Published on October 18th, 2013 | by Silvio Marcacci


Grid Parity, Low LCOE Driving 34% Global Renewables Capacity by 2030

October 18th, 2013 by  

When it comes to global electricity generation, coal is still king – but not for long.

Fast-changing economics mean renewables worldwide will represent 34% of all installed capacity by 2030, according to “World Energy Perspective: Cost of Energy Technologies,” a report from the World Energy Council (WEC) and Bloomberg New Energy Finance (BNEF).

The report finds many clean energy technologies are already cost competitive with fossil fuels and only getting cheaper, echoing another analysis that found US wind and solar costs fell 50% since 2008. As a result, fossil fuel’s slice of the world energy pie is projected to fall fast, from 67% in 2012 to 40%-45% in 2030.

Falling Renewable LCOE Powers Clean Energy Surge

Vast differences in the cost of building and generating power exist across the globe, but one trend is clear – the levelized cost of electricity (LCOE) continues to fall for mature renewable energy technologies, placing them close to grid parity with fossil fuels. In addition, the cost of producing power from renewables fall continue at a rate related to the level of usage, a trend known as the “experience curve.”

“Our study finds that although fossil fuels continue to dominate, renewable energy and the investment appetite for them are growing,” said Guy Turner, Chief Economist at BNEF. “With wider deployment the price of renewables will fall, reducing the risk for investors, and we expect to see greater uptake over the years.”

The WEC report uses several cost metrics exist to evaluate power generation including capital expenditures, operating expenditures, and capacity factor, but LCOE stands as arguably the most important indicator of renewable energy’s value because it’s the only one that evaluates the total lifecycle costs of producing a megawatt hour (MWh) of power.

LCOE is best explained as the price a project must earn per MWh in order to break even on investment and considers cash flow timing, development and construction, long-term debt, and tax implications to equally evaluate all energy technologies on an equal basis in terms of their actual costs. But most importantly, LCOE underlines the ascendance of renewable energy across the world – especially wind and solar.

Wind Power Gusts Ahead

Wind power has already become the largest non-hydro renewable electricity source and is projected to more than triple from 5% of global installed capacity in 2012 to 17% by 2030, breezing past large hydropower. From 2000-2010 global onshore and offshore wind capacity increased 30% per year, reaching 200GW installed in 2010.

Onshore wind LCOE by region

Onshore wind LCOE by region graph via World Energy Council

Onshore wind’s LCOE has fallen 18% since 2009 on the strength of cheaper construction costs and higher capacity factors. Turbine costs have fallen nearly 30% since 2008, outpacing the traditional experience curve. The LCOE for onshore wind is cheapest in India and China, running between $47-$113 and making well-sited wind farms in these countries among the cheapest in the world – an incredibly important factor considering their surging demand for power is currently being met by coal.

The LCOE picture isn’t as clearly defined for offshore wind, as 95% of the world’s 4GW installed offshore wind capacity is located in European waters. By 2020 installed capacity growth in Asia will surge, offsetting Europe’s dominance with 40% of all installed annual capacity – China alone will have 30% of all new capacity. As more offshore wind comes online in different markets, LCOE will become clearer.

Solar’s Remarkable Shine

But if wind’s LCOE drop has been steady, solar energy’s has been meteoric. The WEC reports feed-in tariffs and plummeting photovoltaic module prices make solar competitive with most forms of power generation – in some markets with expensive power, like Germany, businesses with installed solar now find using their generated power more profitable than selling it to the grid.

Solar power LCOE over time

Solar power LCOE over time chart via World Energy Council

As a result, solar power’s worldwide capacity will absolutely boom, growing from 2% of installed capacity in 2012 to 16% by 2030. China and Japan will be biggest beneficiary of solar’s rise, with China set to exceed 50GW installed solar by 2020.

The WEC’s forecast for solar power is incredible, but even this outlook is underestimates solar’s clean energy potential, because it only includes projects above 1 megawatt in capacity – completely ignoring the spread of small-scale rooftop solar and the rise of distributed generation.

