WindEconomics: The fall and fall of wind and solar costs

Energy industry reports confirm wind and solar's price advantage over other sources and highlight strong job-creation potential

Each year, the US Energy Information Administration (EIA) publishes its assessment of the costs of new generation resources. The message from the latest edition, dated March 2021, is that wind and solar PV are now neck and neck in the lowest section of the cost range, and will continue to be so until 2026. Solar PV will be cheaper — by a small margin — in 2040.

Tracking movements in costs since the 2011 edition of the publication, it becomes clear that the energy landscape has undergone profound changes.

What’s in and what’s out?

An early omission from the list of technologies included in more recent reports is coal-fired generation, which last appeared in 2015. At that time, the estimated generation cost for plant commissioning in 2020 was $104/MWh (€87). All prices have been converted to 2020 levels.

Coal with carbon capture and storage, for commissioning in 2022, last appeared in the 2018 edition, at which point the price was estimated at $138/MWh.

However, some omissions are due to a lack of data. This applies to nuclear ($109/MWh in 2022) and solar thermal ($135/MWh in 2022), although both are actively being pursued.

In the 2021 edition, the only estimates for 2040 are for combined cycle gas turbines, geothermal (both close to $37/MW), solar PV ($29.7/MWh) and wind ($30.8/MWh).

A contributing factor to the rapid decline in the generation costs for most technologies has been increasing investor confidence. This has led to the use of a lower weighted average cost of capital. In 2011 a value of 7.4% was used, but it had fallen to 5.4% by the time the 2021 edition appeared.

n another section of the report, there are estimates for cumulative electricity generating capacity additions up to 2050. In the “reference case”, 114GW of wind is added, alongside 435GW of solar and 375GW of gas.

The most optimistic projection is the “low renewables cost” case, which would see 237GW of wind added, plus 657GW of solar PV.

As 14GW of new wind was installed in 2020 alone, a projection of 114GW over 30 years seems very modest.

By coincidence, a report by Wood Mackenzie for the American Clean Power Association suggests that 114GW of extra wind might be installed in just ten years, between 2020 and 2030, in the “base case” scenario — described as the “most likely”.

If a target of 50% renewables by 2030 were to be set, with appropriate administrative actions, then the amount of extra wind energy installed would almost double — to 218GW. In this scenario, onshore wind would account for 24% of US electricity generation by 2030, and offshore wind for 4.2%. Solar would account for 14.7% and hydro for 6.1 %.    

Benefits to the economy

The Wood Mackenzie report also includes estimates of capital spend and job creation in the period between 2020 and 2030.

In a scenario that assumes some action by the US federal government, total capital spend on renewables would be $691 billion, of which $239 billion would go to offshore and onshore wind. Transmission expansion, solar energy and energy storage would account for the remainder.

In a scenario that aims for 50% renewables by 2030, total capital spend would be $1,083 billion, with $424 billion due to wind. In the first scenario, 570,000 jobs would be created by 2030, and in the second 980,000. The majority of these — around two thirds — would be in construction and installation.

A similar analysis by WindEurope estimates that wind energy accounted for 300,000 jobs in 2019, and has an annual turnover of €60 billion ($72 billion). Of that, 65% adds value to the EU economy.

If the EU’s National Energy and Climate Plans are fulfilled, there would be 397GW of wind energy by 2030, contributing 30% of EU electricity demand. Reaching this target means that 21GW of wind capacity must be installed every year during the next decade. As 15GW was installed in 2020, that aspiration may be achievable.

At a glance — principal sources

Annual Energy Outlook, United States Energy Information Administration; Yearly, 2011-21
Renewable energy and infrastructure policies scenario analysis, American Clean Power Association, December 2020
Wind energy and economic recovery in Europe, WindEurope, October 2020

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