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Wind Electricity To Be Fully Competitive With Natural Gas by 2016, Says Bloomberg New Energy Finance

By Stephen Lacey

"Wind Electricity To Be Fully Competitive With Natural Gas by 2016, Says Bloomberg New Energy Finance"

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The best wind farms in the world are already competitive with coal, gas and nuclear plants. But over the next five years, continued performance improvements and cost reductions will bring the average onshore wind plant in line with cheap natural gas, even without a price on carbon, according analysis from Bloomberg New Energy Finance.

After analyzing the cost curve for wind projects since the mind-1980′s, BNEF researchers showed that the cost of wind-generated electricity has fallen 14% for every doubling of installation capacity. These cost reductions are due to a number of factors: more sophisticated manufacturing, better materials, larger turbines, and more experience with plant operations and maintenance. Those improvements, combined with an oversupply of turbines on the global market, will bring the average cost of wind electricity down another 12% by 2016.

These two changes will drive the cost of wind energy down further, to parity with conventional energy sources. Assuming specific learning rates for these components, we expect wind to become fully competitive with energy produced from combined-cycle gas turbines by 2016 in most regions offering fair wind conditions. That would be the case with wind turbine prices at EUR 0.80m/MW by then. Any increase in the cost of gas, which will consequently raise the cost of energy of gas-fired turbines, would bring forward the timing of grid parity for wind.

The wind industry has a conflicted relationship with natural gas. As a “dancing partner” for wind projects, natural gas can offer firm back-up when the wind isn’t blowing. However, the boom in shale gas extraction has dropped natural gas prices substantially, nudging out wind developers in large markets like Texas.

But the industry is still moving on an experience curve that is bringing the wind farms at cost parity with historically low natural gas prices — even without a price on carbon:

Justin Wu, lead wind analyst at Bloomberg New Energy Finance, said: “The public perception of wind power tends to be that it is environmentally-friendly, but expensive and intermittent. That is out-of-date — in the best locations, where generation is already cost-competitive with fossil fuel electricity, and that will be the case for the majority of new onshore turbines installed worldwide by 2016.

The Bloomberg Analysis again proves the importance of a deployment-based strategy in scaling renewable energy. It often takes decades to bring an energy technology to cost-parity with incumbents. While strong R&D programs are an important piece of improving technologies and encouraging breakthroughs, nothing can match experience gained in the field, explains BNEF researcher Justin Wu:

“The press is reacting to the recent price drops in solar equipment as though they are the result of temporary oversupply or of a trade war. This masks what is really going on: a long-term, consistent drop in clean energy technology costs, resulting from decades of hard work by tens of thousands of researchers, engineers, technicians and people in operations and procurement. And it is not going to stop: In the next few years the mainstream world is going to wake up to wind cheaper than gas, and rooftop solar power cheaper than daytime electricity. Add in the same sort of deep long-term price drops for power storage, demand management, LED lighting and so on – and we are clearly talking about a whole new game,” Wu added.

Those cost reductions don’t just come magically from the lab. It takes a strong deployment strategy to realize them. In 1984, there were only 300 MW of installed wind projects around the world. But by the end of this year, there will be over 240,000 MW.

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10 Responses to Wind Electricity To Be Fully Competitive With Natural Gas by 2016, Says Bloomberg New Energy Finance

  1. Paul Magnus says:

    Climate Portals
    Except in BC, Canadian gas has peaked

    The Tyee – Natural Gas Exports Threaten Energy Security Says Expert
    thetyee.ca
    Christy Clark picked the EnCana empire builder to guide her into power, and that says volumes about who’s shaping BC’s future. Part one of two.

  2. Leif says:

    All indication is that renewable energy is still at the beginning of the downward trend while fossil still has a long way to climb. Even without a price on carbon to help mitigate the degradation of the commons countered by “we the people.”

    Who do you love?

  3. Jay Alt says:

    Tell everyone. What’s Big and Green and can’t be stopped?

    Hint, it’s not the Last March of the Ents!

    http://www.youtube.com/watch?v=UTFP9QQzEL4

  4. John Tucker says:

    It needs to be made in the Americas/or under environmental controls. I dont even know if renewables produce in places like china are technically green. I dont think the rest of you do either as the research ive seen on things like carbon footprints is under American or European production.

  5. Steve says:

    John, im sure if you did a little research you would find that china actually produces more wind power than you would think. Wnough so to Power a country like Australia. We shouldnt rip on developing nations. We were all once as bad if not worse than those that are to come. Help them through technology sharing and we will make it through this time of uncertainty.

  6. David B. Benson says:

    Even if so, its about 25% wind power to be backed by 75% natgas power. Doesn’t seem that green to me…

    • BartyLobethal says:

      It’s 25% greener than 100% gas. You seem to imply that anything less than 100% from wind makes wind power unviable. By that same reasoning, gas, coal, oil and nuclear are all unviable.

  7. hunter says:

    If you say this enough will you actually believe it?

  8. Wes Rolley says:

    Mike, if you consider California’s Water Wars, what could we do with 8.6 million acre feet of water? That is what the oil companies have used to bring up the very sticky oil in Western Kern County.
    http://www.hcn.org/issues/42.21/oil-and-water-dont-mix-with-california-agriculture

    “Since the 1960s, when steamflooding was pioneered in Kern County, California oil companies have pumped more than 2.8 trillion gallons of freshwater into the ground — an annual average large enough to supply a city of one million people.”

  9. Carl says:

    25% greener than gas isn’t green enough. We should be investing in LFTR 4th gen nuclear if we’re serious about stabilizing CO2.