Solar power LCOE by region

Solar power LCOE by region graph via World Energy Council

Fossil Fuel’s Achilles Heel: Operational Costs

In spite of falling renewable costs, fossil fuel generation is still cheaper in most regards, except for one – the price of operation. The WEC notes that once renewables are built and online, their costs are mainly marginal operational and maintenance expenses. Compare that to fossil fuels, whose costs are volatile and subject to change from factors like commodity price swings and external costs like carbon pricing and pollution.

This trend is most clearly seen in developed nations like Western Europe, America, and Australia, where the WEC says the potential for significant amounts of new coal generation to come online is low. Today, developing nations buck this trend and coal is a growing generation source in Brazil, China, and India. In fact low capital costs make China the cheapest country to generate power from coal, less than half the LCOE in Europe or the US.

Coal LCOE by region

Coal LCOE by region chart via World Energy Council

But the tide is starting to turn, evidenced by growing concerns about air pollution in China and the development of carbon markets in many of the world’s developing economies where fossil fuels have dominated generation.

Grid Parity For Renewables Fast Approaching

Put it all together, and it’s clear to see global energy economics are changing fast. While coal still dominates global electricity production, renewables are catching up with net investment growing seven-fold from 2004-2011, outpacing fossil fuels for the second year in a row in 2012. And as more renewables come online, their costs continue to fall faster and faster from larger economies of scale.

“The cost of most technologies, and most dramatically that of solar PV, is coming down with production scale-up in many areas of the world,” said Dr. Christoph Frei, World Energy Council Secretary General. “With such growth, grid parity will become reality in the coming years.”

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About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.

  • Matt

    And of course let us not talk about plug parity. If you are a user of power you pay much more than the electric company pays for power. Grid parity is important to you if you are building a 10-1000MW plant and are selling to the grid. But to a person or corporation that is buying power then it is plug (or meter) parity that counts. That is going to make the transition happen much faster than the grid parity preachers think.

    • Bob_Wallace

      Absolutely. In places like Germany and Australia where retail electricity is expensive we’re seeing rooftop solar spread like a cold virus in a kindergarten class.

      When you’re faced with 36c/kWh electricity costs solar can hit parity fast.

      And rooftop solar is killing coal in those countries. Germany is preparing to close down 3GW of coal plants and Australia in the process of closing 9GW. That’s a lot of railroad cars of coal that are going to be staying in the ground from now on.

      • Jouni Valkonen

        If storage gets cheaper fast, as it is likely as electric vehicles are driving the research money into battery technology, Germany could see 100 GW roof-top solar by 2020 and 300–400 GW by 2030. But this depends on how fast the storage technology gets cheaper. Without storage only about 50 GW solar fits into German grid.

        It is however important to understand, that solar panels must be directed into East and West so that the midday generation spike is blunter.

        • Bob_Wallace

          We might have cheap storage within a year.

          Aquion supposedly is manufacturing now. They’ve got a battery that is reported to store for 10c/kWh (assuming frequent cycling, not long term storage). If those batteries work and are sold to individuals rather than only in large shipping container sized units for grids then storing ones own solar would be nicely cheaper than purchasing off the grid in Germany and Australia. With no subsidies.

          That’s a $300/kWh battery.

          The EOS Energy Storage appears to be coming to market with >10,000 cycles at $160/kWh. That takes storage under 2c/kWh and becomes a fossil fuel killer.

          Grid/bulk storage seems to be on a different track than EV storage as size/weight and rapid recharging are not as important for non-EV storage.

          And, yes, it’s probably time to start mounting some panels east- and west-facing to help cover more of the day with solar. Cheaper to use direct than to store.

          If south-facing is producing for 7c/kWh, for example, east/west facing will produce about 80% as much electricity as south facing which would mean ~9c/kWh from those panels. Can’t take 5c wind, store it and send it back for 9c.

          • JamesWimberley

            The east-west thing solves itself. The first customers for solar have the south-facing roofs. As solar gets cheaper, those of us with less attractive roof orientations also find it pays.

