WindEconomics: Beating the $30/MWh barrier

WORLDWIDE: The International Renewable Energy Agency (Irena) has reported on recent trends in auction prices for wind, solar, hydro and biomass.

The wind results are shown in the top chart, together with a selection of the cheapest solar prices.

In locations with a good solar resource, solar PV can deliver the cheapest electricity, as shown by the lowest price of $24/MWh.

Two other solar auctions delivered prices below $30/MWh, which was the cheapest price for wind, in Morocco.

Auctions in Mexico and Peru delivered wind prices at around $36/MWh, while the most expensive result came from Canada at $66/MWh.

There were several solar results in the $60-80/MWh range, with Germany just outside at $81/MWh. The highest result came from Canada at $120/MWh.

Of the three hydro auctions reported, Brazil delivered the lowest price at $57.5/MWh, the highest again came from Canada at $135/MWh.

The wide spread of auction prices is due to variations in the wind and solar resources, and differing financial arrangements in the various locations.

The summary report does not give details of these, although they may be included in the more detailed report, which had not been published as Windpower Monthly went to press.

However, in a separate report, REthinking Energy 2017, Irena compares the levelised costs of the principal renewable-energy sources with each other and with those of fossil fuels. This analysis uses a 7.5% standard weighted average cost of capital.

There is still a wide range of estimates for all technologies, due to variations in construction costs and wind resources.

Looking at the average values, only hydropower and geothermal are cheaper than onshore wind, for which Irena suggests an average of about $55/MWh. Low geothermal costs only apply where hot water or steam is accessible near the surface.

The closest competitor to onshore wind is biomass, where fuel costs may be the main reason for variations in the estimates. Irena puts the average cost of PV at about $135/MWh, slightly higher than offshore wind, but the minimum PV price is around $51/MWh, about half the minimum for offshore wind.

Although some of the prices realised in the auctions were below the minimum levels quoted in the REthinking Energy report, this is probably due to the attractive financing arrangements associated with some of the auction prices.

From cost to value

This is the subtitle of the Next-Generation Wind and Solar Power report from the International Energy Agency (IEA).

While generation-cost comparisons are widely used as a guide to decide which generation sources should be used in a power system, the value of new generation is a related issue to consider.

Ideally, value should be greater than cost for the consumer to benefit from lower electricity prices. In practice, this is often not the case.

PV and wind have now reached the point where cost and value are similar, although the exact relationship between the two depends on the electricity system.

The IEA examines the value/cost ratio for several electricity networks and shows that in some locations, such as South Africa, the value of wind to the system can exceed its cost. High values for wind and solar are realised when there is a good match between fluctuations in demand and renewable power.

In northern Europe, winds are stronger in the winter, when demand is higher, but there can still be periods of very low wind.

California has higher values, as air-conditioning demand rises with temperature, and output from PV plants also increases with the strength of the sun.

The value of wind energy falls as the penetration level increases as more system reserves are required to cope with variability. Ways to mitigate this decline are emerging, including the use of wind turbines with lower power output ratings for their size, as discussed in the February issue.

AT A GLANCE — THIS MONTH'S REPORT CONCLUSIONS

Renewable Energy Auctions, Analysis 2016. International Renewable Energy Agency, 2017 Summarises auction results in renewable energy for 2016 from around the world.

REthinking Energy 2017, Accelerating the global energy transformation. International Renewable Energy Agency, 2017 Further development of renewable energy is feasible and desirable.

Next-Generation Wind and Solar Power. From cost to value, International Energy Agency, 2016 Case studies in integrating variable renewable energy include Brazil, Denmark and South Africa.

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