Renewable power costs continue to fall

Renewable energy has become the most cost-effective way to generate electric power for hundreds of millions of people worldwide who are not on the grid, a new IRENA policy brief reveals.

Renewable energy has also become the least-cost option for extending grid supply in areas with suitable resources, such as sun and wind.

The findings serve as a wake-up call to policy-makers on the declining cost of renewables.

Renewable energy will play a key role in the transition to a truly sustainable energy sector, with access to sustainable energy for all. In the past deployment of renewables was hampered by a number of barriers including their high up-front costs.

Today’s renewable power generation technologies are increasingly cost-competitive and are now the
most economic option for off-grid electrification in most areas, and in locations with good resources, the best option for centralised grid supply and extension.

Renewable power generation technologies now account for around half of all new power generation capacity additions worldwide.

In 2011 additions included 41 GW of new wind power capacity, 28 GW of solar photovoltaic (PV), 25 GW of hydropower, 6 GW of biomass, 0.5 GW of concentrated solar power (CSP) and 0.1 GW of geothermal power.

This rapid deployment of these renewable technologies has a significant impact on costs, because of the high learning rates for renewables, particularly for wind and solar. For instance, for every doubling of the installed capacity of solar PV, module costs will decrease by as much as 22%.2 As a consequence crystalline silicon (c-Si) PV module costs have fallen by more than 60% over the last two years to below USD 1.0/watt (W).

The increasing size of global renewable markets and the diversity of suppliers has produced more competitive markets for renewable technologies.

The following sections of this paper outline the principle findings of the five costing papers on solar PV, CSP, wind power, hydropower and biomass that IRENA released in 2012 and highlight their key insights for policy makers.

It is important to note that cost can be measured in a number of different ways and each way of accounting for the cost of power generation brings its own insights.

The analysis summarised in this paper represents a static analysis of costs. The optimal role of each renewable technology in a country’s energy mix requires a dynamic modelling of electricity system costs to take into account the many complexities of operating an electricity grid.

“A renewable revolution is underway,” says Dolf Gielen, IRENA’s Innovation Director. “Recent years have seen consistent, sometimes dramatic, falls in the cost of electricity from renewables – making it the cheapest option off-grid, and even on-grid in places with plentiful resources.”

“The message is clear: renewable energy today is often the cheapest option to meet rising demand for electricity – even without subsidies. It is also healthier, and better for the environment. A renewable energy future is now bankable, and there are further cost reductions to come.”

Highlights of the IRENA publication, “Renewable Power Generation Costs” include: – Biomass power generation has become competitive wherever low-cost agricultural or forestry waste is available, with the most competitive projects producing electricity for as little as USD 0.06/kWh.

– Concentrating solar power, in which mirrors focus light over a large area into a central generator, has seen costs drop to as little as USD 0.14/kWh.

– Hydropower, currently the world’s largest source of renewable energy, today often provides the lowest cost electricity of any generation source.

– Solar photovoltaics (PV), which has seen rapid development over the past two years, is set to achieve grid parity with residential electricity tariffs in many locations around the world. PV costs typically range from USD 0.16 to 0.36/kWh.

– The most competitive onshore wind power sites can deliver electricity costs at as little as USD 0.04/kwh.

By way of comparison, electricity generated from fossil fuel typically costs between 0.06 and 0.12/kWh in OECD countries – excluding the cost of transmission and distribution.