A major new report by the International Renewable Energy Agency has predicted huge reductions in the cost renewable energy generation, that could see the average cost of electricity from solar PV and onshore wind fall to roughly 5-6 US cents per kilowatt hour by 2025.
The report, published on Thursday, forecasts that by 2025, the levellised cost of electricity (LCOE) generated by solar thermal by 43 per cent (depending on the technology used), by 26 per cent for onshore wind and by 35 per cent for onshore wind.
In the case of solar PV, IRENA estimates the average LCOE could fall by as much as 59 per cent – mirroring the 58 per cent price drop that occurred between 2010-15, that has already made the technology increasingly competitive at utility scale.
The stunning forecast far outstrips that of Bloomberg New Energy Finance, published just last week, which also predicted a 60 per cent fall in solar PV power costs – but not until 2040.
The IRENA report, The Power to Change: Solar and Wind Cost Reduction Potential to 2025, says that these huge solar and wind cost reductions will be driven by increasing economies of scale, more competitive supply chains, and technology improvements that will raise capacity factors and/or reduce installed costs.
All of this will take place against a backdrop of increasing competitive pressures – and presuming the right regulatory and policy frameworks are in place – that will drive innovation, the report says.
In terms of solar PV, the report notes that, “cost reductions to 2025 will depend increasingly on balance of system costs (e.g. inverters, racking and mounting systems, civil works, etc.), technology innovations, operations and maintenance costs and quality project management.
As the report says, this “highlights the importance of the structuring of support policies and their impact on competitive pressures, as well as the benefits that accrue to established and mature markets with a wealth of domestic experience in implementing PV projects.
“The focus in many countries must therefore shift to adopting policies that can reduce costs in these areas,” it says.
© 2016 Solar Choice Pty Ltd
