A new report from the International Renewable Energy Agency (IRENA) has found that the cost of generating renewable energy is now equal to or below the cost of fossil fuels in many parts of the world. Released on Saturday, the major report also asserts that renewables should remain financially competitive even if oil prices remain low for a while. Oil prices have fallen some 60 percent since last summer.
The report states that “history has shown that periods of low oil prices tend to be transitory as long as the world’s thirst for these finite resources rises,” and that for investments with a lifetime of 25 years or so, investments decisions in electricity generation should not be made using current oil prices. The report found that, even without financial support and despite falling oil prices, biomass, hydropower, geothermal, and onshore wind are all competitive with or cheaper than oil, natural gas, and coal-fired power stations.
Titled Renewable Power Generation Costs in 2014, the report also found that the cost of solar power is falling faster than any other technology. Large-scale solar PV costs have halved in the last four years and the cost of installing residential solar has fallen around 70 percent since 2008. The cost of utility-sized solar projects to produce power is about $0.08/kWh without financial support, with prices as low as $0.06/kWh in some places, such as the Middle East. IRENA puts the cost of fossil fuel power as being between $0.07 and $0.19/kWh when environmental and health costs are factored in.
The report, which was launched during IRENA’s fifth Assembly in Abu Dhabi, places a special emphasis on bringing power to the 1.3 billion people worldwide without it. For them, renewables are the cheapest source of potential energy. This also applies to islands and other isolated regions that rely on diesel for power. To coincide with the report, IRENA and the Abu Dhabi Fund for Development announced $57 million in loans to five renewable energy projects in developing countries.
“Renewable energy projects across the globe are now matching or outperforming fossil fuels, particularly when accounting for externalities like local pollution, environmental damage and ill health,” said Adnan Z. Amin, Director-General of IRENA. “The game has changed; the plummeting price of renewables is creating a historic opportunity to build a clean, sustainable energy system and avert catastrophic climate change in an affordable way.”
According to Amin, this report shows that the challenge for renewable energy is no longer primarily cost or technology.
“The discussion is really about what happens in the next phase, when renewable-energy penetration starts to go to higher levels that imply a change in systems and in costs,” he said.
Clean energy costs are predicted to continue to decline, according to the report. Equipment prices may no longer be the main source of these cost reductions going forward, as the technology has matured quite rapidly, especially in the case of solar PV. According to IRENA analyst Michael Taylor, the emphasis will fall more on reducing “balance-of-project” and financing costs. Also known as balance-of-system costs, balance-of-project costs include a number of structural and electrical elements as well as labor and other soft costs.
“There are a lot of policy levers in place that (our member states) can use to relatively easily unlock these,” Taylor told Recharge News.
IRENA, which is headquartered in Abu Dhabi, has 139 member countries and the European Union. Formed in 2009, the organization works with governments to help encourage renewable energy investment. The group also focuses on facilitating knowledge sharing, and recently launched REsource, a tool intended to simplify searching for and understanding clean energy information.