Another report out this week from Irena (International Renewable Energy Agency), includes a convincing conclusion that by 2020 the entire world will be able to mount renewable energy projects for considerably less than existing fossil fuel installations, including those with sunk costs. Renewable energy has fallen in cost faster than even Irena forecast, and has many more years of cost reductions in prospect.
Irena took detailed data on both auction and Power Purchasing Agreement pricing, showing that prices have already fallen during 2018 to $0.049 per kWh for onshore wind and $0.055 per kWh for solar PV and that wind in 2020 will drop a further 8%, to $0.045/kWh, and solar will fall 13%, to $0.048/kWh.
Both of them will be beyond the reach of existing coal-fired plants, and wind pricing in particular will fall below the operating costs of as much as 900 GW of existing coal capacity by 2020, while solar will be ahead of some 700 GW of coal capacity. Clearly with many coal plants changing hands or going bust already, by the end of 2020 their fate will be sealed and a huge backlog for renewables will become well established – more companies will pile in as more investment is available for it.
Among projects due to be commissioned during 2020, Irena says that 77% of wind projects and 83% solar projects have electricity prices which are lower than the cheapest fossil fuel-fired power generation option when compared on the basis of being installed new.
By 2022 all existing available renewable options will compete-head-to-head with incumbents. As the share of variable renewables increases, the importance of looking beyond generation costs to total system costs becomes more important. Integration costs could be minimal if a systemic approach to the power system transformation is applied, but could rise if opportunities for flexibility options are confined narrowly to the electricity sector.
The report goes on to show different elements of costs, particularly on a solar PV project, varying cross multiple countries, with the module cost always being the largest, but soft costs like margin, cost of finance, and system design all being separated out, along with incentives, customer acquisition and permitting and then installation costs whether they are mechanical, electrical or inspection costs, and of course the basic hardware, modules, inverters, racking, grid connection, cables and monitoring.
The report goes on to suggest utility-scale solar PV, citing the auction data, will have an average price of electricity down by 44% by 2020, driven by three factors; competitive procurement using these numbers in territories where costs are higher; a shift to deploying solar PV in sunnier regions with higher capacity factors; and the reduced cost of financing as more money chases more attractive deals.
A big surprise in the report is that concentrated (or concentrating) solar Power (CSP) is having a real step-change in costs, with prices to fall by 27% a year between 2018 and 2021. However the report warns that this is only based on analyzing 5 deals, so it may not be representative.
During 2018 only 500 MW of concentrated solar power was commissioned – in China, Morocco and South Africa at an average LCOE of $0.185/kWh. However the total installed capacity of CSP globally at the end of 2018 is only 5.5 GW, but even so that is 4.3 times what it was in 2010. Given the small scale of the market and supply chains, it is not surprising that the global weighted-average LCOE was $0.185/kWh, just outside the fossil fuel-fired cost range.
With growing developer experience and broadening of supply chains this could go much cheaper and projects in the process of being commissioned in China will take the LCOE far lower for 2019. The report authors suggest that over the next four years CSP will become mainstream and fall in price further.
The report says that CSP has a greater likelihood of providing dispatchable renewable and points out that it might play an increasingly important role in allowing high shares of solar PV.
Recent record low auction prices for solar in Dubai, Mexico, Peru, Chile, Abu Dhabi and Saudi Arabia have shown that a Levelized cost of Energy (LCOE) of $0.03/kWh is possible in a wide variety of national contexts, substantially below the average price. This is possible when installed costs and operations and maintenance (O&M) are low, the solar resource is excellent and financing costs are low. Also crystalline silicon module price declines of between 26% and 32%, went on throughout the period.
However there was a slight uptick in LCOE costs in Germany and the United Kingdom.
India seemed to experience the lowest total installation costs for new utility-scale solar PV projects commissioned in 2018 at $793/kW, 27% lower than for projects commissioned a year earlier. Both China and Italy also saw very competitive installation costs of $879/ kW and $ 870/kW.
In China, the weighted-average LCOE of new utility scale solar PV plants commissioned in 2018 declined, year-on-year, by 20%, to $0.067/kWh.
The report gives the heads up on other renewable technologies including onshore and offshore wind, solar and concentrated solar, hydropower, geothermal power, bioenergy for power and breaks each of them down by costs within each country.