New ‘power-to-X’ prospects may arise as renewables costs continue to fall

15th January 2018 By: Terence Creamer - Creamer Media Editor

New ‘power-to-X’ prospects may arise as renewables costs continue to fall

The outlook for solar and wind electricity costs to 2020 “presages historically low costs for new renewable electricity”, which could create new economic and industrial opportunities, a new International Renewable Energy Agency (Irena) report argues.

Released in Abu Dhabi, the United Arab Emirates, this weekend, the report states that, by 2020, all existing renewable generation technologies will fall within the fossil fuel-fired cost range, with most, notably onshore wind and solar photovoltaic (PV) technologies, at the lower end, or undercutting fossil fuels.

The global weighted average costs over the last 12 months for onshore wind and solar PV were $0.06/kWh and $0.10/kWh respectively, with onshore wind routinely commissioned for $0.04/kWh. The current cost spectrum for fossil fuel power generation, by contrast, ranges from $0.05/kWh to $0.17/kWh.

“Based on the latest auction and project-level cost data, global average costs could decline to about $0.05/kWh for onshore wind and $0.06/kWh for solar PV,” the ‘Renewable Power Generation Costs in 2017’ report states.

By 2020 to 2022, the average levelised cost of electricity (LCOE) from onshore wind, offshore wind, solar photovoltaic PV and concentrated solar power (CSP) is forecast to converge at competitive levels of between $0.03/kWh to $0.10/kWh.

By 2019, the report adds, the best onshore wind and solar PV projects will be delivering electricity for an LCOE equivalent of $0.03/kWh, or less, with CSP and offshore wind capable of providing electricity very competitively, in the range of $0.06/kWh to $0.10/kWh from 2020.

“The overall average, but especially the very low electricity costs for the best solar (PV) and onshore wind projects represent a real paradigm shift in the competitiveness of renewables. Given these low costs, previously uneconomic strategies for the electricity and energy sector could become profitable.

The report argues that low prices in areas with excellent solar and wind resources could open up the economic potential of ‘power-to-X technologies’ such as using electricity to produce hydrogen or ammonia, or other energy dense, storable mediums.

Low prices could potentially turn the current drawback of electric vehicles (EVs) – their potentially high instantaneous power demand for recharging – into an asset, as EVs will be able to take advantage of cheap renewable power when it is available and potentially feed electricity back into the grid if needed later on.

“This, however, has to be balanced by the increased costs of integrating variable renewables and the increased flexibility required to manage systems with high Variable Renewable Energy (VRE) . . . To date, these integration costs have remained modest, but they will rise as very high shares of VRE are reached.”

The decline in costs could also make the curtailment of VRE plants, a previously unthinkable economic burden for renewables – a rational economic decision, as such a strategy could maximising VRE penetration and minimising overall system costs.

The Irena report says technology improvements, competitive procurement and a large base of experienced, internationally active project developers underpin the decline in renewables costs. The cost of generating power from onshore wind has fallen by around a quarter since 2010, while solar PV electricity costs have plunged by 73% over the same period.

Sharp cost reductions, both recent and anticipated, represent remarkable deflation rates for various solar and wind options, the report adds. Learning rates for the 2010 to 2020 period, based on project and auction data, are estimated at 14% for offshore wind, 21% for onshore wind, 30% for CSP and 35% for solar PV.

“Yesterday’s insurmountable challenges, in terms of cost competitiveness, are falling by the wayside and there is a template in this for addressing tomorrow’s challenges.

“The lesson of the last ten years from solar and wind technologies is clear: a long-term vision, with the right support policies and regulatory frameworks, can allow industry to scale, competition to play its part and the right technology solutions to be brought to market faster and cheaper than conventional wisdom suggests is possible,” the report states.