- The global weighted-average cost of electricity from renewable resources continued its downward trend in 2018, with utility-scale solar experiencing the largest year-over-year decline at 26%, according to new analysis.
- The "Renewable Power Generation Costs 2018" report, published by the International Renewable Energy Agency (IRENA), shows that renewable power is the cheapest source of electricity in many parts of the world.
- The report predicts that cost reductions for solar and wind technologies are set to continue until 2020 and beyond, but industry experts are starting to wonder how much lower can prices go.
Renewable energy costs decreased to a record low last year, based on data from energy projects around the world. The cost competitiveness of renewable power will strengthen their business case and solidify them as the engine of the global energy transition, IRENA said.
The report predicts that 77% of onshore wind and 83% of utility-scale projects due for approval in 2020 will have lower electricity prices than the cheapest fossil fuel-fired generation.
"Today's report sends a clear signal to the international community: Renewable energy provides countries with a low-cost climate solution that allows for scaling up action," IRENA Director-General Francesco La Camera said in a statement.
The global-weighted average cost of electricity from renewable resources dropped across the board last year: utility-scale solar by 26%, bioenergy by 14%, solar photovoltaics (PV) and onshore wind each by 13%, hydropower by 12% and geothermal and offshore wind both by 1%, according to the report.
Will Giese, executive director of the Hawaii Solar Energy Association (HSEA), said he wonders what the primary cost reduction driver for solar PV will be moving forward.
"In the U.S., I used to think it was the [federal solar tax credit], but now, considering these prices, what really concerns me is material costs and availability," he said.
"You see price spikes when lithium and cobalt prices go up for energy storage, but this doesn't seem to impact the end storage product itself yet. How much are companies willing to eat costs, and how slim are their margins willing to get? This is doubly true for residential projects, where you see some of the larger [residential] developers essentially burning cash and carrying large amounts of debt quarter to quarter as the residential markets get increasingly more incremental."
The report's author, Michael Taylor, said that at this stage, he doesn't see prices at bottoming out.
"What it does mean is that things like the cost of finance, or name costs become critical to the continued squeezing of prices," Taylor said. "Up to now, they have moved with equipment costs. At least at this stage, we don't see it slowing. I think the great thing of what has happened to the cost of solar PV and wind power, and in terms of the improvements in technology as well, is that the potential is now really global."
For Dan Whitten, vice president of public affairs for Solar Energy Industries Association (SEIA), the report shows that the industry has come a long way in order to compete with traditional resources. To continue this success, he said more work and the right policies are need.