Renewable energy the cheapest option for off-grid power


The International Renewable Energy Agency (IRENA) report, Renewable Power Generation Costs, also finds that in areas with sufficient natural resources, i.e. wind and solar irradiation, renewables are the lowest-cost option for extending the grid.

The Abu Dhabi-based association has produced cost analyses for five types of renewable energy. Although photovoltaics was rated among the costliest in terms of LCOE, the report hailed the rapid falls in the cost of photovoltaic-generated power in recent months, and praised the flexibility of the technology, stating, "Solar PV also has the advantage that, once the domestic installation market is developed, solar PV installations can be ramped up rapidly to meet policy goals or electricity sector needs, no other power generation technology shares this flexibility."

According to IRENA’s figures, the cost of crystalline silicon modules has fallen more than 60% in two years to less than US$1/watt with the price of domestic installations in Germany falling 65% between 2006 and 2012, to as little as $2.2/watt. The report goes on to state that, with 28 GW of new solar capacity installed in 2011, the cost of photovoltaic modules falls by up to 22% with each fresh doubling of capacity.

This huge roll-out and consequent economies of scale and learning curve reductions, combined with its highly modular nature makes photovoltaics a cheaper option than diesel in many off-grid locations.

Biomass and wind are also listed as better-than-diesel options for off-grid, but the report notes that the optimal LCOE reductions available from biomass require agricultural and forestry by-products nearby. Meanwhile, a recent report by the World Research Institute highlighted the fact that photovoltaics, because of the ease of transportation of modules, is a more global market than wind for which turbines are less convenient to transport worldwide.

IRENA is aiming to provide updates on the true cost of generating power from renewables against the cost of generation from fossil fuels, to inform its 103 members as well as 56 applicants for membership.

The Renewable Power Generation Costs report – and associated LCOE costings for photovoltaics, biomass, CSP, hydro and wind – acknowledges generation costs can vary regionally and from country to country and echoes yesterday’s Indian Solar Handbook, released by consultancy Bridge to India, in highlighting the knock-on effects to final costs which result when cheap capital funding is not available for renewable projects.

In IRENA’s LCOE analysis, photovoltaics is rated the most expensive with a typical cost of $0.16 to $0.36/KWh against typical fossil fuel generation costs of $0.6 to $0.12/KWh in OECD countries. CSP is costed at $0.14/KWh; biomass at $0.6/KWh; and onshore wind at $0.4/KWh, with hydro rated the cheapest at less than $0.4/KWh.