On the Economics of Wind and Solar Power

Originally published at The Beam | On the economics of wind and solar power — by Lion Hirth

“Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?”

November’s COP22 climate summit of Marrakech gave climate policy fresh tailwind, after the blow of Donald Trump’s election. Even without a strong global treaty, national climate policies are multiplying — at least a certain type of policies. While the policy that economists often recommend — putting a price on greenhouse gas emissions — remains patchy, as a recent World Bank report shows, subsidies for renewable energy are booming: no fewer than 145 countries support renewables today. Germany’s Energiewende is a prominent, but not the only example: Obama’s Clean Power Plan features renewables as a centerpiece of climate policy, India’s National Solar Mission includes a 100 GW solar power target. In addition China is said to be considering a 200 GW target, and Morocco has announced the building of the largest solar power facility on the planet. Nearly half of all newly added electricity generation capacity was based on renewables. In ten countries, wind and sun deliver more than 10% of electricity consumed. These includes Denmark (43%), Portugal (24%) and Spain (23%).

Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?

On the cost side, the economics of renewables look impressive. The costs of wind power have dropped significantly. On average, wind now generates electricity at $70–80 per Megawatt-hour (MWh) globally, as reported by the two international think tanks IRENA and IEA. Ten years ago, a roof-top solar array for a single family home cost more than $50,000 — today it sells for less than $14,000. (America’s LBNL and Germany’s Fraunhofer ISE provide more data.) Germany, which receives less solar radiation than southern Canada, now generates solar power at $90 per MWh. The United Arab Emirates have tendered a solar power station for $58 per MWh and recent auctions in Chile, Peru and South Africa have resulted in even lower prices.

On the economics of wind and solar power
Join Our List. Click the image to get the best of The Beam delivered to your inbox for free.

In some countries, wind and solar power are now cost-competitive with coal- and natural gas-fired power plants, even when carbon emissions are not priced. However, cost structures are very country-specific, and cost-competitiveness is not universal. Renewables tend to be cheaper where it is windy or sunny, where investors have access to low-cost finance, where fossil fuels are pricey, and where emissions are priced. In many places, however, coal-fired power plants remain the cheapest option for producing electricity, driving the renaissance of coal. Still, for renewables to have caught up with fossil plants in cost terms represents a huge success for wind and solar power.

Costs are, however, only one side of the competitiveness equation. The other is value. Merely comparing electricity generation costs between different plant types is misleading, as it ignores the fact that the economic value of electricity from different power stations is not the same. This is because on wholesale markets the price of electricity fluctuates from hour to hour (or even minute to minute). Some power plants produce electricity disproportionately at times of high prices (so called “peaking” plants), while others produce constantly at low prices (“base load” plants). This little detail has striking consequences for the economics of wind and solar power. Paul Joskow and Michael Grubb observed this a while ago.

On the value side, the outlook for renewables is…

Read the entire article here.

Subscribe to The Beam here.

Renewable Energy covers 100% of new demand in China

China covered all its new energy demand with renewable energy in 2015 – and there was still plenty left to spare

China is drawing evermore power from renewable energy. Greenpeace says the country's growth in wind and solar energy exceeded new electricity demand. Ningxia Wind Farm in northern China
China is drawing evermore power from renewable energy. Greenpeace says the country’s growth in wind and solar energy exceeded new electricity demand. Ningxia Wind Farm in northern China. Image credit Lang Rover Our Planet / Flickr

China installed half of the world’s new solar and wind capacity last year.

But the Chinese aren’t just beefing up their renewable capacity, they’re also cutting down on coal. The new clean energy power plants along with a shift away from heavy industry, mean that coal use in China has dropped over the last three years… Continue reading Renewable Energy covers 100% of new demand in China

Wind Turbines Save the Galápagos Islands

The Wind Turbines Saving the Galápagos Islands

Charles Darwin made the Galápagos Islands synonymous with the idea of change as a means of survival. In the 19th century, the scientist marveled at how similar endemic finches, mockingbirds and giant tortoises across the 19-island archipelago were uniquely adapted to individual islands and later theorized that this ability to adapt determines whether a species will survive long term.

Between 2007 and 2015, three 157-foot wind turbines have supplied, on average, 30 percent of the electricity consumed on San Cristóbal, replacing 2.3 million gallons of diesel fuel and avoiding 21,000 tons of carbon dioxide emissions…

Wind Turbines in the Galápagos Islands
Responding to the call for the introduction of renewable-based energy on the Galapagos Islands, the Global Sustainable Electricity Partnership (GSEP) developed and implemented Ecuador’s first large-scale wind project on the Island of San Cristóbal and one of the largest wind-diesel hybrid systems in the world. The 2.4 MW wind park features three wind turbines, each generating 800 kW to provide approximately one-third of the island’s annual electricity needs. The wind park is complemented by two 6 kW photovoltaic systems which have produced 136,000 kWh of electricity. The grid-connected system has been operated by EOLIC S.A., the Galapagos Wind Company, since 2007. Image and caption courtesy of GlobalElectricity.org

Continue reading Wind Turbines Save the Galápagos Islands

Solar & Wind Catch Up With Coal & Gas

Solar And Wind Catch Up With Coal and Natural Gas Across The Globe

In some regions of the U.S., the cost of utility-scale solar electricity rates are *cheaper than the cost of the fuel alone* for natural-gas plants.
In some regions of the U.S., the cost of utility-scale solar electricity rates are cheaper than the cost of the fuel alone for natural-gas plants. Image courtesy of understandsolar.com

As solar panel prices have decreased by more than 80 percent in the past decade and wind turbines have also seen dramatic price falls, both types of renewable energy have become much more competitive.

Meanwhile, fossil fuels received $583 billion in 2014 globally in subsidies — even as renewable energy continues to receive a much lower level of subsidies ($124 billion in 2014).

Scotland Powers 960,000 Homes via Wind Power


According to a report from the Scottish Government
wind farms generated record amounts of power in the first quarter of 2015.

The same report confirms record levels of renewable energy generation were achieved in the country throughout 2014, with almost half of all electricity demand met via renewable energy generators.

Ardrossan, Scotland wind farm
Wind generated record amounts of power in Q1 of 2015. Statistics also confirm 50% of all demand was met via renewable energy in 2014. Ardrossan, Scotland wind farm image courtesy of Vincent van Zeijst – Own work, CC BY 3.0.


Wind Power
in Scotland

Wind power is Scotland’s fastest growing renewable energy technology, with 5328 MW of installed capacity as of March 2015. This includes 5131 MW of onshore wind and 197 MW of offshore wind.

There is further potential for expansion, especially offshore given the high average wind speeds, and a number of large offshore wind farms are planned.

The Scottish Government has a target of generating 50% of Scotland’s electricity from renewable energy by 2015, and 100% by 2020, which was raised from 50% in September 2010.

The majority of this new energy capacity will come from wind power. — Wikipedia

If Scotland meets it’s planned target of 100% renewable energy generation in 2020, it will join a growing list of foresighted nations that are powered by clean energy.