All commercialized renewables to compete with fossil fuels by 2020: IRENA

London (Platts)--15 Jan 2018 814 am EST/1314 GMT

A new report by the International Renewable Energy Agency released Saturday further underlines the falling cost of renewables and the scope for future reductions.

  • Solar PV and onshore wind to generate electricity below $30/MWh by 2020
  • Bioenergy, CSP to become competitive with fossil fuels by 2020

The agency says that all currently commercialized renewables technologies will be competitive with fossil fuels by 2020, assuming a Levelized Cost of Electricity for fossil fuels in a range of $50-$170/MWh.

Solar PV costs are expected to drop by 50% by 2020, while onshore wind costs have fallen by around a quarter since 2010, the report "Renewable Power Generation Costs in 2017" says. It concludes that the best onshore wind and solar PV projects could be delivering electricity for $30/MWh or less within the next two years.

According to the agency, the global weighted average LCOE over the last 12 months for onshore wind and solar PV stood at $60/MWh and $100/MWh respectively, but recent tender results "will significantly undercut these averages."

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Recent auction results show onshore wind routinely being commissioned at $40/MWh, IRENA said.

"This new dynamic signals a significant shift in the energy paradigm," IRENA Director-General Adnan Amin said. "These cost declines across technologies are unprecedented and representative of the degree to which renewable energy is disrupting the global energy system."

The report by IRENA is in line with other analyses of the LCOE for renewables. In November, investment back Lazard published a study that put wind as the cheapest source of power generation at $45/MWh in 2017, some $15/MWh below combined-cycle gas turbines at $60/MWh, and less than half the cost of new coal-fired generation at $102/MWh.

Moreover, the cost of utility-scale solar PV had fallen to second lowest at $50/MWh.

Generation costs are heavily affected by location and particularly so in the case of renewables. Falling solar costs reflect recent tenders in the Middle East and other regions with high irradiation that have seen new records broken consistently in recent years.

Tenders for utility-scale solar PV came in at or below $30/MWh in 2017, while onshore wind also continued to break new ground, with Mexico seeing offers into its renewable tender in November at the staggeringly low price of $18/MWh.

As a result, IRENA's claim that the best onshore wind and solar PV resources will return electricity at or below $30/MWh by 2020 is not particularly contentious.

However, where the report goes further is in the projection that all currently commercialized renewables technologies will be competitive with fossil fuels by 2020, providing generators and planners with a much wider suite of technologies with different operational capacities and characteristics.

Given the operational differences in renewable technologies, a mixed renewable portfolio is much more robust and able to deal with fluctuations in demand and supply, making it more than the sum of its parts.

A broadening range of renewables technologies thus has significant implications for the amount of storage, demand-side management, baseload generation and back-up natural gas-fired generation required in low carbon energy systems.

The report says that other forms of renewable power generation, such as bioenergy, geothermal and hydropower projects, in the last 12 months, have competed head-to-head on costs with power from fossil fuels.

According to the agency, new bioenergy and geothermal projects commissioned in 2017 had global weighted average costs of about $70/MWh.

IRENA says project and auction data suggest that all currently commercialized renewable power generation technologies will be competing, and even undercutting, fossil fuels by generating in a range of $30-$100/MWh by 2020.

Competitive procurement practices together with the emergence of a large base of experienced medium-to-large project developers competing for global market opportunities are cited as new drivers of recent cost reductions, in addition to continued technology advancements.

In particular, IRENA estimates that the learning rate (the cost decrease with every doubling of cumulative capacity) for Concentrated Solar Power with storage has increased from 10-12% before 2013 to above 20% today.

When recent auction results in Dubai and South Australia are factored in, the learning rate between 2010-2022 could reach 30%.

As a result, IRENA predicts sharp falls in the LCOE for CSP to about $80/MWh by 2020, putting it well within the range of competing fossil fuel options.

Similarly with bioenergy, which incorporates a wide range of feedstocks and technologies, the best projects -- i.e. with cheap feedstocks, weak emissions controls and low capital costs -- could return electricity as low as $40/MWh, falling to $30/MWh if combined with combined heat and power.

However, bioenergy costs in Europe and the US are assumed to be significantly higher at $80-$90/MWh, falling by about $10/MWh, if municipal solid waste projects are excluded, as the primary aim of these projects is waste disposal rather than power generation.

--Ross McCracken,
--Edited by Jonathan Dart,

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