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Why renewable energy prices are declining?

renewable energy

As renewable energy is derived from renewable resources, very few resources are lost due to its production. Based on its source, they are of different types.

They are solar energy derived from the sun, wind energy derived from the motion of the wind, hydroelectric energy derived from the gravitational potential of water.

Biomass energy is taken from Plants, Hydrogen, and Fuel Cell derived from chemical reactions that produce energy, Geothermal Power is derived from the Earth’s heat are the other renewable energy.

Climate change

Air pollution and climate change are the two grave issues the whole world is facing now. Certainly, Fossil fuel pollution drives the climate into a new and less human-friendly climate.

Fossil fuels account for 79% of the world’s energy production. Its burning causes 87% of the world’s CO2 emissions.  It is neither safe nor sustainable. It has a large negative side effect.

Fossil fuels takes a massive toll on human life every year. Going renewable will save millions of lives and dollars per year. Renewable energy is the only energy system that is viable for the long term.

Almost a decade back, renewable energy was very expensive. Wind and solar farms required lots of space to create very little energy. Fossil fuels create a lot of energy from relatively lesser space. As a result, fossil fuels have massive popularity worldwide.

Expensive renewable energy

The benefits of renewable energy were many. However, its adoption was almost impossible due to its high cost. Countries like Denmark and Germany faced the highest energy prices in the world with their large amounts of renewable generation. Wind farms in Britain were twice as expensive as fossil fuels. Solar energy was no better.

Electricity from fossil fuels were far cheaper than electricity from renewables. As a result, fossil fuel dominates in the energy market. In most places in the world, power from new renewables is now cheaper than power from new fossil fuels. Most importantly, the cost for solar and wind power technologies falls year on year.

Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents per kilowatt-hour. Both onshore and offshore wind declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh respectively.

According to Bloomberg research, electricity can be produced from a wind farm at a cost of $80/MWh in Australian dollars. A coal-fired power station produces electricity at $143/MWh, while a gas baseload power plant produces electricity at $116/MWh.

The positive aspects of powering with renewable energy sources are overpowering. This has made many governments pump money into various renewable sources of electricity.

Some of the common and widely used renewable sources of electricity are wind turbines, solar farms, hydroelectric and geothermal plants.

Building a new power plant that burns fossil fuels was much cheaper in the past. Wind was 22%, and solar 223% more expensive than coal.  As a result, most governments accept fossil fuels power plants as the main source of energy.

Solar and Wind Energy

Unlike the present situation,  earlier it was more expensive to build a new solar photovoltaic (PV) or wind plant.

The costs of fossil fuels depend on the price of the fuel that they burn and its operational costs. The operational costs of renewable energy are less as its fuel doesn’t have to be paid or dug out.

Renewable energy sources are infinite in Nature. As a result, the cost of renewable power was mainly the cost of its technology. Solar and wind power are the two options that received huge popularity among renewable energy sources.

Solar system installation was very expensive. Because of its hype, there was an initial demand. This resulted in increased production. It gave them a chance to learn how to improve the production process.

Production increased with demand and as a result, the prices started falling down. Renewables have low fuel costs and small operating and maintenance costs. The LCOE of the scale of the renewable with the cost of its technologies.

Fossil fuels VS Renewable energy

The reason why renewable energy is being more profitable than fossil fuel is that they follow steep learning curves. With each doubling of the cumulative installed capacity their price declines by the same fraction.

Fossil fuels do not follow learning curves. We are moving ahead to a future where the disadvantage of fossil fuels and advantages of renewable energy will keep increasing.

The increased installation capacity has definitely brought down the price of renewable energy. Low-carbon technologies were initially affordable only for satellites. Now it is capable of providing the cheapest electricity on the planet.

A fall in energy prices means an increase in people’s income. Powering with renewable sources helps to improve economic growth along with reducing greenhouse gas emissions. Therefore, a better world and a precious futur.

Renewable energy prices falling

Statistics show that renewable energy prices are continually falling fast, of which wind and solar are at the lowest. The total cost of its infrastructure and operation beats fossil fuels by large margins. This trend is expected in coming years too.

Even utility-scale renewable energy prices are significantly lesser than coal and gas generation. Consequently, this calls for the stability of energy prices across the globe.

Improving technologies and economies of scale have caused a decline in renewable prices over a decade. Increasingly competitive supply chains and growing developer experience have also contributed to this decline in price.

Utility-scale solar PV power has shown the sharpest cost decline at 82%. Concentrating solar power (CSP) has declined at 47%. Onshore and offshore wind made a cost decline of 39%, and 29% respectively.

Government energy subsidies is one of the main reasons behind the affordability of wind and solar energy.

People hesitate to go for renewable options because of their high upfront cost. To attract people towards renewable energy, many governments offer consumers and businesses subsidies.

Government Payback

Tax breaks, incentives, and direct payment by the government actually help in paying back a portion of the initial expense. These monetary incentives reduce the end cost of choosing renewable energy sources. Certainly, This helps the consumers who invest in green energy.

When more and more people invest in wind and solar, more research is done in this area. In addition, increased installation helps in the reduction of costs. Renewable energy being technologies improve with science. Intensive researches lead to the creation of more efficient technology.

Researches help to overcome many shortcomings of previous installations. Earlier many environmental factors caused product failures. With research, they were able to balance the resilience and efficiency of these technologies. This made the installation cheaper and durable. The advances in green technology have a more significant influence.

With finite energy sources, fossil fuels are subject to market volatility. Its supply is controlled by various companies and governments thus creating a volatile market.  The sustainable energy industry is not subject to market levity. Consequently, no need to worry about the rising electricity bills.

Renewable energy technologies are now at or near grid parity with fossil fuel generation. In addition, some regions could achieve this even without subsidies. This is made viable by the latest technologies that are deployed behind the meter and at a utility scale.

As technology advances, the energy transition becomes a less daunting prospect. Latest technologies in research and development might deliver solar PV with much greater efficiency. That is to say, it could convert every bit of sunlight that hits the panel.

The decline in renewable energy costs has made it a cost-effective investment.  Renewable energy has helped us reach an important turning point in the energy transition.