New IEA Report on Renewable Energy Costs & Policy (IEA Nails It!)

November 23rd, 2011 by Zachary Shahan

The International Energy Agency (IEA), traditionally a very fossil-fuel-friendly international agency, reported today that renewable energy is becoming cost-competitive (and should receive subsidies to account for its environmental, energy security, and health benefits) — several extended quotes below.

While I’m happy to see the IEA make this announcement (and there are tons of great points made in the report that I highlight below), I can’t help but point out a couple things….

If you look at the full costs of each energy source (that means adding in health costs, energy security costs, and environmental costs) solar, wind, and geothermal are already equal to or cheaper than fossil fuels. What’s the difference between a dollar you spend at the hospital and a dollar you spend on your electricity? Nothing much, except who’s receiving that dollar and what you are going through (i.e. what health predicament you have or don’t have). IEA gets this, but could have done a better job of spelling that out.

Additionally, not even taking those factors into account, if you look at the rising costs of coal and nuclear, the falling costs of solar, and the time it takes to put up a coal or nuclear power plant, solar is already cheaper by many insider estimates.

Similarly, wind and geothermal are excessively cheap, and taking these same points into account, they are the cheapest options for new electricity in many or most regions today.

But, back to the IEA…. Here’s a great summary quote from the agency on renewable energy costs and renewable energy’s importance today:

“Taking the portfolio as a whole, RE technologies should no longer be considered only as high–cost, immature options, but potentially as a valuable component of any secure and sustainable energy economy, providing energy at a low cost with high price stability.”

IEA is for Renewable Energy Support

Again, I’m going to give some big kudos to the IEA for supporting green subsidies for renewable energy to better account for the environmental and energy security savings offered by clean energy. But even without these subsidies, the point is that renewable energy is knocking fossil fuels of their “I’m cheaper.. sort of” pedastool.

A “Key finding” of the IEA’s (highlighted in a nice little box at the top of a page):

“A portfolio of RE technologies is becoming cost-competitive in an increasingly broad range of circumstances, in some cases providing investment opportunities without the need for specific economic support, but economic barriers are still important in many cases. A range of significant non-economic barriers is also delaying progress.”

Hmm, I wonder what those “non-economic barriers are” (looking at you, Boehner, Inhofe, Stearns, and gang).

OK, not quite in the same way, but the IEA spelled it out, too:

“But even where RE technologies could be competitive, deployment can be delayed or prevented by barriers related to, for example, regulatory and policy uncertainty, institutional and administrative arrangements or infrastructure designed with fossil fuels in mind that may be unsuited to more distributed energy supply or the high up-front capital demand of RE technologies. Sustainability and social acceptance can also be critical issues for some technologies. In particular, regulatory and policy uncertainty may play a very significant role, even when economic barriers are removed, as shown by the analysis of the performance of financial support mechanisms in the next section”

Aside from pointing out that subsidies are warranted for the reasons mentioned above, the IEA also mentioned that they should get support to help them transition from nascent or emerging to more mature technologies:

“Support is also justified to allow the newer RE technologies to progress down the learning curve and so provide benefits at lower cost and in larger scale in the near future (Figure E.2).”

The IEA delved into this topic several more times and covered specific policy options in good detail as well.

IEA: More Renewable Energy Cost Drops Coming

As I’ve written more times than I can count, renewable energy costs will continue coming down. But it’s nice to see the IEA put that in print.

“The market expansion of RE technologies, however, has been accompanied by cost reductions in critical technologies, such as wind and solar PV, and such trends are set to continue.”

A 16-page executive summary of the report is now on the IEA website.









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