Windeconomics: Auctions continue to see wind prices fall

WORLDWIDE: Two sets of recent auction results show that wind can now undercut coal as an electricity-generating source, but it faces stiff competition from solar photovoltaics.

The Australian Capital Territory (ACT) is running a series of auctions for solar, wind and storage, offering bidders a guaranteed price for their electricity. Although run by ACT, the projects can be anywhere in Australia.

In the last auction, the 109MW Hornsdale wind farm, stage 3, 150km north of Adelaide, secured a 20-year contract at A$73/MWh (US$56/MWh. A wind project in New South Wales secured a contract at A$67/MWh.

The next solar auction results are expected soon, but a report from the Australian National University in late February put the cost of solar PV at US$60/MWh. The authors put the generation cost for new coal-fired power stations at around $62/MWh.

The main focus of this report was to demonstrate that Australian electricity could be sourced 100% from renewables, and at modest costs. Wind and PV could supply 90% of electricity, with the remainder coming from hydro and biomass.

At 2016 prices, the authors suggest the overall cost of energy would be around $72/MWh, about 15% higher than the cost of using the existing mix of generation.

However, by assuming modest cost reductions for wind and PV — to $38/MWh — then the total cost of the all-renewables system falls to $58/MWh - about 6% less than the cost of a coal-fired option.

The authors argue that their estimates are conservative and that the viability of the all-renewables system could be improved by increased use of demand-side management, including optimised charging schedules for electric cars.

Costs of variability

The Australian report estimates that additional pumped storage hydro would be required for a 100% renewables system, but the additional cost of balancing would be modest — in the $19-23/MWh range.

A new report from the UK Energy Research Centre has examined this question in depth and concluded that these extra costs are modest up to a wind energy penetration level of about 30%, with all the studies reporting costs less than £10/MWh ($12.4/MWh).

Above 30% there is some scatter in the data, with some estimates higher than the Australian figures.

More low prices: India

Indian auction results published in February delivered wind at $52/MWh and solar at $45/MWh. The contracts run for 25 years, but are not indexed-linked. The auction prices are slightly below the Australian figures.

Indian wind turbines are cheaper than the global average - at about $770/kW - and installed costs are just under $1,000/kW, which is about 30% below the global average. However, interest rates in India are above average, and lenders may not be prepared to offer loan periods longer than about 15-18 years.

The more stringent financial criteria reduce the advantages of the lower installed costs, with the result that the Indian wind auction prices are only about 10% lower than the Australian prices.

Good prospects for US wind in near term

The United States Energy Information Administration published its 2017 Annual Energy Outlook (AEO) in January.

The key message for renewables is that the retirement of old, less efficient fossil-fuel units, and the near-term availability of renewable tax credits is likely to result in natural gas and renewables being the primary sources of new generation capacity.

The underlying assumptions are published in a table summarising the key cost and performance characteristics of the electricity-generation technologies. Wind farms commissioned in 2019, at $1,686/kW are expected to be 2.5% more expensive than wind commissioned in 2018, reported in the 2016 AEO.

Solar PV, however, at $2,277/kW, is expected to be some 8% cheaper.

Nuclear, for commissioning in 2022, is expected to be some 4% cheaper at $5,880/kW. The capital costs of most of the other thermal technologies rise slightly.

There are wide variations in the projections for the installed costs of wind, from $1,536/kW in the mid-south, to $2,498/kW in the north-east.


Blakers, A, Lu, B and Stocks, M, 100% renewable electricity in Australia. Australian National University, 2017 Analysis of cost implications of operating the Australian electricity system with 100% renewables shows costs would be modest and less than building new coal-fired generation capacity.

Heptonstall, P, Gross, R and Steiner, F, The costs and impacts of intermittency - 2016 update, Imperial College, London, UK, February 2017 Systematic review of the evidence on the costs and impacts of intermittent electricity generation technologies.

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