New Report Confirms Renewable Power Costs Less — But It’s Not What You Think

January 19th, 2015 by Tina Casey

Oil price crash or no, renewable energy is still highly competitive in the global market, according to the new Renewable Power Generation Costs report from IRENA, the International Renewable Energy Agency. However, there’s an interesting twist to the new report. If you’re guessing a lot of the competition is coming from solar, guess again. Despite a huge drop in the cost of solar energy, solar is still not your best bet for beating fossil fuels on cost. So, where exactly does IRENA see renewables coming out ahead?

Renewable Energy Costs And Energy Poverty

Before we get into the new report, let’s note that the fossil fuel lobby has been promoting the idea that its products are the best solution for the problem of “energy inequality.” You might also be familiar with the energy inequality pitch through its corollary, “climate bullies.”

Whatever you call it, the fossil lobby is trying to promote the idea that fossil fuels offer developing nations the quickest, cheapest pathway to reducing poverty. In effect, it’s a moral case for fossil fuels.

We’re wondering why the fossil industry hasn’t already made much more headway in that regard, given that it’s had a clear field for the past 100 years and more, but it’s a moot point now that there is stiff competition from new technology. IRENA’s Renewable Power Generation report is perfectly clear on that score:

For 1.3 billion people worldwide without electricity, renewables are the cheapest source of energy. Renewables also offer massive gains in cost and security for islands and other isolated areas reliant on diesel.

So, there goes your moral case for fossil fuels.

Renewable Power Costs

You can download the full report here, but for those of you on the go, here’s a brief summary, keeping in mind that the report deals with averages and the cost of renewable power generation can vary widely from one region to another.

According to IRENA’s figures, the big winner is onshore wind power, along with biomass for power, hydropower, and geothermal.

As for solar, check out the chart below. The peach-colored bar indicates the cost range for fossil fuels, and you can see that a good deal of solar power generation is still floating above the high end of that range (power generation projects are represented by color coded spheres, with the larger spheres indicating larger projects).

On the bright side, solar is in a much better position than it was just a few years ago. Last fall IRENA issued report called REthinking Energy, which reported that the cost of solar power had dropped 80 percent since 2008.

The darker yellow indicates concentrating solar power (CSP). As you can see, the picture doesn’t look so good for CSP right now, but keep in mind that it’s a new technology compared to photovoltaic cells. Offshore wind power is in a similar situation compared to onshore wind, and in both cases IRENA foresees continued cost declines leading to the potential for equaling or beating fossil fuels.

IRENA notes, by the way, that biomass, geothermal, and hydropower have gotten a head start, since these forms of renewable energy have been in use for many years in some instances (Hoover Dam, much?).

That makes the gains for onshore wind all the more impressive. Although primitive windmills have been in use for hundreds of years, modern wind turbines have only been on the scene for a relatively short time and they’ve already managed to largely beat fossil fuels at their own game:

…Onshore wind is now one of the most competitive sources of electricity available. Technology improvements, occurring at the same time as installed costs have continued to decline, mean that the LCOE [levelized cost of energy] of onshore wind is now within the same cost range, or even lower, than for fossil fuels. The best wind projects around the world are consistently delivering electricity for USD 0.05/kWh [5 cents per kilowatt hour]without financial support.

As if the oil industry isn’t already having enough nightmares, IRENA also predicts that costs for onshore wind power will continue to drop.

So, if anybody out there thought that the oil price crash could put a damper on renewable energy investment, guess again. Here in the US, the fossil fuel sector has been cutting back on operations and slashing payrolls, which already sets the stage for the inevitable oil price rise, so you’re going to see renewables in an even better position sooner rather than later.

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