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Sidebar 3. Renewable Power Technology Cost Trends
The past decade has seen a dramatic and sustained
improvement in the competitiveness of renewable power
generation technologies. Around the world, renewables have
benefited from a virtuous cycle of increased deployment
leading to greater economies of scale and manufacturing
improvements, increased competition, technology improvements
i and falling costs. Improvements in the competitiveness
of renewable power generation technologies continued in
2015.
Biomass, hydro, geothermal and onshore wind power all can
provide electricity competitively where good resources exist.
The global weighted average levelised cost of electricity
(LCOE) of projects commissioned in 2015 was around USD
0.06/kWh for biomass, USD 0.08/kWh for geothermal, USD
0.05/kWh for hydro and USD 0.06/kWh for onshore wind.
These technologies compete head-to-head with fossil fuels,
which have costs of between USD 0.045/kWh and USD 0.14/
kWh. Solar technologies also are increasingly providing lowcost,
competitive electricity due to rising economies of scale
as well as technology improvements and their associated cost
reductions – and this trend will continue.
Onshore wind is now one of the most competitive sources
of electricity available. Technology improvements (e.g.,
higher hub heights and larger swept areas) and declining
total installed costs mean that onshore wind is now within
the same cost range as, or even lower than, that for new
fossil fuel capacity. Onshore wind projects around the world
are consistently delivering electricity for USD 0.04/kWh to
USD 0.09/kWh, without financial support. Power purchase
agreement (PPA) announcements made in 2015 and 2016 for
future delivery (e.g., 2017 and beyond) suggest costs at about
USD 0.04/kWh.
Peru (USD 0.05/kWh) and Mexico (USD 0.035/kWh) ably
demonstrate this shift iii . Solar PV is now competing head-tohead,
without financial support, even in regions with abundant
fossil fuels. Tenders in Brazil, Chile, Jordan and South Africa all
have highlighted that solar PV can be competitive.
The electricity from CSP and offshore wind power
technologies has higher costs than other renewable power
generation options (global weighted averages of USD 0.24/
kWh and USD 0.165/kWh, respectively, in 2015), although
some projects show costs falling within the range of new
fossil fuel options. Because both CSP and offshore wind
power are in their infancy in terms of deployment, they still
have significant potential for future cost reductions. As their
costs continue to come down, they will play an increasing role
in the future energy mix iv . CSP, in particular, has a bright future
because of its ability to add low-cost thermal energy storage
to allow for dispatchability.
Costs for the more mature renewable power generation
technologies – biomass for power, geothermal and
hydropower – have been broadly stable since 2010. Where
untapped economic resources remain, these technologies
can provide some of the cheapest electricity of any source.
Given the installed costs and the performance of today’s
renewable technologies, and the costs of conventional
technologies, renewable power generation is increasingly
competing head-to-head with fossil fuels, without financial
support, when new capacity is required and despite the fact
that fossil fuels do not carry the full cost of their externalities.
Based on global data, the weighted average investment
cost for onshore wind fell by slightly more than two-thirds
between 1983 and 2015, from USD 4,766/kW to USD 1,550/
kW ii , while the LCOE fell from an estimated USD 0.38/kWh
to USD 0.06/kWh over the same period. Increased capacity
factors (due to technology improvements) and declining wind
turbine costs each have accounted for around one-third of the
reduction in LCOE since 1983; the remaining one-third is due
to other capital cost reductions and declining operation and
maintenance costs.
Solar PV also has experienced significant cost reductions.
Between 2010 and 2015, the global weighted average LCOE
of utility-scale (>1 MW) solar PV fell by almost 60%, driven
primarily by reductions in module costs of around threequarters
during this period. In 2015, the most competitive utilityscale
solar PV projects were regularly delivering electricity for
just USD 0.08/kWh, without financial support, compared to
a range of USD 0.045/kWh to USD 0.14/kWh for new fossil
fuel power (excluding health and carbon emission costs). But
even lower costs are being contracted for 2017 and beyond.
Tenders during 2015 and 2016 in Dubai (USD 0.06/kWh),
i Supported by a 4.6-fold increase in public R&D support in OECD
countries between 1990 and 2013, from IEA, Energy Technology
RD&D Budgets Database (Paris: 2016).
ii Except for tenders, all cost data refer to the year a project comes
online.
iii It is important to note that tender and PPA prices are not necessarily
equivalent to a calculated LCOE, as headline remuneration rates
are usually quoted. Duration of the contract, escalation clauses,
partly indexed tariffs and other details can mean that LCOEs can be
significantly higher than headline remuneration rates (70% higher in
one example in the United States for solar PV).
iv For CSP, the additional value of the dispatchability of plants with
low-cost thermal energy storage also needs to be considered, as this
is not captured in a simple LCOE metric.
Source: See endnote 167 for this chapter.
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