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| | These factors suggest that there is scope to reduce the varying production costs of <span data-scaytid="23" data-scayt_word="renewables">renewables</span>.<span style="font-size: 0.85em; line-height: 1.5em;"></span> | | These factors suggest that there is scope to reduce the varying production costs of <span data-scaytid="23" data-scayt_word="renewables">renewables</span>.<span style="font-size: 0.85em; line-height: 1.5em;"></span> |
| | *The most expensive form of renewable energy is [[Portal:Hydro|ocean/tidal electricity]], which, even at the bottom of the potential cost range, remains uncompetitive with fossil fuels.<br/> | | *The most expensive form of renewable energy is [[Portal:Hydro|ocean/tidal electricity]], which, even at the bottom of the potential cost range, remains uncompetitive with fossil fuels.<br/> |
| − | **Onshore and offshore wind and large solar photovoltaic (PV) plants today require policy support in <span data-scaytid="331" data-scayt_word="orde">orde</span>r to bridge the gap <span data-scaytid="151" data-scayt_word="bewteen">bewteen</span> <span data-scaytid="159" data-scayt_word="geration">geration</span> costs and the <span data-scaytid="168" data-scayt_word="markert">markert</span> prices of <span data-scaytid="179" data-scayt_word="elecrticty">elecrticty</span>. This is expected to change in the near future as [http://iea-retd.org/wp-content/uploads/2013/07/20130710-RE-COST-FINAL-REPORT.pdf reported] by the [http://iea-retd.org/ International Energy Agency's Renewable Energy Technology Deployment Group]. The report finds that technology and market dynamics are driving down the costs of renewable power generation while increasing the costs involved in <span data-scaytid="415" data-scayt_word="non-renwable">non-renwable</span> <span data-scaytid="421" data-scayt_word="gereation">gereation</span>. Thus in the near future, onshore wind and large scale PV plants could be able to offer attractive business cases to investors in regions with a high proportion of thermal generation without resorting to incentives <ref name="Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss">Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss</ref>. | + | **Onshore and offshore wind and large solar photovoltaic (PV) plants today require policy support in order to bridge the gap between generation costs and the market prices of electricity. This is expected to change in the near future as [http://iea-retd.org/wp-content/uploads/2013/07/20130710-RE-COST-FINAL-REPORT.pdf reported] by the [http://iea-retd.org/ International Energy Agency's Renewable Energy Technology Deployment Group] (<span data-scaytid="1051" data-scayt_word="IEA">IEA</span>). The report finds that technology and market dynamics are driving down the costs of renewable power generation while increasing the costs involved in non-renewable generation. Thus in the near future, onshore wind and large scale PV plants could be able to offer attractive business cases to investors in regions with a high proportion of thermal generation without resorting to incentives <ref name="Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss">Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss</ref>. |
| | *The next is [[Portal:Solar|solar power]], which at its cheapest is potentially competitive with fossil fuels. However, its midrange costs are well above fossil fuels. This wide range reflects the cost implications of different technologies. For example, large-scale '''Concentrated Solar Power (<span data-scaytid="36" data-scayt_word="CSP">CSP</span>)''' techniques employed in a desert environment could produce electricity at a far lower cost than small solar panels fitted to residential properties.<br/> | | *The next is [[Portal:Solar|solar power]], which at its cheapest is potentially competitive with fossil fuels. However, its midrange costs are well above fossil fuels. This wide range reflects the cost implications of different technologies. For example, large-scale '''Concentrated Solar Power (<span data-scaytid="36" data-scayt_word="CSP">CSP</span>)''' techniques employed in a desert environment could produce electricity at a far lower cost than small solar panels fitted to residential properties.<br/> |
| | *[[Portal:Wind|Wind power]] can be cheaper, but remains more expensive than fossil fuels in most instances. This range reflects differing scales of energy generation, but also the different cost structures of onshore and offshore wind.<br/> | | *[[Portal:Wind|Wind power]] can be cheaper, but remains more expensive than fossil fuels in most instances. This range reflects differing scales of energy generation, but also the different cost structures of onshore and offshore wind.<br/> |
| | *[[Portal:Bioenergy|Biomass]], [[Geothermal Energy|geothermal]] and [[Portal:Hydro|hydropower]] in particular are already competitive with fossil fuels in some circumstances <ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>. | | *[[Portal:Bioenergy|Biomass]], [[Geothermal Energy|geothermal]] and [[Portal:Hydro|hydropower]] in particular are already competitive with fossil fuels in some circumstances <ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>. |
