Fossil fuels losing cost advantage over solar, wind, IEA says

The cost of producing electricity from renewable sources such as solar and wind has dropped significantly over the past five years, narrowing the gap with power generated from fossil fuels and nuclear reactors, according to the International Energy Agency.

“The costs of renewable technologies – in particular solar photovoltaic – have declined significantly over the past five years,” the Paris-based IEA said in a report called Projected Costs of Generating Electricity. “These technologies are no longer cost outliers.”

The median cost of producing so-called baseload power that is available all the time from natural gas, coal and atomic plants was about $100 a megawatt-hour for 2015 compared with about $200 for solar, which dropped from $500 in 2010. Those costs take into account investment, fuel, maintenance and dismantling of the installations over their lifetimes and vary widely between countries and plants. For instance, commercial rooftop solar installations generate power for $311.77 a megawatt-hour in Belgium and $166.70 in sunnier Spain, the findings show.

The IEA findings come as more than 190 nations prepare to broker a new climate agreement in Paris in December to limit carbon emissions from burning fossil fuels. Based on figures from 181 power plants in 22 countries, the study concludes that no single technology is the cheapest under all circumstances and costs depend “highly” on available resources, labor costs and local regulations.

Cost Increases

The median costs of power generation from gas and coal rose over the five-year period, the agency said. For atomic energy, the findings indicate that costs are “roughly on par” with those reported in 2010, “thus undermining the growing narrative that nuclear costs continue to increase globally.”

The costs are expected to change considerably in the coming decades as new technologies are deployed. Coal plants will become as much as 70 percent more expensive if they include equipment to capture carbon emissions while offshore wind and solar costs are expected to fall, the IEA study showed. New utility-size solar installations could produce power for less than $100 a megawatt-hour before 2025 in the sunniest regions while panels on rooftops could reach that level five years later.

In Europe, governments have set targets for lowering carbon emissions and producing power from renewables such as solar and wind. The U.K. is in the process of making a final decision on developing costly nuclear plants while Germany has increased generation from coal, the dirtiest fossil fuel, following a phase out of atomic plants after the Japanese disaster at Fukushima in 2011.

 

Source: Bloomberg

Date: September 2015

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