Solar and wind energy costs will continue their stunning falls over the next decade, and by 2027 will be cheaper than existing coal and gas plants in most parts of the world, according to a major new report by Bloomberg New Energy Finance.
BNEF’s annual New Energy Outlook, NEO2016, says solar energy costs, which have already fallen by 80 per cent since 2008, will fall another 60 per cent to an average cost of $40/MWh around the world by 2040. In some countries, that cost has already been beaten.
This “precipitous” fall, as BNEF describes it, means that solar will account for nearly half of all new capacity installed around the world in the coming decades. One third of this will be on rooftops, and it will be accompanied by huge growth in battery storage. By 2040, solar will supply 15 per cent of all electricity demand.
Wind energy costs will also fall another 40 per cent, mostly driven by improving capacity factors that will rise to 33 per cent in 2030 and 41 per cent in 2040. It will account for more than 20 per cent of all new additions.
Prices will remain low for coal and gas, because of falling demand, but wind and solar will still be cheaper than these fossil fuels by 2027 in most parts of the world. “This is a tipping point that results in rapid and widespread renewables development,” the BNEF report says.
That means that the role of coal and gas will change completely from the concept of “base load” to that of gap fillers.
“As natural gas and coal plants are increasingly idled in favor of renewables, their capacity factors will take a big hit, and lifetime cost of those plants goes up. Think of them as the expensive back-up power for cheap renewables.”
The signs of this have already started to emerge in Australia. In May, thanks to record amounts of wind generation, most wind farms operated at capacity factors of more than 50 per cent, more than many coal generators. And that is before the imminent deployment of huge amounts of large scale solar.
(The full report is available only to clients of BNEF).
© 2016 Solar Choice Pty Ltd