Have renewable energies become competitive?

renewables energies, smart grids, wind power, solar energy, coalIt is now commonly admitted that the growing scarcity of raw materials is likely to lead to higher energy prices for consumers, while it has already ignited discussion with respect to the energy policies which will shape our energy future. While in France the average price of a KWh amounts to .0994€, it is 30% more expensive on average elsewhere in Europe. Renewable energies are an increasingly interesting answer to the challenge we are facing, although they are often perceived as costly. In fact the IRENA (International Renewable Energy Agency) published a study last June about the increasing competitiveness of renewable energy. So is « green energy » actually more expensive to produce? Here is an overview of the main electricity-generating sources and their costs.

Solar energy generation still expensive

One may think that the reason why solar panels (especially household installations) have developed significantly is their low cost, but actually the CRE (the French Energy Regulatory Commission) says solar energy is still expensive, from 150 to 400€ per MWh. According to the IRENA, though, it becomes 10% cheaper every three months (60% cheaper in the two last years). According to the European Photovoltaic Industry Association, the price of a solar-generated MWh should be within the range of 80 to 180€ by 2020. Although installation and operational costs shrink, solar energy is intrinsically intermittent as it depends on sunlight. New projects, such as the Gemasol solar power plant in Spain, attempt to overcome such limits.

Wind power now worth exploiting

Wind electricity, whether onshore or offshore, is a virtually unlimited and non polluting power generation source whose production costs are decreasing. According to experts, a wind MWh costs between 70 and 200€. The problem is that wind power generation is intermittent as turbines can only function 25% of the time. Offshore wind power is both the most efficient and the costliest technology (120 to 250€ per offshore wind MWh). This price gap is due to the higher installation and maintenance costs of offshore power plants.

Hydropower: an abundant and cheap energy source

Hydropower is, on average, the third cheapest energy source (15 to 20€ per MWh). Despite their colossal building costs, dams are very cheap to operate and maintain once they are in service. Besides, hydroelectricity is extremely flexible, as dams can get started very fast to relieve the grid at peak times.

Natural conditions (topography, water flow) necessary to the construction of hydropower plants are the main limitation to their high-scale development. For instance, France’s hydro-potential has almost been fully developed, whereas in Brazil huge investments are being made in massive hydroelectric complex projects.

Can renewables compete with fossil fuels?

Gas-generated electricity is barely more expensive than hydropower, with a price from 60 to 80€ per MWh. Coal-based electricity is very economical, as well as extremely polluting, with a cost between 50 and 100 € per MWh. China is currently the largest coal consumer worldwide, getting 70% of its electricity from coal plants. Finally, petrol-based electricity is very expensive, from 150 to 300 € per MWh. However, similarly to other fossil fuels, it is flexible and can address consumption peaks almost instantly. By way of conclusion, the decreasing cost of renewables, nearing this of fossil fuels, no longer hampers their development as the curves are going to intersect because of the combined effects of higher raw material prices and widespread dissemination of new technologies.

According to Dolf Gielen, director of the Innovation and Technology Centre at the IRENA, most current energy investments are related to renewables. The latter are even reported to represent half of new power production capacity worldwide. Technical improvements such as smart grids will surely facilitate the use of renewable energy in the short run.

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