“The levelised costs of electricity produced with onshore wind and solar PV technologies exhibit a very high sensitivity to the load factor variation, and to a lesser extent to the construction cost, at any discount rate,” explains Projected Costs of Generating Electricity produced by IEA and the OECD Nuclear Energy Agency..
The report presents data for a variety of fuels and technologies, including coal and gas (with and without carbon capture), nuclear, hydro, onshore and offshore wind, biomass, solar, wave and tidal, as well as combined heat & power (CHP). It provides levelised costs of electricity for 200 plants, based on data covering 21 countries and several companies.
While nuclear reactors and thermal generating plants have a a generic load factor of 85%, plant-specific load factors were used for renewable energy sources. For wind farms, load factors range between 21% and 41% for onshore wind turbines, and 34% to 43% for offshore wind farms.
Cost reflects discount rate
At a 5% discount rate, levelised generation costs for onshore wind in OECD countries ranged between US$48/MWh (in the USA) and US$163/MWh (Switzerland), and from US$101 (US) to US$188 (Belgium) for offshore wind turbines.
The share of investment costs is 77% for onshore wind and 73% for offshore wind.
At a 10% discount rate, the levelised costs for wind ranges between US$70 (US) and US$234/MWh (Switzerland). The share of investment costs is 87% for onshore wind turbines and 80% for offshore wind
Solar PV can cost US$333/MWh
For solar photovoltaic (PV), the load factors vary from 10% to 25%. At the higher end, the levelised costs reach US$215 at a 5% discount rate and US$333/MWh at a 10% discount rate. With lower load factors, the levelised costs of solar-generated electricity are US$600/MWh.
“The cost of electricity in the coming years will depend on a number of key parameters, foremost among them the costs of raising financial capital and the price of carbon,” the report explains. “No technology triumphs overall for baseload generation - it all depends on the specific circumstances.”
The report assumes a price of US$30 per tonne of CO2.
When financing costs are low, nuclear (followed by coal with carbon capture) is the most competitive solution but, with higher financing costs, coal-fired generation (followed by coal with carbon capture and gas-fired combined cycle turbines) are the cheapest sources of electricity.
Renewable energy depends on local resources
“Apart from interest rates, generation costs of renewables are heavily dependent on local resources and fast technological improvement,” it says. “Today, where local conditions are favourable, hydro and wind are competitive generation technologies.”
“The cost for renewable energy technologies shows important variations from country to country and, within each country, from location to location,” it adds. “In addition, some of the largest current markets for renewable energy are not represented in the study.”
“The variable nature of wind power, in contrast to conventional, dispatchable technologies, requires flexible reserves to be on hand for when the resource is not available,” it notes. “Thus, the wind cost is higher at the level of the system than at the level of the plant, although our analysis of integration studies suggests that this additional cost is not prohibitive.”
“System costs are likely to be lower in larger markets, with a geographical spread of plants, and when wind is part of a complementary portfolio of other generation technologies,” it states. “Other renewable energies are for the time being outside this range, although significant cost reductions are expected
with larger deployment, in particular for solar PV as intermediate load.”
Government has a role to play, says IEA head
“To bolster competitiveness of low-carbon technologies such as nuclear, renewables and CCS, we need strong government action to lower the cost of financing and a significant CO2 price signal to be internalised in power markets,” says Nobuo Tanaka of IEA. “Governments play a key role when it comes to the costs of raising financial capital and the price of carbon.”