Renewables throw down: Wind competitive with coal, solar creeping up
This year has brought a significant shift in the generating cost comparison between renewable energy and fossil fuels.
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Credit: ggyykk |
In some parts of the world, onshore wind energy has become fully competitive with gas and coal, and solar is closing the gap, according to a levelized cost of electricity (LCOE) analysis for the second half of 2015 by Bloomberg New Energy Finance (BNEF).
Levelized costs take into account not just the cost of generating a marginal megawatt-hour of electricity, but also the upfront capital and development expense, the cost of equity and debt finance, and operating and maintenance fees.
The Bloomberg analysis shows that while onshore wind and crystalline silicon photovoltaics -- the two most widespread renewable technologies -- have both reduced costs this year, costs have gone up for gas- and coal-fired generation.
In fact, the global average LCOE for onshore wind fell from $85 per megawatt-hour in the first half of the year to $83 in the second half while crystalline silicon PV solar fell from $129 to $122, according to the report.
At the same time, the LCOE for coal-fired generation increased from $66 per MWh to $75 in the Americas, $68 to $73 in Asia-Pacific, and $82 to $105 in Europe; the LCOE for combined-cycle gas turbine generation rose from $76 to $82 in the Americas, $85 to $93 in Asia-Pacific and $103 to $118 in Europe, Middle East and Africa (EMEA).
"Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs," said Seb Henbest, head of EMEA, Bloomberg New Energy Finance. "Meanwhile, coal and gas have gotten more expensive on the back of lower utilization rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform."
Among other low-carbon energy technologies, offshore wind reduced its global average LCOE from $176 per MWh to $174, but still remains significantly more expensive than wind, solar PV, coal or gas, according to BNEF, while biomass incineration saw its levelized cost stay steady at $134 per MWh. Nuclear, like coal and gas, has very different LCOE levels from one region to another, but both the Americas and the Europe, Middle East and Africa region saw increases in levelized costs to $261 and $158 per MWh, respectively.
"Generating costs continue to vary greatly from region to region, reflecting influences such as the shale gas boom in the US, changing utilization rates in areas of high renewables penetration, the shortage of local gas production in East Asia, carbon prices in Europe, differing regulations on nuclear power across the world, and contrasting resources for solar generation," said Luke Mills, BNEF analyst of energy economics. "But onshore wind and solar PV are both now much more competitive against the established generation technologies than would have seemed possible only five or 10 years ago."
Among the country-level findings, onshore wind is now fully cost-competitive with both gas-fired and coal-fired generation, once carbon costs are taken into account, in the UK and Germany. In the UK, onshore wind comes in on average at $85 per MWh in the second half of 2015 compared to $115 for combined-cycle gas and $115 for coal-fired power; in Germany, onshore wind is at $80 compared to $118 for gas and $106 for coal.
In China, onshore wind is cheaper than gas-fired power at $77 per MWh versus $113, but much more expensive than coal-generated electricity at $44, while solar PV power is at $109. In the United States, coal and gas are still cheaper at $65 per MWh versus onshore wind at $80 and PV at $107.
"In the U.S., we've known that wind energy can be cheaper than gas in some states, but solar is now inching toward that same milestone," said Jacqueline Lilinshtein, BNEF U.S. analyst. "It's surprising how much the cost of utility-scale solar PV has dropped in the US. It's now ~$50 per megawatt hour if you include federal subsidies. Six months ago, it was $60, so that's a pretty significant drop. We attribute this to lower installation and equipment costs fueled by increased competition to build before federal subsidies expire."
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