IEA-NEA report examines plunge in costs of generating electricity from renewables

The significant drop in the price of solar and wind generation costs, especially for solar PV installations, helped prevent cost inflation in electricity generation over the past five years, according to a newly published report by the International Energy Agency (IEA) and the Nuclear Energy Agency (NEA).

The study, Projected Costs of Generating Electricity: 2015 Edition, also shows that new nuclear power plants generate electricity more cheaply than other established “baseload” sources such as coal- and gas-fired power plants over the full lifetime of facilities when financing costs are relatively low.

The report attributes the drop in the price of solar and wind generation to “sustained technological progress.” A “plateauing in the price of new nuclear energy plants” also helped keep electricity generation cost inflation down, the study finds.

The report presents the contrasting costs for different power generation technologies around the world and shows that renewable sources can produce electricity at close to or even below the cost of new fossil fuel-based power stations.

“No single technology proves the cheapest form of electricity generation under all circumstances: many factors determine the final cost of any investment, principally local influences such as market structure, policy environment and resource endowments,” the study says.

Analyzing generation costs at more than 180 plants – from large nuclear and fossil-fuel facilities to wind farms to residential-sized solar PV installations – in 22 countries, including Brazil, China and South Africa, the study projects, country by country and for the different technologies, what it would cost to generate electricity over the lifetime of a plant built to enter service in 2020.

The report’s standardized form of analysis, levelized cost of electricity (LCOE), displays the cost range of generation in each country for each technology, based on three discount rates.

Solar PV technologies

The study divides solar PV technologies into three categories: residential, commercial and large (or ground-mounted). It found that overnight costs for residential PV ranged from $1,867 per kilowatt electric (kWe) in Portugal to $3,366/kWe in France. LCOEs at a 3% discount rate ranged from $96 per megawatt hour in Portugal to $218/MWh in Japan. At a 7% discount rate, LCOEs ranged from $132/MWh in Portugal to $293/MWh in France. At a 10% discount rate, they ranged from $162/MWh to $374/MWh, in Portugal for both cases.

For commercial PV, overnight costs ranged from $1,029/kWe in Austria to $1,977/kWe in Denmark. LCOEs ranged from $69/MWh in Austria to $142/MWh in Belgium at a 3% discount rate; $98/MWh (Austria) to $190/MWh (Belgium) at a 7% discount rate; and $121/MWh (Portugal) to $230/MWh (Belgium) at a 10% discount rate.

Overnight costs for large, ground-mounted PV ranged from $1,200/kWe in Germany to $2,563/kWe in Japan. LCOEs at a 3% discount rate ranged from $54/MWh in the United States to $181/MWh in Japan, $80/MWh (United States) to $239/MWh (Japan) at a 7% discount rate and $103/MWh (United States) to $290/MWh (Japan) at a 10% discount rate.

 /></p><p class=In comparison, overnight costs for coal plants in member countries of the Organization for Economic Co-operation and Development (OECD) ranged from a low of $1,218/kWe in Korea to a high of $3,067/kWe in Portugal. In OECD countries, LCOEs at a 3% discount rate ranged from a low of $66/MWh in Germany to a high of $95/MWh in Japan. At a 7% discount rate, LCOEs ranged from $76/MWh (Germany) to $107/MWh (Japan), and at a 10% discount rate they ranged from $83/MWh (Germany) to $119/MWh (Japan).

While the costs of renewable technologies in some higher priced markets can be well above that of coal or gas-fired plants, the report details how utility-scale solar PV and especially onshore wind power are comparable and often lower in countries featuring plentiful resources and appropriate market and regulatory frameworks.

“While more significant regional variations remain than for baseload technologies, variable renewable technology costs continue to converge towards international benchmarks at the lower end of their cost range,” the report finds.

Projected Costs of Generating Electricity: 2015 Edition also looks further into the future by examining the potential cost of emerging technologies like ocean energy and fuel cells and likewise discusses the value and cost of generation from the perspective of the power system as a whole, examining other relevant cost metrics that may be more appropriate for a world where the concept of baseload power is of declining relevance.