WindEconomics: Ongoing cost reduction over next 35 years

WORLDWIDE:The cost of wind in relation to other energies continues to be researched globally. The latest report worthy of consideration, concluded that wind energy in Germany will become progressively cheaper than nuclear in the years ahead and generating costs will still be lower than those of photovoltaics (PV).

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This finding is consistent with the "generating costs" analysis in our February issue.

The April report, Comparing the Cost of Low-Carbon Technologies: What is the Cheapest Option?, was prepared by Prognos, a European forecasting company, on behalf of Agora Energiewende, a consultancy that aims to understand the problems associated with the phase-out of nuclear energy in Germany and discuss feasible policy measures to assist the growth of renewable energy sources.

This most recent report tracks the cost of onshore wind, photovoltaics and nuclear for the next 35 years and briefly looks at other generating options, including carbon capture and storage and offshore wind. It also looks at system costs - the total costs of running a complete electricity system. This deals with the issue, often raised by critics, that gas plants must be built or retained to meet demand when wind energy production is low.

The cost of nuclear — based on the contract provisionally agreed for the Hinkley Point C power station in the UK — is EUR 112/MWh in 2013 money, throughout the 35-year period of the contract. Prognos estimates the cost of new wind at the start of the contract will be around EUR 75/MWh, falling to around EUR 45/MWh after 35 years.

The latest German tariffs allow for a steady reduction in generating costs that reflects the falling costs of the technologies. For wind, the reduction is 1.5% per annum, but the reduction for PV is more complex and depends on the amount of capacity that is installed in each year. Prognos assumes that the starting tariff for PV is about EUR 94/MWh, falling to about EUR 57/MWh after 35 years.

If these digression rates are realised, the cost of PV by 2055 will be around half the cost of nuclear. These generation cost trends are illustrated in the chart below.

As the remuneration for particular wind and PV plant varies, depending on the date of commissioning, the report also makes an estimate of the average cost of the renewable technologies over the 35-year period. For onshore wind, the estimate is EUR 56/MWh for a high wind speed site and up to EUR 73/MWh for a low wind speed site. For offshore wind the estimate is EUR 95/MWh, and for PV, the estimate is EUR 73/MWh.

The report notes that, for carbon capture and storage technologies, "no real cost figures are available", but cites UK Department of Energy and Climate Change estimates at EUR 112/MWh for gas and EUR 126/MWh upwards for coal.

Power system cost

An examination of the total costs of operating a power system enables the costs of backup capacity to be taken into account and so gives a more complete picture. The report considered the operation of the German electricity network over a year and, for ease of presentation, scaled the numbers down so that it had an average demand of 1GW.

Renewables of 50%

Prognos then looked at two scenarios: one where 50% of the electricity was supplied by nuclear, and one where 50% was provided by a mixture of wind and photovoltaics. The results, detailed in the graphic below, show that, due to the lower load factor of wind and PV, the plant capacity was significantly higher where wind and photovoltaics provided 50% - 3.98GW compared with 1.48GW - but the annual costs were 21% lower.

The analysis was based on current costs of renewables, and so their cost advantage is likely to increase in the years ahead, if, as is likely, onshore wind costs continue to fall. The system-wide study examined the hourly variations in the output of wind and PV, giving the added weight to the conclusions.

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