Advanced technology and larger renewable systems have resulted in PV solar and onshore wind being the cheapest options of new-build electricity generation, when compared to fossil fuels and other renewables, for two-thirds of the worldwide population. The latest finding by analysts at Bloomberg New Energy Finance (BNEF), which considered the second half of 2019, highlight a positive outcome for PV solar and onshore wind. These findings should result in renewable technologies being favoured over fossil fuels in the future. However, as COVID-19 is greatly impacting the energy market, price competition may once again arise between renewable energy and fossil fuels.
BNEF has measured the price of renewable electricity by using the average levelized cost of electricity (LCOE). This measurement is used as a metric for quantifying the costs of generating power. The LCOE does not include subsidies or tax credits. Thus, with government incentives, including the Contracts for Difference, the UK is in a very promising position for installing PV solar and onshore wind at even cheaper rates.
Onshore Wind Price Dwindling
BNEF’s analysis has found that onshore wind has experienced the biggest decrease in price with a 9% drop, making onshore wind the most economical electricity generator. The large drop has resulted in the global average price for new onshore wind projects costing £35.39 ($44) megawatts per hour (MWh). This large price decline is thought to be related to multiple factors, including an average increase in turbine size to 4.1 MW. Furthermore, the average onshore windfarm has doubled in capacity from 2016 to 73 MW.
Tifenn Brandily, the lead author for BNEF, has said when referring to developers installing onshore wind and PV solar: “Larger scale enables them to slash balance-of-plant operations and maintenance expenses and have a stronger negotiating position when ordering equipment.”
Carbon Tracker estimates that as prices continue to fall, new-build wind and PV solar will be cheaper than coal for 100% of the global population by 2030.
Solar PV Price Decrease
BNEF has also calculated a 4% price drop in PV solar, which is also the biggest solar price cut since 2015. Solar PV now has an average global price of £40.18 ($50) MWh, while China has the lowest price at just £30.54 ($38) MWh. Again, this reduction in price is partly due to solar farms’ average size having increased by a third since 2016 to 27 MW. Aside from a size expansion, BNEF highlight that PV solar has seen an advancement in technology, as monocrystalline modules are preforming more effectively, generating more electricity per panel.
The global average LCOE price for onshore wind and PV solar is vastly lower than the Department for Business Energy and Industrial Energy’s (BEIS) 2016 predictions for 2020. BEIS 2020 predictions equated to £63 ($78.27) MWh for onshore wind and £67 ($83.21) MWh for PV solar. The Solar Trade Association LCOE price forecast was slightly closer to BNEF’s PV solar price average, with an estimation between £50 ($62.10) and £60 ($74.53) for PV solar in 2019. Different aspects may be considered in these price forecasts, causing some variation in the estimated prices when compared to BNEF’s results. However, as there is such a great difference in price, the results still highlight that these technologies are dropping in price far quicker than expected in the energy industry, as the capacity and technology continue to evolve.
Battery Storage Price Dropping
BNEF reported that the price of battery storage with a four-hour duration has halved since 2018. Now having a global average of £120.37 ($150) MWh, battery storage is steadily reducing in costs over time. The price decrease is largely influenced by the average capacity of batteries increasing to 30 MW, a 400% expansion since 2016.
Moreover, the cost drop is related to a growing manufacturing base and an advancement in battery chemistry. In 2019, John B. Goodenough, M. Stanley Whittingham and Akira Yoshino were awarded the Nobel Price in Chemistry for their work on developing lithium-ion batteries. There are also many other new developments in battery technology which are moving away from traditional batteries and allowing a higher capacity, including solid-state batteries, lithium-sulfur batteries and sodium-ion batteries. With the amazing research that is taking place to advance battery storage, it is hoped that this technology will continue to increase in efficiency and capacity, resulting in a lower technology cost.
How Will COVID-19 Affect These Prices?
As BNEF’s analysis considered the last six months of 2019, the effect of COVID-19 is not included in the forecast. BNEF is uncertain of how the pandemic will affect the price of renewable energy technologies this year.
Seb Henbest, chief economist at BNEF, has said: “The coronavirus will have a range of impacts on the relative cost of fossil and renewable electricity. One important question is what happens to the costs of finance over the short and medium-term. Another concerns commodity prices – coal and gas prices have weakened on world markets. If sustained, this could help shield fossil fuel generation for a while from the cost onslaught from renewables.”
However, the International Energy Agency (IEA) has reported that, as a result of COVID-19, there has been a major drop in fossil fuel demands, which is expected to continue. Additionally, the current oil prices have reached an all-time low. The IEA has expressed that solar and wind have not been as badly affected and are still expected to grow in size by 15% and 10% respectively over 2020. These predictions by IEA have already been exhibited by the UK, who have taken advantage of solar during the sunshine-filled April and May, resulting in increasing the coal-free record of over 18 days and reaching a new solar record of 9.68 GW. As solar and wind are expected to continue growing in size during 2020, we can hope that this growth will continue to lower the price of these renewables.
During these unprecedented times, we may be diverted away from the climate crisis. However, with reducing costs of renewables, high investments towards a net-zero target and a greater awareness of our environmental impact, now is still a great time to think about deploying solar and wind.
If you are interested in how onsite renewable generation could benefit you, our software, the OnGen Expert, can be used to calculate the feasibility of renewable and low carbon technologies at your sites. Contact OnGen to get started today.