wind power costing 27 nov 2012 at the energy talk, london

The Renewable Revolution:Wind Power Costs

27 November, 2012

Michael Taylormtaylor@irena.org

IRENA Innovation and Technology Centre

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Director-General: Adnan Amin

Established April 2011

The intergovernmental RE agency

Mission: Accelerate deployment of renewable energy

Scope: Hub, voice and source of objective information for

renewable energy

Mandate: Sustainable deployment of the six RE resources

(Biomass, Geothermal, Hydro, Ocean, Solar, Wind)

Location: Headquarters in Abu Dhabi, United Arab Emirates

Innovation and Technology Centre IITC, Bonn

About IRENA

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IRENA Membership

Status: September, 2012

IRENA’s 101 Members and 159 Signatories

Organizational structure

Office of the Director -General

Policy Advisory Services, Capacity Building (PASCB)

Knowledge Management

Innovation and Technology (KMTC)

Innovation and Technology Centre

(IITC)

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IRENA is NOT a:Bank

R&D instituteNGO

COSTING….

WHY?HOW?WITH WHOM?

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1

Rationale and goals

• Renewable energy can meet countries policy goals for

secure, reliable and affordable energy and access.

• Lack of objective and up-to-date data

• Economics are a key decision factor

• Cost declines, rapid for some renewables, occurring

• Decision making is often based on:

outdated numbers

opinion, not fact based

• IRENA to strive to become THE source for cost data

• Goals are to assist government decision-making, and fill

significant information gap 6

Framework

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Where to set the boundaries?

Are costs even available? Prices, or price indicators?

Levelised cost of electricity (LCOE)

Data Sources

• General information Business journals (eg Photon), consultancies (eg BNEF), industry associations

(eg WWEA, ESTELA, etc.), auctions and tenders (eg Brazil), project design

studies, development banks (e.g. KfW), World Bank, etc......

• Questionnaire: real world project data IRENA/GIZ collaboration

79 projects for Asia and Africa (34 PV, 20 hydropower, 11 wind, 8

biomass, 3 hydbrid and 3 CSP)

7 submissions unusable!

• Data gaps, some assumptions required. Transportation data difficult

to seperate out

• Difficult to define what is a “development project“

• Inconsistencies in the allocation of costs8

TODAY’S COSTS

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Key findings

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• A renewable revolution is under way

• Dramatic cost reductions for Solar PV, onshore wind

competitive at best sites, CSP has great potential,

hydropower and biomass more mature

• Unpredictable price variations affect policy efficiency

• Renewables now the economic solution off-grid and for

mini-grids

• Data collection poses challenges

• A shift in policy focus will need to come

Levelised cost of electricity

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Note: assumes a 10% cost of capital

Wind

• Capacity factors are increasing

(US example)

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• Wind turbine prices declining

(US example)

• The LCOE is coming down

(Brazilian Auctions)

• Onshore wind is now competitive

with fossil fuels in many countries

• Offshore wind is still expensive

Wind turbine prices

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Sources: LBNL, 2012; BNEF, 2012; IEA Wind, 2007, 2008, 2009, 2010, 2011 and 2012.

Wind farm total installed costsNon-OECD

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Sources: IRENA Renewable Cost Database

Wind farm capacity factorsNon-OECD

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Sources: LBNL, 2012 and IRENA Renewable Cost Database

O&M costs

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The LCOE of windNon-OECD

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2011

US

D/k

Wh

COST REDUCTION POTENTIAL

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Learning curve for turbinesStrong anomalies in recent years; further

analysis needed

19Source: Bloomberg New Energy Finance, February, 2011

H2 2012

Chinese turbine prices

The share of O&M in the LCOEof wind power

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Summary of cost reduction potentials

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• Wind is often the most competitive non-hydro RE, LCOE will

continue to decline.

• Will global market prices for turbines converge like PV

modules?

• Operation and maintenance cost can account for a

substantial share of LCOE, cost reduction potential less well

understood.

• Balance of project costs: will these continue to decline as

rapidly as equipment costs?

• Reasons for differences in bottom-up engineering cost

estimates and real world project costs not well understood

CONCLUSIONS

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Implications of cost declines

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• Rapid, unexpected, cost reductions pose challenges

• Efficient support policies still needed

• An integrated strategy is required

• Policy focus will need to shift, depending on country, in the

near future. Few countries “get” this!

To Conclude

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• A renewable revolution underway driven by a virtuous circle

• Renewables are THE economic solution for off-grid and mini-grid

electricity projects (PV and small-scale wind, biomass and hydro) and

increasingly for grid-supply

• Wind, and renewables in general, increasingly competitive without

assistance. But typically for best resources -> needs to expand

• Reductions in LCOE of wind will be driven by technology improvements

and capital cost reductions, but are there constraints?

• Renewables will increasingly have to work together

• Analysis will have to shift from LCOE to electricity system costs. Demand-

side is the forgotten resource!

• The quest for better cost data and understanding of differences continues.

Regular updates for PV, CSP and wind will be needed

Renewables are increasingly competitive, but more needs to be done to fulfill their potential…

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mtaylor@irena.org

www.irena.org/publications

IRENA is part of the solution

Additional slides

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Typical installed capital costsand capacity factors

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