Renewable Power is Cost Competitive

The International Renewable Energy Agency (IRENA) in its REmap 2030 report highlighted that “renewable technologies are now the most economic solution for new capacity in an increasing number of countries and regions.” This was attributed to the declining cost to deliver electricity from solar photovoltaics (PV), concentrated solar power (CSP) and wind, meanwhile hydropower, biomass and geothermal offer some of the lowest-cost electricity of any kind.

According to the international agency, prices for solar PV modules declined by 70% between 2009 and 2013. This has led to corresponding
declines in the levelised cost of electricity (LCOE) for solar PV, making it increasingly competitive for supplying power to the grid. As a result, in locations where PV system costs are low and/or excellent solar resources exist, solar PV is often competitive with residential electricity rates today. This of-course holds true in our neck of the woods, see my post on Jamaica’s Solar Potential for PV Applications.

It was also reported that wind turbine prices in North America have declined by around 16% since their peak in 2009, and continued technology improvements such as higher hub heights and larger swept areas mean that more energy is being harvested from the same wind resource, and thus raising capacity factors. The LCOE of wind has therefore dropped significantly since 2009, and wind is increasingly becoming the least-cost option for new grid supply.

However, despite this fact we are still fighting to add 320MW of natural gas generation to the national grid – for which we are yet to find a supplier of the natural gas. This simple means even after the new plant is successfully completed it will still be business as usual! I therefore strongly suggest that the OUR start working on a new least cost generation expansion plan immediately, because its obvious that the 2010 study is far out dated, even before any of the recommended generation plant break ground.

The more mature Hydro power and biomass for power generation have lower potentials for cost reductions stated IRENA. However, the document goes on to state that where untapped economic resources exist, these technologies can offer the lowest-cost electricity available – cheaper than other renewables, and fossil fuels. What was interesting to me was that IRENA stated that the weighted average LCOE of small hydropower by region, for example, varies between USD 3.2 cents and USD 7 cents per kilowatt-hour (kWh). So the question I had to ask was why are we sticking on maximizing the use of available hydro electric potential in Jamaica? See my post on Jamaica’s Hydroelectric Potential.

IRENA’s analysis of more than 9 000 utility-scale renewable projects, 150 000 small-scale PV projects and range of literature sources shows that the rapid deployment of renewables, working in combination with the high learning rates for some technologies, has produced a virtuous circle that is leading to significant cost declines. Renewables cost less than is commonly perceived: in OECD countries, for example, installed costs for solar PV and wind are now typically lower than for coal-fired power plants.

Figure 1 takes the individual project data for LCOEs by country from the IRENA database and summaries the results by technology for OECD and non-OECD countries, assuming a 10% cost of capital. Although the cost ranges for renewables are wide, reflecting the varying resource quality and capital costs, the weighted average LCOE of the projects installed for which IRENA has data is very competitive compared to new fossil fuel-fired generation options. For example, where oil-fired generation is the predominant power generation source (on islands, off-grid and in some countries), a lower-cost renewable solution almost always exists today.

For more information on the costs and performance of renewable power technologies and to view the underlying data, visit www.irena.org/costs

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