Cost reductions in clean renewable energy and storage
The ongoing innovations and developments in clean renewable energy technologies have led to significant cost reductions in various clean renewable energy technologies. Large cost reductions have been achieved particularly for solar PV and wind power. Solar PV and onshore wind power have both become cost competitive with new fossil fuel and nuclear power generation in an increasing number of locations globally. These have been due in part to declines in component prices and improvements in generation efficiency. The competitive bid prices for offshore wind power schemes have also dropped significantly in Europe recently which have made them more attractive.
IRENA has reported, in their recent renewable cost analysis report, that the cost of generating power from onshore wind has fallen by over 20% since 2010
Clean renewable energy growth management 9 whilst the cost of solar photovoltaic (PV) electricity has fallen by over 70% in the same time period. With further price falls expected for these and other clean renewable energy options, IRENA has forecasted that key renewable energy technologies should be competitive on price basis with fossil fuels by the 2020-2025 period.
Globally, onshore wind power schemes have reduced in costs to around $0.04-0.06 per kilowatt hour (kWh) which should be cost competitive against fossil fuel generation. The cost of solar PV has been reduced down to $0.10 per kWh. In comparison, the cost of electricity generation based on traditional fossil fuel power generation routes has typically been within a range of $0.05-$0.17 per kWh, which would be higher than the latest clean renewable energy power generation costs. IRENA has forecasted that offshore wind and concentrating solar power should further reduce in cost to a range of $0.06-$0.10 per kWh by 2020-2025. These would make all the key renewable technologies cost competitive against traditional fossil fuel power generation options in the near future (IRENA, Investments in Renewables Analysis, 2018).
Latest analysis by Bloomberg New Energy Finance (BNEF) has also shown that the benchmark levelised cost of electricity (LCOE) for offshore wind has fallen by over 20%. LCOE helps to measure the all-in expense of producing a MWh of electricity from a new project. It also takes into account various costs of development, construction and equipment, financing, feedstock, operation and maintenance. Onshore wind power and photovoltaic solar have also become cheaper. These have resulted in their respective benchmark LCOE reaching $50 and $57 per megawatt-hour for recent projects. A good example is that for renewable projects starting construction in early 2019 the LCOEs have been reduced by 10-18% compared to equivalent cost figures of a year ago. The improvements in cost competitiveness of these low-carbon renewable options have been achieved due to a combination of technology innovation, economics of scale, stiff price competition and manufacturing improvements. The LCOE per megawatt-hour for onshore wind, solar PV and offshore wind has fallen by 49%, 84% and 56% respectively since 2010. Although the LCOE of solar PV has fallen 18% in the last year, the great majority of these cost declines have happened in the third quarter of 2018. These major cost reductions have occurred then mainly because a significant shift in Chinese policy has resulted in a huge global over-supply of renewable modules which then resulted in sharp price reductions.
The renewable innovation and cost reductions have enabled solar PV and onshore wind to become the cheapest sources of new “bulk renewable generation” in most emerging economies and developed countries. Offshore wind has often been seen as a relatively expensive generation option compared to onshore wind or solar PV. However, recent auction programmes for new offshore wind capacity have produced sharp reductions in capital costs, in particular for offshore wind facilities with larger advanced wind turbines. These have helped to reduce the global generation benchmark for offshore wind technology to below
$100 per MWh. This is a significant reduction, over two times lower than the offshore wind costs of more than $220 per MWh five years ago. These lower offshore wind tender prices in Europe have resulted in several high-profile projects reaching financial close in recent months. The cost declines in recent months for offshore wind generation have been the sharpest that have been seen for any renewable energy technology globally.
Energy storage systems have also shown significant cost reductions in recent years. One of the most striking cost reductions has occurred in lithium-ion batteries in the first half of 2019. Latest analysis by BloombergNEF (BNEF) has shown that the benchmark levelised cost of electricity or LCOE for lithium-ion batteries has fallen by 35%, to near to U5D185 per megawatt-hour, since the first half of 2018. This meant that lithium-ion battery storage costs have dropped sharply by over 75% since 2012. These significant cost reductions have helped to open up new exciting opportunities for many clean renewable energy storage developments. Battery power storage integrated with solar or wind projects is starting to compete strongly in many markets against fossil fuel generation options. In many cases, clean renewables do not require any government subsidies to be cost competitive against coal-fire and gas-fired generation for the provision of dispatchable power. These new integrated clean renewable generation units with advanced energy storage options will be able to deliver clean power reliably whenever the grid needs it, as opposed to only when the wind is blowing, or the sun is shining. Electricity demands are normally subject to pronounced peaks and lows inter-day. Meeting the peak power demands has previously been dominated by fossil fuel technologies such as coal power generation, open-cycle gas turbines, gas reciprocating engines, etc. These traditional fossil fuel generation routes will now face strong competition from new clean renewable power generation units which have been integrated with advanced power storage systems, together with digital distributed power management systems. The new integrated renewable power storage system could supply one to four hours of peak energy storage with latest developments (BNEF, Battery Power’s Latest Plunge in Costs, 2019).
The new clean renewable systems integrated with battery storage systems and distributed power management systems are particularly important and attractive for developing and emerging economies. These should make clean renewable energy installations much more attractive particularly for electric supply systems for remote locations, such as islands or isolated rural communities, where electricity prices have been high and it is expensive to install new connections to national grids systems. Many developing countries have increasingly turned to clean renewable technologies which might be on-grid or off-grid. They have also been introducing supporting policies such as tendering or feed-in tariffs (FITs) to back their new clean renewable energy growths. A good example is the increasing use of new clean renewable energy electricity generation systems integrated with distributed power management and advanced battery storage systems. These are becoming especially attractive for supplying electricity to remote rural communities and villages in developing economies worldwide.
These new renewable developments can also help to supply clean electricity to over one billion people worldwide, who currently do not have access to electricity globally.