appeared on energypost.eu


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