Renewable Energy Prices Continue to Fall

RenewEconomy has some interesting graphs from BNEF showing how competitive solar and wind power has become over time – Bugger the utilities: wind and solar will be built anyway.

But as the electricity incumbents continue to circle the wagons around their threatened business models, the renewable energy industry may be able to take comfort in some good news: Australia may be able to meet its 20 per cent renewable energy target by 2020, and go beyond that, simply because renewables will represent the cheapest option as the electricity industry looks for new generation and is forced to replace ageing and redundant capacity.Kobad Bhavnagri, the Australia head of Bloomberg New Energy Finance, told the Clean Energy Week conference on Wednesday that renewables could supply 46 per cent of Australia’s electricity by 2030, compared to around 12 per cent now, and the official target of a minimum 20 per cent target by 2020.

How would this be achieved? Well, according to BNEF, large-scale solar – mostly PV – will account for around 17GW (17,000MW) of installed capacity. That compares to just 10MW now. This does not include at least 10GW of rooftop solar – compared to around 2.5GW now. BNEF expects wind energy to account for around 12.5GW, although it expects wind’s share in new investment to diminish rapidly from around 2017 as it is overtaken by solar PV.

Costs are the critical part of the equation, because most of Australia’s existing capacity will need to replaced in coming decades, and the choice will be based around which technology is the cheapest to build new plant. The incumbent generators are concerned because they know that wind and solar make poor bedfellows with inflexible fossil fuel generators, and that an increased penetration of renewables will force many coal generators to close early.

BNEF notes – as can be seen in the first graph – that gas generation will also be too expensive, and its share of the electricity generation capacity will actually fall, as there is already enough capacity to deal with the variability and intermittency of renewables. And in any case, Bhavnagri says, developments in battery technology means “storage is coming faster than most people would think.”

BNEF says solar modules will continue to fall in price by 25 per cent for every doubling in global capacity, while wind generation will fall around 14 per cent for every doubling in capacity. The conclusions are an extension to their earlier study, which noted that wind is already cheaper than new coal and gas, and solar will be there soon.