“Turning to renewables for new power generation is not simply an environmentally conscious decision, it is now overwhelmingly a smart economic one,” said Adnan Amin, who has the numbers to back it up. Amin heads the International Renewable Energy Agency (Irena), and the numbers can be found in a new report the agency released at its annual summit on Jan. 13 in Abu Dhabi.
In most of the world, renewable electricity is already competitive with fossil-fuel power. Better still, the report makes the extraordinary prediction: By 2020, all forms of renewable electricity will be consistently cheaper than power produced by burning fossil fuels.
Today, fossil-fuel power typically costs between $0.05 to $0.17 per kWh. By comparison, consider the global-weighted average cost of electricity generated by various forms of renewables in 2017, as calculated by Irena: hydropower ($0.05 per kWh), onshore wind ($0.06 per kWh), bioenergy and geothermal ($0.07 per kWh), and solar photovoltaics ($0.10 per kWh).
Offshore wind and solar thermal power aren’t yet competitive with fossil fuels, but that should change by 2020, Irena predicts, with the cost of solar thermal falling to $0.06 per kWh and offshore wind to $0.10 per kWh. The drivers will be technology development, competitive bidding systems, and large base of experienced project developers across the world.
But cost isn’t the only consideration in the wider adoption of renewable energy. Power from solar photovoltaics and the wind are intermittent. So even if the costs of generation fall, other sources of power—typically fossil fuels or nuclear—will be needed to fill in the gaps, and those producers will be able to charge more.
Varun Sivaram, an expert in solar power at the Council on Foreign Relations, has shown that intermittent power sources suffer from value deflation as they become more important in the energy mix. In a simulation of California’s power market, he found that “when a grid relies on solar power for 15% of its total energy needs, the value of solar falls by more than half,” Sivaram writes in his upcoming book Taming the Sun. “At 30% solar power, solar’s value declines by more than two-thirds.”
The way to overcome these problems is to use more stable sources of low-emission power such as hydropower, geothermal, solar thermal, or nuclear. But hydropower and geothermal are dictated by geography, a constraint that’s not easy to overcome. In some places, solar thermal power could be an option, but it remains relatively more expensive than other renewable sources. Nuclear power faces steep capital costs and negative public perceptions. Another option is to develop large-scale energy storage, such as huge batteries, but this remains a very expensive proposition.
If the world is to continue to adopt carbon-free energy sources, the renewables industry will have to overcome such problems through investment in basic research, which Sivaram argues isn’t happening as much as it should.