Many renewables now at or near grid parity with fossil fuels

Signal of change / Many renewables now at or near grid parity with fossil fuels

By Joy Green / 29 Nov 2014

Declining costs mean that the competitiveness of renewable power technologies has reached historic levels. The mature renewables, geothermal and hydropower, have already reached grid parity with fossil fuels across the world, and in some instances are actually cheaper. However these technologies are often constrained by geographical factors. Other, more flexible renewables – onshore wind, biomass for power and solar PV – are maturing fast and are now approaching grid parity in several markets.


According to the International Renewable Energy Agency (IRENA), the average costs of power from new on-shore wind projects built in 2013 – 2014 are just $0.06 - $0.07 per kWh in North America and Asia, and some projects in the US have costs as low as $0.05 per kWh without subsidies. Average costs are only slightly higher in Eurasia, Europe and Central America, at $0.07 - $0.08 per kWh. Even the least mature onshore wind markets in Oceania and Africa manage to generate electricity at an average of $0.09 – $0.10 per kWh. This compares well with fossil fuels that produce electricity at $0.05 – $0.14 per kWh at face cost, and $0.07 – $0.19 per kWh when environmental and health externalities are taken into account.


Biomass power plants produce electricity at an average cost of $0.07 per kWh in North America, and just $0.04 - $0.05 per kWh in Asia, Eurasia and Africa. Costs in Europe are higher at an average of $0.14 per kWh.


The costs for solar PV projects are higher in comparison, but are falling rapidly. The average cost of electricity generated by utility–scale solar PV that was installed in 2013 and 2014 ranges from $0.11 - $0.30 per kWh, but the best-performing projects in the US produced power at just $0.08 per kWh, and prices in the Middle East fell as low as $0.06 per kWh in 2014. Deutsche Bank stated in January 2015 that thirty-nine countries already have regions of solar PV grid parity, and it expects that solar PV will be at grid parity in 80% of the world by the end of 2017.


[All cost information comes from IRENA unless otherwise stated.]

Image credit: lar/Flickr

So what?

Renewables are already experiencing strong growth globally and outpacing fossil fuels in the addition of new power capacity. Reaching grid parity with coal and gas means that this growth in renewables is likely to continue despite the steep fall in the oil price since mid-2014. Once renewables become cost-competitive with fossil fuels, it becomes economically feasible to use them at significant scale; for example, the Government of Turkey was recently advised by Bloomberg New Energy Finance to invest in wind, solar and hydro rather than coal as it expands power capacity. The costs between now and 2030 would be almost the same, at around $400 billion, and renewables have the added advantage of low carbon emissions, low pollution levels, and reduced exposure to volatile commodity prices.


What might the implications of this be? What related signals of change have you seen?

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