Solar & wind power now cheapest source of energy

Renewable energy power plants have beaten the price barrier set by the historically cheap price of new coal or gas units.
26 November 2018

A photovoltaic power station, also known as a solar park. Source: Shutterstock

The Chinese government’s changing attitude to solar power has made solar and onshore wind energy generation methods the cheapest new ways to create electricity, according to a new analysis from Bloomberg New Energy Finance.

This year the Chinese government has capped the rate of new installations of PV cells and reduced feed-in tariffs for solar energy, but also announced it would offer non-monetary incentives to aid solar and wind power to achieve a more equal footing on energy markets.

This slow-down in monetary incentives in solar has led to a glut of solar energy hardware destined for China coming onto the world market, which has driven down prices of solar installations.

Across the world, the cost of new (non-tracking – i.e. static) solar panel energy production fell to $60/MWh in the second half of this year, a 13 percent fall from the first semester of 2018.

“It is now hard to deny that wind and solar PV are as cheap or cheaper than coal and gas, just about everywhere,” said Tifenn Brandily, an analyst with Bloomberg New Energy Finance, and the report’s author. “And combined with battery storage they are also now increasingly able to compete with fossil fuel alternatives for hours when the wind isn’t blowing and the sun isn’t shining.”

While panels that tilt in one or two axises gather more sunlight and therefore produce more power, their manufacture, installation and maintenance costs are higher than fixed, or non-tilting installations.

Brandily continues, “Batteries are also today the cheapest source of fast-response flexibility and peaking capacity everywhere except the US where cheap gas still has an edge. As technology costs continue to decline it’s a matter of when, not if, these new energy technologies will disrupt electricity systems all over the world.”

The reference here is to the comparative costs of stored power from solar installations being able to compete in cost with gas to cope with sudden peaks in demand.

For new installations of power generation capability, therefore, coal is no longer the go-to choice on pure cost terms. This is true for all the major economies in the world with the exception of Japan, but including China and India.

In India, the latest solar and onshore wind plants are now half the cost of new coal facilities, which should ensure that countries move away from polluting energy sources, at last.

By 2030, Bloomberg New Energy Finance expects the cost of new coal & gas plants to remain fairly constant, but new large-scale static solar photovoltaic (PV) facilities’ costs will drop by 41 percent. Similarly, the costs of onshore wind farms will fall by a further 25 percent.

Furthermore, as the market for batteries for electric cars continues to rise, battery technology costs are expected to fall by up to 66 percent by 2030. This will have a knock-on effect for utility-scale PV power generation, driving costs down further in that sector.

Batteries combined with solar PV or wind are becoming more common, and BNEF’s analysis predicts that new solar and wind paired with four-hour battery storage systems can already be cost-competitive without government subsidies.

The findings come from BNEF’s “2H 2018 LCOE” report, published on Monday last week.