Cost of renewable generation drops below natural gas and coal in U.K. and Germany, Americas could follow
Driven by climate change initiatives, renewables are reaping the benefits of a price on carbon
NEW YORK—The past few years have marked a significant shift toward renewable power generation, and 2015 is no different. Renewable energy’s latest milestone, however, is one that could tip the scales heavily in its favour. According to a Bloomberg New Energy Finance report, onshore wind and solar photovoltaics – the most widespread renewable technologies – have both become significantly cheaper this year, and in some regions, are now actually cheaper than gas-fired and coal-fired generation.
“Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs,”Seb Henbest, Bloomberg New Energy Finance’s head of Europe, Middle East and Africa, said. “Meanwhile, coal and gas have got more expensive on the back of lower utilisation rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform.”
The global average levelised cost of electricity for onshore wind declined to US$83 per megawatt hour in the first half of 2015 from $85, while solar PV slid to $122 from $129 previously. Meanwhile, coal-fired generation increased from $66 per megawatt hour to $75 in the Americas, to $73 in Asia-Pacific and to $105 in Europe. Combined-cycle natural gas generation also rose to $82, $93 and $118 in each respective region.
One of the main contributors to the falling cost of renewables, as well as the rising price of traditional generation technologies, is the growing cost of carbon.
This carbon cost and the improvement to renewable technology has allowed the price onshore wind to drop below natural gas and coal plants for the first time in both Germany and the U.K. Though in the U.S., gas and coal remain cheaper than renewables – $65 compared to $80 for onshore wind and $107 for solar PV – the cost equation is likely to continue shifting with the country’s new Clean Power Plan.
“Generating costs continue to vary greatly from region to region, reflecting influences such as the shale gas boom in the US, changing utilisation 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,” Luke Mills, an analyst at Bloomberg New Energy Finance, said.
“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,” he added.
As the price of carbon begins to be factored in worldwide, renewables will likely become more and more appealing for energy producers.