Renewable energy has caught up to coal and natural gas-fired power generation, says International Energy Agency
The cost of producing renewable energy such as wind and solar has now fallen to par or lower than the cost of new fossil fuel-based power stations, according to a new report from the International Energy Agency.
The cost of producing electricity from renewable energy has been falling for several years, says the IEA. Its new report provides in detail the costs for different power generation technologies around the world and shows that renewable sources can produce electricity at close to or even below the cost of new fossil fuel-based power stations.
The report, Projected Costs of Generating Electricity: 2015 Edition, also shows that new nuclear power plants generate electricity more cheaply than other established “baseload” sources such as coal and gas-fired power plants over the full lifetime of facilities when financing costs are relatively low.
The report, a joint project by the International Energy Agency and the Nuclear Energy Agency, calculates the cost of producing electricity from different types of new power plants.
Compared with the previous edition published five years ago, Projected Costs of Generating Electricity: 2015 Edition details a significant drop in the price of solar and wind generation costs – especially solar photovoltaic installations – as a result of sustained technological progress.
That drop, as well as a plateauing in the price of new nuclear energy plants, helped arrest cost inflation in electricity generation over the past five years.
No single technology proves the cheapest form of electricity generation under all circumstances, according to the IEA report.
Many factors determine the final cost of any investment, but principally local influences such as market structure, policy environment and resource endowments.
Projected Costs of Generating Electricity: 2015 Edition looks at generation costs at more than 180 plants – from large nuclear and fossil-fuel facilities to wind farms to residential-sized solar PV installations – in 22 countries, including Brazil, China and South Africa.
The data were used to project, country by country and for the different technologies, what it would cost to generate electricity over the lifetime of a plant built to enter service in 2020. The report’s standardised form of analysis, levelised cost of electricity (LCOE), displays the cost range of generation in each country for each technology, based on three discount rates.
While the costs of renewable energy in some higher priced markets can be well above that of coal or gas-fired plants, the report details how utility-scale solar PV and especially onshore wind power are comparable and often lower in countries featuring plentiful resources and appropriate market and regulatory frameworks.
Further, while more significant regional variations remain than for baseload technologies, variable renewable energy costs continue to converge towards international benchmarks at the lower end of their cost range.
Projected Costs of Generating Electricity: 2015 Edition looks even further into the future by examining the potential cost of emerging technologies like ocean energy and fuel cells.
The report also discusses the value and cost of generation from the perspective of the power system as a whole, examining other relevant cost metrics that may be more appropriate for a world where the concept of baseload power is of declining relevance.