The two renewable power technologies that have attracted the biggest shares of investment over recent years are onshore wind and solar photovoltaics (PV).
Renewable power was certainly expensive and immature 10 years ago, but its competitiveness has changed significantly in the last four years — brought about by a combination of technological improvement, economies of scale in manufacturing and low-cost Asian production.
Variations in renewable power technologies
The transformation has further to go, however, and it has not applied to all renewable power technologies.
- Small and large hydroelectric, for instance, is a mature sector and remains broadly where it has been for decades — competitive with fossil fuels.
- Geothermal is also mature and can be one of the cheapest forms of generation in the best locations.
- Wave and tidal technologies are still costly, with dozens of rival devices at the prototype or pilot stage, vying for what could be a big market in the future.
- Biomass and waste-to-power are types of generation with a wide range of costs per megawatt-hour, depending on the feedstock used and the size of the plant.
- Offshore wind has seen costs increase recently, as projects have moved into deeper water, but like solar thermal, or CSP, it has the potential to improve cost competitiveness in the next decade.
The big changes have occurred in the two renewable power technologies that have attracted the biggest shares of investment over recent years — onshore wind and solar photovoltaics (PV).
Onshore wind energy sector
Onshore wind farms vary from the single turbine projects of one or two megawatts to the world’s largest, such as the 600MW Cogealac installation in Romania or the 782MW Roscoe Wind Farm in Texas.
Wind turbine prices actually increased as demand ran ahead of supply up to the first half of 2009. However, since then, turbine prices per megawatt have fallen steadily — from €1.21 million, to €0.93 million in the first half of this year, and €0.91 million for turbines already ordered but not due to be delivered until the second half of next year. (These figures are given in euros, not dollars, since Europe is a bigger manufacturing center for turbines than the US is.)
The cost of generating electricity from onshore wind fell 9% in the year ending the fourth quarter of 2011, edging its cost per megawatthour closer to that of combined-cycle gas turbines and coal-fired power stations.
The analysis of Bloomberg New Energy Finance suggests that wind farms in the best locations are already competitive with coal and gas generation, even without subsidies or carbon prices, and that by 2016, this will be the case with average onshore wind projects worldwide.
Solar photovoltaics energy sector
Solar photovoltaics (PV) vary from large-scale plants such as the 85MW Montalto di Castro complex in Italy to rooftop installations of just three, two or even one panel on residential rooftops from California to Sydney.
The cost of a solar module has been in long-term decline since its invention in the 1950s. But in the mid- 2000s, this trend stopped for a while. However, PV electricity fell by between 20% and 26% — depending on the exact technology used — in the year ending the fourth quarter of 2011.
Nonetheless, PV remains significantly more expensive than coal- or gas-fired generation as a way of producing wholesale electricity. However, there are three important factors to bear in mind:
- The carbon cost of gas and coal power is not imposed on the power sector in many countries, and even where it is, as in the European Union, market prices of carbon credits appear to be much lower than the real cost of the emissions to the planet.
- PV’s competitiveness is expected to continue to improve as the technology matures. Bloomberg New Energy Finance forecasts that the utility-scale system cost of PV will fall to US$1.44 per watt by 2020.
- Most significantly, even if the cost of PV power remains well above the wholesale price of electricity, in many countries it is already competitive with the retail price of electricity. This means that households and small businesses will save money if they install PV on their rooftops and use it to generate a part of their own power—even without subsidies
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