Solar and Wind Costs Expected to Continue Falling—A Lot

(3BL Media/Justmeans) - A new report has come out from the International Renewable Energy Agency (IRENA) that points to continued dramatic reductions in the average costs for both solar and wind power.

The report, entitled The Power to Change: Solar and Wind Cost Reduction Potential to 2025, finds that given the right regulatory frameworks and policies, prices will continue to fall through 2025 and beyond.

Solar PV prices could fall another 59%, solar CSP 43%, while offshore wind could fall 35% and onshore wind, 26%, all compared with 2015 prices. This would bring the average cost of renewable electricity (solar and onshore wind) down to 5-6Wh ¢/kWh.  Those prices today are 7 cents for wind and 13 cents for solar PV. As of March 2016, the lowest price of electricity in the US for residential customers was 9.14 ¢//kWh.

IRENA Director, Adnan Z. Amin said, “We have already seen dramatic cost decreases in solar and wind in recent years and this report shows that prices will continue to drop, thanks to different technology and market drivers. Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case to switch from fossil fuels to renewables.”

According to the report, these cost reductions will come about as the result of “increasing economies of scale, more competitive supply chains and technology improvements that will raise capacity factors and/or reduce installed costs.”

Competitive pressure will continue to drive innovation in a market that appears to be growing substantially. Solar technology improvements could provide lower cost materials, easier installation or higher conversion efficiencies, which would mean that less panels would be required for a given electrical load. Scientists in Australia just tested a 34.5% efficient solar cell. The previous record was 24%. Better tracking or improved optics could increase the portion of the day that power is produced, otherwise known as the capacity factor.

For wind turbines, better siting can improve output and lower cost through improved capacity as can improvements that reduce the minimum wind speed required to produce power. Predictive maintenance is helping to improve reliability and reduce down time. There are also improvements as installers, developers and manufacturers learn best practices from one another.

Analysis shows a significant opportunity to reduce pricing by addressing cost structures, which vary widely across the globe.

For example, a rooftop solar PV installation in Germany cost only 37% as much as the same installation would cost in California. Regulations impacting costs can be found at the national, state and local levels.

As these prices continue to fall, the remaining costs, known as balance of system (BoS) costs, operation and maintenance costs (O&M) and capital costs will rise in relative importance.

Balance of system costs for solar include everything but the solar module itself. That means the inverter which converts the Dc to AC and synchronizes it with the grid and mounting hardware. It also includes the so-called soft costs which are the installation labor, the customer acquisition cost (e.g. sales, marketing) and the permitting, inspection and interconnection (PII) costs.

While cost variations are substantial across localities, all projections show costs coming down, with utility-scale solar falling into the range of 3-12¢//kWh. By 2025.

Onshore wind costs have fallen by 7% every time the global installed capacity has doubled. IRENA projections show installed wind costs dropping another 12% by 2025. The levelized cost of energy LCOE, will fall even further, by as much as 26% due to improvements that will improve capacity factor. These include larger turbines, increased hub heights and rotor diameters. It’s difficult to say exactly where the next breakthrough might come from. One group of researchers at Stanford found a way to more efficiently pack turbines closer together without reducing performance. They did this by studying swimming schools of fish.

Image credit:richardghawley:Flickr Creative Commons