Renewables pressing home cost advantage against fossil fuels

New research from Bloomberg New Energy Finance (BNEF) has found wind and solar technologies are making clear headway in reducing their costs compared to fossil fuels worldwide.

Analysts found that wind and solar projects worldwide were 18 percent cheaper since last year, while factoring in their entire lifetime costs.

At the same time, the growth in battery technologies, fuelled by the electric vehicle and storage industries, has also put pressure on the traditional roles played by coal and gas plants.

Lithium-ion batteries have decreased in cost by 79 percent since 2010, meaning they are often a better fit for providing “switch on switch off” services when there is a need to smooth out supply and demand.

The increased prevalence of pairing batteries with wind and solar farms is also grim news for the fossil fuel industry. These projects can now be called upon to ramp up generation at a moment’s notice, something usually the preserve of coal or gas plants.

Seb Henbest, head of Europe, Middle East and Africa for BNEF, said: “Competitive auctions for new renewable energy capacity have forced developers, equipment providers and financiers to bear down on all the different costs of establishing wind and solar projects.

“Thanks to this and to progressively more efficient technology, we are seeing record-low prices being set for wind and solar, and then those records being broken again and again on a regular basis. This is having a powerful effect – it is changing perceptions.”

Low costs for renewables were also not confined to one region. Some of the lowest costs for onshore wind were found in India, Brazil and Sweden. Similarly, solar PV made the most progress in Chile, Australia and Jordan.

For example, BNEF research found the levelised cost of onshore wind in India was now $39 per megawatt hour (MWh), a decrease of 46 percent in one year. By contrast, coal is at $68 per MWh.

Elena Giannakopoulou, head of energy economics at BNEF said the conclusions were “chilling for the fossil fuel sector”

“The economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants”, she added.

The analysis follows recent research from IRENA that showed all renewable technologies are expected to be cost-competitive with fossil fuels by 2020.

 

Photo Credit: Andrea Boldizsar