The topic of renewable energy costs is a hotly contested topic that touches on many politically sensitive areas. Over the years what has become clear however is that it is not a simple answer as to what is the best alternative for energy production.
There are country specific strategies and policies effecting every source of energy production. It is obvious however that the trend of renewable energy production is on a massive rise and this is set to continue.
“Renewable energy is a key component for energy access in developing areas as it offers a long term sustainable and currency-neutral supply. In African and global markets, we are seeing increased interest in this work and we will continue working with development agencies and institutions as well as investors as a part of a commitment to be socially impactful in our investment strategy.”
Sidney Yankson , Trustee, GCP Foundation
The International Energy Agency (IEA) reports that 2014 saw a record 95 GW of new wind and solar projects, and forecasts that it will account for 25% of power generation in 2018, a figure that’s up from 20 percent in 2011. Among other startling predictions were the following:
- 72% of the over $10 trillion forecasted dollars spent on new power generation worldwide to 2040 will be invested in new wind and solar PV plants.
- Solar is price comparable to coal in Germany, Australia, the U.S., Spain and Italy.
- By 2040, the levelized cost is set to drop up over 60%, and as soon as 2021, it will be cheaper than coal in China, India, Mexico, the U.K. and Brazil.
In most countries, renewables must be supplemented by a basic supply of oil and gas. As gas becomes more plentiful and available, industry analysts posit that gas will be one of the flexible technologies needed to help meet peaks, and provide system stability of non-depletable energy sources.
What may contribute to this trend are the quickly declining installed costs for solar PV, as shown in the table below:
According to the Energy Information Administration (EIA) and the University of Texas, from 2010 through 2013, US federal renewable energy subsidies increased by 54%, from $8.6 billion to $13.2 billion, despite the fact that total federal energy subsidies declined by 23%, from $38 billion to $29 billion. The sponsoring government’s agenda of energy independence and renewable promotion has been effective in creating long-term industry investments.
In Germany and in much of Europe, the government has long subsidized and promoted renewable energy. German renewable energy based electricity generation almost reached the 30% mark in 2016.
Africa is seeing a huge influx of solar and renewable projects due mainly to two related factors: need and economics. As foreign oil and gas supply costs are related to currency values, many countries face pricing issues. While the current oil prices are beneficial in that regard, the need for a sustainable infrastructure is present, so as economies in Eastern and Southern Africa rebound, many nations have subsidized the development of many projects through foreign and local investment to that end. Thus the levelized cost lower due to subsidies and low interest project debt.
In many countries, solar power is a lower cost alternative and is also heavily subsidized by the government in their purchase agreements. Thus, this region may have typically lower than average total costs. China and India lead the way with overall investment not only in the region but among many developed and BRIC nations in solar/renewable energy.
Subsidies, or Technology?
Logically speaking the cost of any energy project is directly related to not only the existing technology costs, but also macro policies and subsidies from governments. As both are changing the shift in new energy projects is making itself clear. Utility-scale batteries are now capable of competing with natural gas in terms of availability and flexibility to provide surplus generation for peak demand. When added to small micro grids, EIA estimates that by 2040 renewables will reach 74% penetration in Germany, 38% in the U.S., 55% in China and 49% in India.
As for subsidies, fossil-fuel consumption subsidies dropped in 2015 to $325 billion, from $500 billion This reflect both lower fossil-fuel prices as well as a subsidy reform process that has gathered momentum in several countries as they look at new strategies for long term infrastructure.
Its clear that renewable energy will not completely replace fossil fuel as it alone can’t meet the baseload generation needs anytime soon. However, an optimal solution is to use a combined approach of both traditional and renewable, and most governments are shifting their subsidy policies accordingly.
CO2 Emissions are another major plus for solar, not only do solar production facilities produce relatively lower environmental maladies than coal and gas production, but with no emissions in the burning operations process, this can make a major impact.
New job creation from solar and renewable is projected to add net new jobs to the economy. Rising automation in extraction, overcapacity, industry consolidation, regional shifts, and the substitution of coal by natural gas in the power sector are resulting in minor job losses in regions. Globally, the renewable energy sector employed 9.8 million people in 2016 – a 1.1% increase over 2015. In 2016, jobs in renewables, excluding big hydro, increased 2.8% to 8.3 million. This is a replacement of labor force to some extent, as well as net new jobs in many countries.