What's the renewable energy cost? The answer will vary by technology, but on average, onshore wind and solar PV cost about $0.06 per kilowatt-hour.
The most competitive solutions will involve a mix of these technologies, including demand-side management and energy storage.
Regardless of the exact costs, intermittent RE is still too expensive to compete with fossil fuels in price.
Let's look at some of the factors that affect the cost of renewable energy.
What is Renewable Energy?
Renewable energy encompasses the utilization of energy harnessed from naturally occurring sources that have the unique capacity to naturally replenish themselves over the course of time.
This intrinsic ability for renewal not only distinguishes them but also underpins their status as sustainable and ecologically sound alternatives for energy generation.
Renewable energy sources include solar, wind, hydropower, geothermal, and biomass energy.
The Importance of Evaluating Costs
Evaluating costs is crucial for decision-making in different areas. It helps individuals, businesses, and governments make informed choices for financial stability and resource allocation.
In personal finance, evaluating costs helps manage budgets, distinguish between essential and discretionary expenses, and ensure financial security.
It prevents overspending, debt, and financial hardships, fostering control and preparedness for the future.
Cost evaluation is key for businesses to optimize efficiency. Assessing expenses helps identify savings, streamline processes, and boost profitability.
It also aids in project viability, resource allocation, and competitive pricing in dynamic markets.
4 Factors Influencing Renewable Energy Costs
Various intricate factors intricately interplay to shape the costs associated with renewable energy generation.
These multifaceted influencers provide a nuanced understanding of the dynamics behind the pricing of sustainable energy sources.
- Technology Type and Maturity: Renewable energy consists of various technologies at different stages of development. Mature technologies like hydropower are cheaper due to their established nature while emerging innovations like advanced solar panels require higher upfront investments.
- Resource Availability: Earth's geography affects renewable energy costs. Regions with abundant resources like sunlight, wind, water currents, and geothermal heat can produce energy more affordably because they can harness these resources with fewer infrastructure investments.
- Scale of Installation: Renewable energy projects with large scale have cost advantages due to economies of scale. As projects grow in size, costs per unit of energy decrease because of better resource utilization, efficient operations, and increased efficiency.
- Regulatory Environment: Government regulations greatly impact the cost of renewable energy. Progressive policies such as feed-in tariffs and renewable energy targets can stimulate investment, innovation, and competition, ultimately reducing costs.
Comparing Renewable Energy Costs with Conventional Sources
Solar PV Cost
In 2010, the cost of utility-scale solar power was $378 per megawatt-hour (MWh), but it has since dropped to as low as $68 per MWh, making it more affordable than coal, onshore wind, and nuclear energy.
This reduction is attributed to increased competition and lower capital expenses. Over the past decade, the cost of photovoltaic (PV) technology has plummeted by over tenfold.
However, converting solar energy from DC to AC results in a 10% loss of energy. Given that solar power reaches its peak for an average of 3.63 hours daily over a 20-year period, and with panels lasting 30 years or more, solar PV can cost homeowners $68 per MWh or less.
The International Renewable Energy Agency (IRENA) noted a drop to $68 per MWh by 2019, highlighting significant progress, yet installation costs for rooftop systems remain above $800 per MWh for most homeowners.
Costs vary by location, being cheaper in India compared to China. The U.S. Department of Energy's SunShot initiative aims to make solar electricity cost-competitive by 2030, achieving 90% of this goal within five years of its launch.
Additionally, with potential congressional approval, up to $65 million in new funding could further reduce solar electricity costs to $0.02 per kWh in the next five years.
Onshore Wind Costs
Germany has set a maximum price of 6.20 euro cents per kWh for onshore wind turbines from 2019. This aims to increase applications while keeping consumer prices low. Developers are worried about political uncertainties.
Between 2010 and 2018, Europe's offshore wind project costs dropped by 28%, most notably in Belgium.
Germany and the UK also saw a 24% decrease. This is due to economies of scale, suggesting costs may reach $0.06 to $10/kWh by 2020.
However, the absence of a US supply chain and Jones Act-compliant vessels has kept prices high in the US at $160 per MWh in 2017, in contrast to the UK's $0.06/kWh.