            The shift would of course be accelerated with time-of-day pricing, giving a premium to the high-value “shoulders” around 10am and 4 pm. When utilities give up trying to roll back net metering, maybe they could push this obvious element of the new pricing model.

        • JamesWimberley

          Where do you get the 50GW number for Germany? It’ s the current limit to solar FITs, beyond which (on current plans) it’s a free market – not a brick wall.

          Record German solar output was 23.9 GW on July 7, from about 35GW capacity. The German daytime peak load is 60 GW, so on the same capacity factor you would need 87GW to match it on the sunniest day. Stretch the peak from a moment to four hours, and you’d need 100GW. Beyond that, you either need large-scale storage, or PV system prices so cheap that they pay even giving away noonday summer power.

          • Jouni Valkonen

            you cannot just shut down the baseload power during the sunny day and it takes few decades to replace old baseload power with load following baseload. I first estimated that the 40 GW was the limit, but later edited it to 50GW, because it is achievable if peak solar is curtailed by facing panels into East and West.

          • JamesWimberley

            You should correct your figures for effective capacity. You will never get a 100% cloudless day over Germany. I think it’s reasonable to use the July record as a realistic peak of about 66% nameplate capacity.
            Why do you think it costs a lot to provide 10GW transmission for excess solar power? It’ s simply using the grid in reverse. You now have >80GW transmission capacity for energy flowing into homes and factories on the proverbial rainy November evenings. Do transformers have one-way valves?

          • Jouni Valkonen

            I am aware that when I say 50 GW, then actual peak production is only 30 GW. This is obvious and self-evident. Also you must be aware, that peak power is irrelevant. You need to always look monthly median power. I.e. what is most expected daily peak production.

            The point is that is more profitable to curtail top 10 GW from solar output than to expand grid as such that it can export this extra 10 GW into Poland, because it is not needed on Germany. Imagine also that in addition to solar, there might be 20 GW wind in the grid in addition to brown coal and nuclear that cannot do the load following.

          • mds

            Pointless argument. Low-cost storage is doable and is coming.

  • JamesWimberley

    The WEC is a broad umbrella, covering both renewable sheep and fossil wolves. These forecasts are therefore mainstream and politically acceptable to both factions. They do not predict an absolute decline in fossil fuel use; it’s just that renewables will take up the increase, so everybody’s happy.

    Except our children. we have to cut fossil fuel use, soon, and hard.

    The growth scenario is simply Bloomberg’s New Normal one from here:
    It is based on a model including cost reduction of 35% in wind by 2030, or 2% a year, and 50% in PV by 2050, or 1.3% a year (but front-loaded, with a 9% a year reduction to 2020).

    The wind curve is reasonable if conservative: GE are claiming a >5% increase in efficiency simply with better controls, which can be retrofitted. But on solar, the assumptions are incredible. Why should progress in PV stop after the next decade? What’s to stop automated 1GW fabs, ACPV, and streamlined mounting from getting existing technology PV down to 25c per watt? Why should we assume that none of the very many ideas for alternative or complementary ultra-low-cost PV will work – perovskite layers, graphene connectors, microgrooved surfaces?

    Studiously, the report also ignores distributed solar generation and its disruption of the historic generating market. This does not depend on relative LCOE but on creaming off the profitable daytime peak load, and (with wind) automatic priority in the merit order. Coal plants are being closed not because of their LCOE but because they can’t make a profit at the low load factor to which renewables are pushing them. In time, old baseload plants will get a reprieve from capacity markets to pay for backup to intermittent wind and solar; but the beneficiaries will be gas plants, not dirty coal.

    The revolution has elbows. Message to oil, coal, and gas: we are coming to get you.

    • Bob_Wallace

      Preach it, James!

      May His Appendages Touch Us All!!!

      • JamesWimberley

        Cthulhu notes your praise. Maybe you will be spared.

        • mds

          Hosers. God has built you a huge fusion generator were it can be safely operated. We are just now figuring out how to use it …right when we need it most …and still you do not see a miracle. Spoilt children I think. 😉

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