Record Low Renewable Auction Prices Indicate Increasing Global Competitiveness, Says MAKE

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A new research note from MAKE Consulting has confirmed what many have said before, the record low prices being awarded at renewable energy auctions across the world throughout 2016 and 2017 are indicative of the increasing competitiveness of renewable energy technologies globally.

MAKE Consulting, one of the leading renewable energy analyst groups, published a new Research Note this week looking into the levelized cost of electricity, or LCOE, of renewable energy technologies, examining the declining costs for wind and solar energy as well as other forms of power generation across fourteen key global markets. The Research Note compares the LCOE of wind and solar to natural gas, coal-fired power, nuclear, hydro, and geothermal, and found that continued technological improvements, economy of scale, and the growth of aggressive market competitions have all served to lower the LCOE of renewable energy technologies to the point where they are nearing competitiveness or are already competitive with traditional power technologies.

Only a few years ago many of us felt that, while renewable energy technology was obviously the only sensible method moving forward, it might take a lot of governmental support to ease the world into a position where renewable energy technologies were considered efficient and economically viable. While there is and has been governmental support, what very few people saw coming, however, was the pace at which unsubsidized costs would plummet all on their own — thanks, as mentioned, to technological improvements, economy of scale, and the competitiveness of auctions.

Just this month, Navigant Research published figures which showed that distributed solar PV prices had dropped from $2.28/W in 2015 to $1.89/W in 2016. Similarly, wind energy prices have narrowed so quickly and dramatically that we were all caught off guard earlier this year when DONG Energy and EnBw both won the rights to develop wind farms for no subsidy at all.

Parallel to the declining costs of renewable energy technologies has been the added costs attributable to fossil fuel energy sources, thanks to increased environmental regulations and declining load factors, combining to reduce the cost effectiveness of fossil fuel technologies.

There is of course regional and geographical variability to the LCOE of renewable energy technologies. The LCOE of wind and solar power in the US are both low, but further development is critical for prices to continue declining. Developing renewable energy markets such as those in the Americas fluctuate depending on which country we are talking about — Mexican wind and solar prices are cost competitive with gas-fired generation, while Brazil’s costs are much higher due to supply chain dynamics. In the Asia Pacific, the LCOE of onshore wind in China and India needs to drop further for national targets to be met under evolving market mechanisms in play there, while MAKE expects the European offshore market to experience significant improvement in LCOE over the next five years due to infrastructure investments in the North Sea.


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Joshua S Hill

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.

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