Why renewable energy prices are declining?
As renewable energy is derived from renewable resources, very few resources are lost due to its production. Based on its source, they are of different types.
They are solar energy derived from the sun, wind energy derived from the motion of the wind, hydroelectric energy derived from the gravitational potential of water.
Biomass energy taken from Plants, Hydrogen and Fuel Cell derived from chemical reactions that produce energy, Geothermal Power derived from the Earth’s heat are the other renewable energies.
Air pollution and climate change are the two grave issues the whole world is facing now. Fossil fuel pollution drives the climate into new and less human friendly climate.
Fossil fuels account for 79% of the world’s energy production. Its burning causes 87% of the world’s CO2 emissions. It is neither safe nor sustainable. It has a large negative side effect.
It takes a massive toll on human life every year. Going renewable will save millions of lives and dollars per year. Renewable energy is the only energy system that is viable for a long term.
Almost a decade back, renewable energy was very expensive. Wind and solar farms required lots of space to create very little energy. Fossil fuels create a lot of energy from relatively lesser space.
Though the benefits of renewable energy were many, its adoption was almost impossible due to its high cost.
Countries like Denmark and Germany faced the highest energy prices in the world with their large amounts of renewable generation. Wind farms in Britain was twice as expensive as fossil fuels. Solar energy was no better.
Electricity from fossil fuels were far cheaper than electricity from renewables. This led to the domination of fossil fuels in global power supply in the past. This has dramatically changed in the last decade.
In most places in the world, power from new renewables is now cheaper than power from new fossil fuels. Costs for solar and wind power technologies falls year-on-year.
Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents per kilowatt-hour. Both onshore and offshore wind declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh respectively.
According to Bloomberg research, electricity can be produced from a wind farm at a cost of $80/MWh in Australian dollars. A coal-fired power station produces electricity at $143/MWh, while a gas baseload power plant produces electricity at $116/MWh.
The positive aspects of powering with renewable energy sources are overpowering. This has made many governments pump money into various renewable sources of electricity.
Some of the common and widely used renewable sources of electricity are wind turbines, solar farms, hydroelectric and geothermal plants.
Building a new power plant that burns fossil fuels was much cheaper in the past. Wind was 22%, and solar 223% more expensive than coal.
Unlike the present situation, earlier it was more expensive to build a new solar photovoltaic (PV) or wind plant.
The costs of fossil fuels depend on the price of the fuel that they burn and its operational costs. The operational costs of renewable energy are less as its fuel don’t have to be paid or dug out.
Renewable energy sources are infinite in Nature. The cost of renewable power was mainly the cost of its technology.
Solar and wind power are the two options that received huge popularity among the renewable energy sources.
Solar system installation was very expensive. Because of its hype there was an initial demand. This resulted in an increased production. It gave them a chance to learn how to improve production process.
Production increased with demand and as a result the prices started falling down. The renewables have low fuel costs and a small operating and maintenance costs. The LCOE of the renewables scale with the cost of its technologies.
The reason why renewable energy is being more profitable than fossil fuel is that they follow steep learning curves. With each doubling of the cumulative installed capacity their price declines by the same fraction.
Fossil fuels do not follow learning curves. We are moving ahead to a future where the disadvantage of fossil fuels and advantages of renewable energy will keep increasing.
Increased installation capacity has definitely brought down the price of renewable energy. Low-carbon technologies that were initially affordable only for satellites. Now it is capable of providing the cheapest electricity on the planet.
Fall in energy prices means an increase in people’s income. Powering with renewable sources helps to improve the economic growth along with reducing greenhouse gas emissions.
Statistics show that renewable energy prices are continually falling fast, of which wind and solar are at the lowest. The total cost of its infrastructure and operation beats fossil fuels by large margins. This trend is expected in coming years too.
Even utility-scale renewable energy prices are significantly lesser than coal and gas generation. This calls for a stability of energy prices across the globe.
Improving technologies and economies of scale have caused a decline in renewable prices over a decade. Increasingly competitive supply chains and growing developer experience have also contributed to this decline in price.
Utility-scale solar PV power has shown the sharpest cost decline at 82%. Concentrating solar power (CSP) has declined at 47%. Onshore and offshore wind made a cost decline of 39%, and 29% respectively.
Government energy subsidies is one of the main reasons behind the affordability of wind and solar energy.
People hesitate to go for renewable option because of its high upfront cost. To attract people towards renewable energy, many governments offer consumers and businesses subsidies.
Tax breaks, incentives and direct payment by the government actually helps in paying back a portion of the initial expense.
These monetary incentives reduce the end cost of choosing renewable energy sources. This helps the consumers who invest in green energy.
Increased installation helps in the reduction of costs. When more and more people invest in wind and solar, more research is done in this area.
Renewable energy being technologies, it improves with science. Intensive researches lead to the creation of more efficient technology.
Researches help to overcome many short comings of previous installations. Earlier many environmental factors caused product failures.
With research, they were able to balance resilience and efficiency of these technology. This made the installation cheaper and durable. The advances in green technology have a more significant influence.
With finite energy sources, fossil fuels are subject to market volatility. Its supply is controlled by various companies and governments thus creating a volatile market. Sustainable energy industry is not subject to market levity.
Renewable energy technologies are now at or near grid parity with fossil fuel generation. Some regions could achieve this even without subsidies.
This is made viable by the latest technologies that are deployed behind the meter and at utility scale.
As technology advances, the energy transition becomes a less daunting prospect. Latest technologies in research and development might deliver solar PV with a much greater efficiency. It could convert every bit of sunlight that hits the panel.
The decline in renewable energy costs have made it a cost-effective investment. Renewable energy has helped us reach an important turning point in energy transition.
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