WindEconomics: PV narrowly beats wind in Germany

GERMANY: The Fraunhofer Institute in Germany has released a comprehensive report comparing the generation costs for PV and wind with those of the fossil-fuel generation technologies.

PV costs are lowest in the south of Germany, where the solar resource is better (pic: Parabel)
PV costs are lowest in the south of Germany, where the solar resource is better (pic: Parabel)

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It concludes that large photovoltaic systems are capable of delivering the lowest generation costs at €37.1/MWh — marginally lower than the cheapest wind at €39.9/MWh.

The lowest PV cost comes from an installation costing €600/kW, located in the south of the country, where the solar resource is best. The cheapest wind cost is linked to an onshore installation costing €1,500/kW, with a capacity factor of 36.5%.

Fraunhofer suggests that the range of generation costs for offshore wind is between €74.9/MWh and €137.9/MWh and puts the cheapest fossil generation cost (for lignite) at €45.9-79.8/MWh.

The analysis includes estimates for generation costs from biogas facilities, with the gas derived from silage maize and pig manure.

Although this is a renewable-energy technology, the plant cost is substantial, and, in addition, there is a fuel cost, which was assumed to be €3/MWh.

Consequently, the lowest generation cost was calculated as €100/MWh — the highest of all the renewables technologies examined.

Cost of capital

Various factors need to be taken into account when making comparisons with data from other sources. The weighted average cost of capital (WACC) assumed is quite low — 2.1% (real) for large PV, 2.5% for onshore wind and 4.8% for offshore wind. (Using the same WACC for PV and onshore wind would make the generation costs almost equal.)

Nevertheless, the interest rates reflect the increasing maturity of renewable-energy technologies, making them more attractive to investors.

Other relevant factors are the assumption of a 25-year lifetime for PV and wind (20 years is more common) and the omission of grid connection costs.

The installed costs used by the institute are shown in the chart below, and range from €600-800/kW for large PV (above 2MW in size) up to €3,100-4,700/kW for offshore wind.

Although PV is cheaper to install than wind energy, its productivity is roughly half that of wind, which is why the generation costs are very similar.


In Germany, the best sites for PV are in the south of the country, where the productivity — in kWh/kW — is almost 50% higher than in the north.

With wind energy, the situation is reversed, with the coastal regions in the north typically being 75% more productive than those in southern Germany.

Fraunhofer puts the productivity in the best offshore zones at 40% higher than in the coastal onshore sites, with average wind speeds up to 10.3 m/s.

All the assumptions about wind speeds are based on the use of wind turbines with hub heights of 120 metres, both onshore and offshore.

Into the future

The competitive position of wind and photovoltaics is expected to improve into the future, driven partly by rising fuel prices and increases in the cost of carbon dioxide, and partly by lower PV and wind costs.

A learning ratio is used, which expresses the percentage reduction in cost for each doubling of capacity. For the renewables, the report suggests a learning ratio of 15% for PV and 5% for wind.

At anticipated rates of development, PV capacity is likely to double within 3.5 years, whereas wind (depending on the scenario) doubles in about six years.

Based on these assumptions, the cheapest PV is expected to cost around €30/MWh in 2025, onshore wind around €38/MWh, and offshore wind around €72/MWh.

As offshore projects with lower prices, for earlier dates, have already been announced, this suggests that the learning rate assumed for offshore wind may have been somewhat conservative.

At a glance — This month's report conclusions

Study on electricity generation costs, Fraunhofer ISE, Germany, March 2018 Reviews and compares electricity generation costs from PV, wind, biogas, gas and coal. Concludes large PV is cheapest, followed by onshore wind. The gap between PV and wind will widen into the future

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