Published on January 15th, 2018 | by George Harvey0
Renewable Energy Grid Parity Confusion, Old Data, & Media Errors
January 15th, 2018 by George Harvey
The International Renewable Energy Agency (IRENA) has been much in the news since it released its report Renewable Power Generation Costs in 2017. Article after article has told us that it said we could see the costs of renewable energy drop to meet those of fossil fuels by 2020.
We might ask, “How realistic is this projection?” It is a question especially important to anyone who might be invested in some form of energy, whether through financial instruments, employment, or political allegiance. And there are a number of reasons why we should question any information we get.
For example, some news outlets are almost perfectly predictable in a politically oriented slant. Some of those theoretically allied with right-wing political groups in the United States seem incapable of saying anything positive about renewable energy systems.
When I first saw that information presented by important so-called conservative news media seemed out of step with what everyone else was saying, I did some research on where they got their data. In some cases, I found that they had sourced it to the US Department of Energy. The source of their disagreement with everyone else was that they seemed to insist on using data that was at least 3 years old.
Lazard’s most recent Levelized Cost of Energy Analysis (LCOE), which was released as version 11.0 in November of 2017, showed that in the previous 5 years, the LCOE for utility-scale chrystalline power installations in the US had declined from $125/MWh to $50/MWh. This is a decline of nearly 17% per year, on average. Using data that is 3 years out of date will lead to overestimating the cost of solar power by over 70%, and this is hardly useful for an investor.
The reason why this happens may become clear for anyone who looks at the funding for the anti-renewable information services. A large proportion of the money comes from those invested in fossil fuels, who are likely to regard approaching grid parity as a threat to be kept at bay as long as possible. Reporting that grid parity is drawing near is tantamount to advertising in favor of the enemy.
(In a world where “Greed is Good,” objective use of data has to give way to the dictates of goal-oriented, “objectivistic” evaluations. Which is why political appointees are given their positions based on political allegiance, without regard for other considerations. Which is why Washington, DC, is increasingly populated by political commissars instead of competent office holders.)
If the data are a year old, they are likely to be obsolete, off by 17% to 20% in the case of costs of electricity produced by large solar power systems. In fact, if the data are 6 months old, they are very likely to be obsolescent. This means that if the IRENA LCOE numbers are based on data from 2017, then half of them may already be out of date, and the numbers for rapidly declining costs may be unacceptably high. Projections based on them are probably excessively conservative. Again, this does not help the person who wants to understand current conditions.
A person who wants current information needs to stay abreast of the current market. Such a person will inevitably be ahead of both IRENA and Lazard, because their data is getting old by the time it is published.
Another problem with the numbers some media present is that they can be inappropriate if applied to local situations. Under the circumstances, applying worldwide data to a country or region is not particularly helpful. This is certainly the case with a cursory view of the IRENA report. Getting into the body of the report will show that conditions vary enormously around the world, but the report deals with global trends.
Some media pieces covering the report are not helpful, when they review it in ways that may reflect only highlights of the Key Findings. For example, that section has this statement: “The global weighted average levelised cost of electricity (LCOE) of utility-scale solar PV has fallen 73% since 2010, to USD 0.10/kWh for new projects commissioned in 2017.” A careless analysis might miss the subsequent statement: “Record low auction prices for solar PV in Dubai, Mexico, Peru, Chile, Abu Dhabi and Saudi Arabia in 2016 and 2017 confirm that the LCOE can be reduced to USD 0.03/kWh from 2018 onward, given the right conditions.” There is a big difference between 10¢/kWh and 3¢/kWh.
Regular readers of CleanTechnica might not have been very surprised by the record low prices. On the other hand, they may be surprised at the idea of PV costs of 10¢/kWh given in the IRENA report. We should bear in mind that the prices reflect conditions across the world, and that includes not only the US or the Middle East, but places like Nigeria and Mongolia.
Energy costs from renewable resources in the United States and in some other countries appear to be below those of much of the world. Bids recently reported by Xcel Energy (see the CleanTechnica post “Wind & Solar + Storage Prices Smash Records“) make it clear that renewable energy costs in the range of 2¢/kWh to 5¢/kWh are prevalent in its territory, even when storage is included. And since these are median costs reported for 350 proposals, we can be sure that they represent conditions in much of the US. The wind power prices were even lower, with median bids of 1.81¢/kWh for over 17 GW of wind capacity plus storage. These could be compared to the data for fossil fuels given in the Lazard report, which is from 4.2¢/kWh and up.
The IRENA report does not say, as some articles about the report have implied, that solar and onshore wind power will reach grid parity by 2020. Much more interestingly, what it says is, “By 2020, all the renewable power generation technologies that are now in commercial use are expected to fall within the fossil fuel-fired cost range, with most at the lower end or undercutting fossil fuels.” That means that higher priced renewable sources are also expected by IRENA to be competitive, including offshore wind power and concentrating solar thermal power.
In answer to the question about how realistic the IRENA projection is, we might say that IRENA did a really good job of analyzing data, some of which was slightly obsolescent, for a worldwide market. The fact that the data might have been somewhat obsolescent is not IRENA’s fault — it is a necessary result of its respectably careful methods. And the fact that the market covers the world is the result of its mission.
If the IRENA forecast seems tepid, it is only partly because of the minor shortcomings I find in the report itself. Some media might deserve harsher criticism.
Energy prices are changing so fast that annual publications based on analysis of a year’s data are necessarily somewhat behind the times. Those who want to be up to date are better off doing their own research, reading and evaluating news on a daily basis. (Am I allowed to put in a plug for CleanTechnica as a useful daily source?)
Grid parity for solar and wind power come when they can compete with generation on the grid. The figures that have come in the last year from Lazard reflect the prices of power purchase agreements that have been regularly announced in the news. So, in answer to the question about grid parity, it looks like an objective observer in the US would say we do not have to wait until 2020, because we have already passed that point. We will not have to wait until 2020 for grid parity for the most important renewable power sources. That has already come.
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