Onshore wind and solar PV are now cheaper than coal and fossil fuels in Asia and North America at $0.06/kWh. Although concentrated solar power and solar PV are not competitive yet, upcoming price reductions will make them viable options.
Government initiatives are crucial for creating a market where solar PV and onshore wind can compete, leading to global energy cost reductions.
Geothermal energy costs $68/kWh to produce, with high initial investment but low ongoing expenses, making it a sustainable power option.
In the U.S., a geothermal field and power station cost $2,500 per kW to establish. Operational and maintenance costs range from $0.01 to $0.03/kWh, influenced by system availability.
Geothermal power in the US is more expensive than onshore wind and solar power. Berkshire Hathaway, which owns rights to geothermal resources in the Salton Sea, struggles to sell its electricity because other renewables are cheaper.
The US Department of Energy's geothermal research budget is $1 billion this year, with an extra $200 million until 2024 for commercialization.
Global geothermal investments rose to $675 million in H1 2020, contributing to a 5% growth in renewable energy investments. Geothermal production capacity is estimated to reach 24 gigawatts by 2024.
Ormat Technologies, Inc., a leader in geothermal energy, has signed a Power Purchase Agreement with the Southern California Public Power Authority.
They will provide 16MW of energy and sell the remaining 14MW. This is the first geothermal plant in CAISO in 30 years.
Hydropower, contributing to 6% of the nation's energy, is considered a renewable energy source with water as its fuel, generating electricity at a cost of about $68 per megawatt-hour.
Despite being pricier than solar, wind, and natural gas, it remains cheaper than certain energy efficiency upgrades, like window insulation, and constitutes 52% of the US's renewable electricity.
Known for its cost-effectiveness globally, hydroelectricity is vital for electric system stability and grid reliability through various ancillary services. With the Levelized Cost of Electricity (LCOE) reaching as low as $0.020 per kWh for significant projects, it's historically been the most economical electricity source.
Last year, the global average cost for new hydro capacity was USD 0.06/kWh. In contrast, solar photovoltaic costs have plummeted from $378 per megawatt-hour in 2010 to $0.68 per kWh in 2019, making renewable sources more competitive.
Onshore wind energy now costs near $0.13 per kWh. Despite hydropower's affordability, transitioning to fully renewable energy remains a challenge.
A study in PLOS One highlighted that carbon dioxide emissions from reservoirs, influenced by soil erosion rates, are significant, emphasizing the environmental impact of even renewable sources like hydropower.
The World Bank notes that bioenergy production costs $68 per kilowatt-hour, predominantly in the Chinese provinces of Sichuan, Yunnan, and Qinghai.
In rural regions, these expenses exceed 5% of GDP. To neutralize a gigatonne of CO2 annually under the “B90-2015-PC” scenario, bioenergy production and economic costs converge by half.
The cost calculation includes the present value of crop revenues, minus storage and harvesting losses, with the cost per hectare (Ct) and yield (Yt) factored in. It also accounts for the land's opportunity cost but distinguishes it from reforestation costs.
If miscanthus and switchgrass costs align, bioenergy becomes more affordable, especially in Southern Missouri compared to other Midwestern areas.
Utilizing marginal lands further reduces costs due to lower land opportunity costs, offering long-term savings on agrochemicals and land for farmers.
Where to Access Renewable Energy
- Residential Solar Panel Providers: Homeowners can collaborate with solar panel providers for self-sustained energy. These companies offer consultation, installation, and maintenance for hassle-free residential solar power. They are crucial allies for harnessing renewable energy at home.
- Commercial Renewable Energy Companies: Many renewable energy companies help businesses transition to eco-friendly energy sources by providing customized solutions such as solar panels and wind turbines. They work closely with businesses to meet their specific energy needs and achieve renewable energy goals.
- Government Initiatives and Programs: To boost renewable energy, governments offer grants, incentives, and resources, aiming to encourage adoption in various sectors. By providing financial assistance and promoting eco-consciousness, these initiatives drive individuals and businesses towards cleaner energy choices.
The landscape of renewable energy costs is ever-evolving, driven by technological advancements, resource availability, and supportive policies.
As the world continues its journey towards a more sustainable future, understanding these costs is essential for making informed decisions about energy sources.
By embracing renewable energy, we not only contribute to mitigating climate change but also stand to benefit from increasingly competitive and economically viable alternatives to conventional