Wind energy costs approach nonrenewable levels

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According to the International Renewable Energy Agency (IRENA), wind energy and other renewable technologies are producing electricity at costs that are comparable to their nonrenewable counterparts — and it’s happened so rapidly that public perception is yet to catch up.

“Renewable power generation technologies can now provide electricity at very competitive levels,” said Michael Taylor, a senior analyst at the IRENA Renewable Energy Cost Status and Outlook division.

“Yet despite these facts, many of the world’s decision-makers have yet to grasp how competitive renewables have become. Often, vested interests lead to propagation of the myth of ‘costly’ renewable energy. In other cases, the change has simply come so fast, and so unexpectedly, that public information has yet to catch up.”

According to IRENA’s estimates, the levelised cost of energy (LCOE) of onshore wind in Europe fell by as much as 65% between 1988 and 2014. LCOE is a metric used to measure the cost of a generator’s energy, calculated by taking the system’s expected lifetime cost and dividing it by the system’s predicted power output.

LCOE generated from wind is now said to be below £0.038/KWh in high resource areas, on a par with the average cost of coal-fired power (£0.037/KWh), while gas-fired power is slightly lower at £0.031/KWh.

Benefits of renewable power such as the absence of exposure to fuel price volatility are not accounted for in such calculations, nor are environmental factors.

“If the environmental and health costs of fossil fuels were properly priced at realistic levels, the situation would be even more favourable for wind,” Taylor added.

One of the main drivers for improvements in the levelised cost of wind power has been the growth in the scale of the wind market from a cottage industry to a major industrial sector with a number of global players. This has allowed economies of scale to be exploited, resulted in more efficient and competitive supply chains, and encouraged competition to drive down costs. At the same time, technology improvements have also had a large impact.

Future cost reductions in wind energy will largely hinge on driving down operation and maintenance (O&M) costs, which currently account for between 20 to 25% of the LCOE of an onshore wind project.

According to Taylor, future cost reduction opportunities will increasingly come from a balance of project costs, O&M and financing costs.

“The European wind sector needs to continue to invest in R&D, look increasingly to efficiency opportunities in the supply chain, as well as looking to O&M cost reductions. It is also critical that policy settings provide long-term stability for industry to plan and operate in,” he concluded.