Renewable energy, taking a long-term view . . .

lazard logoReaders who hope to see the clean energy and fuel sector flourish will be reassured by a report from Lazard, a financial advisory and asset management firm in good standing. Its Levelized Cost of Energy Analysis – Version 8.0 (2014 update), an in-depth study comparing the cost of generating energy from conventional and alternative technologies, points out that, in the first half of this year, almost half the utility-scale generation capacity added in the US has been in solar and wind power, according to the government’s Energy Information Administration.

Figures here refer to the United States economy, but Angus McCrone of Bloomberg New Energy Finance adds in the FT: “renewables have raised their share of UK electricity output from 6.8% in 2010 to 14.8% in 2013, and 19.5% and 17% in the first two quarters of this year as a result of sustained investment”.

Though Moneyweek reports that cheap oil is ‘threatening’ renewables as investors in renewable energy fear new investment projects may not be economically viable, steady returns from renewables investments ensure that the sector is confident it can ride out oil price plunging below $60 a barrel, according to Business Green.

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Earlier Business Green had spelt this out in more detail. Lazard’s findings are that large wind farms and solar plants are now cost-competitive with gas-fired power in many parts of the US even without subsidy, raising the prospect of a fundamental shift in the country’s energy market.

Because solar power is available during the day and can generate most at times of high demand for power for air-conditioning, it can compete with gas “peaking” plants, which have a cost per MWh of $179-$230, making the comparison even more favourable. Wind power’s lowest possible unsubsidised cost has dropped from a minimum of $101 per megawatt hour in 2009 to a minimum of $37 per MWh.

McCrone adds that renewables have seen major reductions since 2009 in global average levelised costs per MWh, more than 50% in the case of solar photovoltaics and 15% in the case of onshore wind.

In sum, costs have fallen and efficiency has risen for solar panels and wind turbines, to the point that in areas of strong wind or sunshine they can provide electricity more cheaply than fossil fuel plants.

Lazard figures suggest that rooftop solar is still relatively costly, with a minimum cost of $180 per MWh for homes and $126 per MWh for businesses, because of relatively higher costs of installation and support.

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Tom Beach of Crossborder Energy, however, argues that estimates of the higher cost of rooftop solar fail to take into account the savings it provides because of the reduced need for investment in transmission capacity to move power around.

Industry critics point out that renewable energy technologies such as rooftop solar panels and offshore wind still have significantly higher costs and rely on tax credits and state incentives to be commercially viable.

But in straight numerical terms, subsidies for oil, coal and gas far outweigh those for renewables.

global fuel subsidiesSee the IEA’s stunning figures, reported in April by the BBC online.

Technical progress and huge investment in solar module manufacturing capacity in China has sent the price of photovoltaic panels tumbling and – Lazard expects – will encourage greater investment by generators and utilities and help to ease public concerns about the cost of government regulations intended to support alternative energy and cut carbon dioxide emissions.

BP: The “Better Growth, Better Climate” report, including infographics and other materials, is available at leaders, business executives and investors)