As if the U.S. coal industry didn't have enough bad news last week, a new report from the International Renewable Energy Agency gives it about two years before renewable energy outpaces the global market for fossil fuel power generation. According to the report, "the best" wind and solar projects will beat fossil fuels on cost in 2019, and other renewables will come out ahead by 2020.
The now-familiar factor of technology improvements plays a key role of course, but the IRENA report zeroes in on another critical element that was already in play by 2016.
The global cadre of seasoned renewable energy developers was once limited to a smattering of niche companies, but in the past 10 years the field has exploded, leading to increased efficiencies all along the renewable energy supply chain.
Competitive procurement practices together with the emergence of a large base of experienced medium-to-large project developers competing for global market opportunities, are cited as new drivers of recent cost reductions, in addition to continued technology advancements.
A recent case in point is BP. The company's high profile "Beyond Petroleum" campaign launched in 2000, but it died on the vine when supportive technology, policy and consumer demand failed to materialize. Now that all three legs of the stool are in place, BP rekindled its interest in renewables last year by investing $200 million in a new partnership with the experienced solar leader LightSource.
Another good example is Shell's acquisition of Texas-based MP2 Energy last fall. The diversified company is credited with developing a leading demand-response portfolio that pulls all the levers in the renewable energy field, including distributed energy generation and energy efficiency.
Shell expects to combine the trading and marketing expertise of Shell Energy North America (SENA) with MP2 to challenge the conventional energy providers:
MP2 is an energy leader in Demand Response Solutions and is developing new and innovative approaches to on-site generation management. These strengths now combined with SENA's trading capabilities, market knowledge and balance sheet result is an entity that can compete with the largest and most sophisticated energy providers delivering electricity across the U.S.
This all adds up to a considerable amount of investment firepower combining with experienced developers, a maturing supply chain and economies of scale. None of these factors are likely to go away any time soon.
Global weighted average costs over the last 12 months for onshore wind and solar PV now stand at USD 6 cents and USD 10 cents per kWh respectively, with recent auction results suggesting future projects will significantly undercut these averages. The report highlights that onshore wind is now routinely commissioned for USD 4 cents per kWh. The current cost spectrum for fossil fuel power generation ranges from USD 5-17 cents per kWh.
Costs for concentrating solar and offshore wind are higher, but IRENA foresees that projects commissioned between 2020 and 2022 will hit the range of USD 6-10 cents per kWh. At that level, the technologies will continue to be deployed.
The US Department of Energy, for one, looks to be a continued source of support for offshore wind and concentrating solar deployment. The agency engaged in a vigorous program to promote those technologies under the Obama administration, and those efforts are still ongoing.
According to IRENA, other renewable energy projects in the past 12 months -- bioenergy, geothermal and hydropower -- are also competing "head to head" on costs with fossil fuels.
All in all, IRENA projects that all commercial available renewable energy technologies will compete -- and in some markets, undercut -- with fossils on price by 2020.
Last week the U.S. Energy Information Administration underscored how quickly the renewable energy trend has overtaken the power generation field, with a new report titled, "Nearly half of utility-scale capacity installed in 2017 came from renewables," at 12 gigawatts or so. EIA estimated the total in utility-scale capacity additions for 2017 at about 25 gigawatts.
EIA, which operates under the auspices of the Energy Department, noted that a small-scale renewable energy also made a good showing, with 3.5 gigawatts.
While the power generation sector is moving rapidly toward decarbonization, carbon emissions from the transportation sector remain stubbornly high, demonstrating the importance of the Energy Department's new electrification initiative.
In addition to power generation and transportation, the agency's "Electrification Futures Study" is examining residential and commercial buildings as well as industrial energy users.
The goal is to quantify the impacts of widespread electrification, enabling energy planners to smooth the transition to a decarbonized economy.
Image (screenshot): via IRENA.
Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes. She is currently Deputy Director of Public Information for the County of Union, New Jersey. Views expressed here are her own and do not necessarily reflect agency policy.