Demystifying Renewable Power Generation Costs

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Presentation to IRENA's expert meeting on the social acceptance issues surrounding renewables. This presentation focusses on some of the new myths (as a result of recent cost reductions) and some more persistent older myths about the costs of renewables.

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Demystifying Renewable Power Generation Costs

  1. 1. IRENA’s Costing Analysis: Social Acceptance Issues October 2013 Michael Taylor mtaylor@irena.org IRENA Innovation and Technology Centre
  2. 2. COSTING….WHY? AND…. RELEVANCE TO SOCIAL ACCEPTANCE 2
  3. 3. Rationale and goals • Renewable energy can meet policy goals for secure, reliable and affordable energy and access. • Lack of objective and up-to-date data is a barrier • Cost declines, rapid for some renewables • But, decision making is often based on:  outdated numbers  opinion, not fact based • IRENA to strive to become THE source for cost data • Goals:  Assist government decision-making, allow more ambitious policies  Fill a significant information gap 3
  4. 4. Costing and Social Acceptance • Renewables can meet goals for secure, reliable and affordable energy; while improving access, environmental results and energy security. • But at what cost? Critical issues - level and rate of change • Also how to address misconceptions and misinformation?  Renewables cost too much…  They aren’t really getting cheaper….  High capital costs are a barrier….  Integrating them costs as much as the renewables themselves… • Cost work of IRENA can help provide the ammunition to address these issues 4
  5. 5. MYTH #1 RENEWABLES COST TOO MUCH….. 5
  6. 6. Power generation: Key findings 6 • Renewables now THE economic solution off-grid and for mini-grids, increasingly competitive for grid supply • Dramatic cost reductions for Solar PV. Onshore wind competitive at best sites, CSP has great potential. Hydropower, geothermal and biomass more mature but low cost • Equipment cost declines and technology improvements LCOEs are falling
  7. 7. LCOE ranges and averages 7
  8. 8. Hydropower • Mature technology, flexibility in design in many cases • Lowest cost electricity of any source in many cases • Importance will grow with penetration of variable RE 8
  9. 9. Advanced biofuels 9
  10. 10. MYTH #2 THEY AREN’T REALLY GETTING CHEAPER 10
  11. 11. The LCOE of wind © IRENA 2013 11 Higher capacity factors from improved technology Wind turbine cost reductions
  12. 12. PV modules prices 12
  13. 13. Future cost reductions: An aceleration for wind & CSP? A slowing for solar PV? 13 Source: Bloomberg New Energy Finance, February, 2011 H2 2012 Chinese turbine prices 2012
  14. 14. An emerging issue: Balance of system costs and O&M costs to be a problem? 14 Cost reduction pass-through will be strongly tied to success in reducing BoS costs Source: Seel, Barbose and Wiser, 2012 As equipment costs fall, O&M’s share of LCOE will rise and may slow LCOE reductions
  15. 15. MYTH #3 HIGH CAPITAL COSTS ARE A BARRIER TO RENEWABLES 15
  16. 16. Well only if you have cheap gas or oil….. 16 Pulversied coal supercritical Source: IRENA and BREE, 2012 Gas OCGT-CCGT Nuclear They can be a barrier full stop! for power generation technologies, except where abundant oil and gas exist cheaply…
  17. 17. MYTH #4 INTEGRATION COSTS OFFSET THE BENEFITS OF RENEWABLES 17
  18. 18. Integration costs • Are not yet a global issue or constraint • 1.3 billion people without access to electricity • Any system relying on oil-fired generation can integrate high percentages and still reduce costs • There are grid-integration benefits in many developing countries with poor system reliability • But the issues are real for those early adopters in OECD • Requires careful co-ordination and planning to minimize • Using “yesterdays” solution is not the answer 18
  19. 19. Integration costs widely overstated 19 PV Parity Project: For penetration of 2-18% NO demand response! NEA (2013) for 10% solar…
  20. 20. PLANS FOR THE IRENA RENEWABLE COSTING ALLIANCE 20
  21. 21. Rationale and Plans • Analysis to date has been based on low hanging fruit • Engage with business: The Alliance will work at a technical level on data and its availability • Alliance members share, confidentially, their data on real world project costs • Entirely voluntary, we work together for mutual benefit • Establishment period now, offical launch at Assembly • Goals:  more data, better data, a greater focus on analysis of data 21
  22. 22. Who can be a member? • Anyone with real world renewable project costs and performance data • Utilities, project developers, community associations, individuals, research institutions, banks, development banks, etc. • What if I only have one piece of the cost puzzle?  It depends, talk to us: for instance, data on the cost of equity and loans very interesting….only installed PV costs (no CF) in 10 homes in Munich, maybe not… 22
  23. 23. Structure Member countries: Steering group for costing analysis focus One workshop a year Must nominate institution to deliver data Quarterly newsletter Alliance Members: Provide data, confidentially One workshop a year Ability to query the database in detail Quarterly newsletter Observers: Quarterly newsletter Mailing list for new publications/analysis 23
  24. 24. Renewables are increasingly competitive, but more needs to be done to fulfill their potential… 24 IRENA is part of the solution

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