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| − | The International Energy Agency's [http://iea-retd.org/ Renewable Energy Technology Deployment Group] reports that generation costs for renewable power are also falling and approaching the costs for gas and coal fired plants, especially when the hidden subsidies that thermal generation plants receive is taken out of the equation. | + | The International Energy Agency's (<span data-scaytid="1052" data-scayt_word="IEA">IEA</span>) [http://iea-retd.org/ Renewable Energy Technology Deployment Group] reports that generation costs for renewable power are also falling and approaching the costs for gas and coal fired plants, especially when the hidden subsidies that thermal generation plants receive is taken out of the equation. |
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| | On the other hand, the cost of gas and coal fired plants is increasing because they are being used less, largely due to policy support for <span data-scaytid="940" data-scayt_word="renewables">renewables</span> construction delays, higher financing rates, and the increasing cost of fuel in some European countries and in Japan. | | On the other hand, the cost of gas and coal fired plants is increasing because they are being used less, largely due to policy support for <span data-scaytid="940" data-scayt_word="renewables">renewables</span> construction delays, higher financing rates, and the increasing cost of fuel in some European countries and in Japan. |
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| − | Crucially, the higher capital costs involved in some new-build thermal plants due to emission reduction systems will <span data-scaytid="951" data-scayt_word="poistively">poistively</span> or <span data-scaytid="952" data-scayt_word="negativley">negativley</span> <span data-scaytid="955" data-scayt_word="infleunce">infleunce</span> the future competitiveness of thermal generation. | + | Crucially, the higher capital costs involved in some new-build thermal plants due to emission reduction systems will be positively or negatively influenced by the shape and provisions of future policies for emission control<ref name="Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss">Bayar, T., 2013. The Cost of New Renewable Power Generation: Approaching Parity? Available at: http://www.renewableenergyworld.com/rea/news/article/2013/07/costing-renewable-power-generation?cmpid=rss</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span> |
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| − | <span style="line-height: 1.5em; font-size: 0.85em;">At the same time, the report stated, the cost of gas- and coal-fired plants is increasing because they are being used less — largely due to policy support for </span><span data-scaytid="136" data-scayt_word="renewables" style="line-height: 1.5em; font-size: 0.85em;">renewables</span><span style="line-height: 1.5em; font-size: 0.85em;">, construction delays, higher financing rates, and the increasing cost of fuel in some European countries and Japan. Most crucial is the higher capital costs involved in some new-build thermal plants due to emission reduction systems, the report argued. “The future competitiveness of thermal generation is going to be positively or negatively influenced by the shape and provisions of future policies for control of emissions,” it said.</span>
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| − | '''Expansion of Renewable Energy Use:'''
| + | The <span data-scaytid="1050" data-scayt_word="IEA">IEA</span> in a recent [http://iea-retd.org/wp-content/uploads/2013/07/20130710-RE-COST-FINAL-REPORT.pdf report] concluded that there is no unique costs of renewable or non-renewable power generation. Cost ranges associated with any power generation are relatively large and highly dependent on the regulatory and market contexts. |
| − | #The basic economics of renewable energy need to be artificially altered, either by increasing the cost of fossil fuel-based energy (e.g. through taxes or equivalent mechanisms), or by reducing the costs of renewable energy (e.g. subsidies), or by boosting the returns to renewable energies (e.g. through paying a premium for this form of energy) <ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>.
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| − | #Developing countries should not necessarily be required to meet these costs. This is particularly so where the development of renewable energy capacity may place countries at a competitive disadvantage and/or these countries bear no responsibility for climate change. The costs should be met by countries that do bear these responsibilities. This case is even stronger while developed countries are [[Subsidies|subsidizing fossil-fuel energy]]<ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span><br/>
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| + | The report stressed the necessity of maintaining current incentives in order to provide business cases that can interest investors as generally the costs of both new renewable power plants and new-non-renewable generation are higher than the market price of electricity. |
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| + | '''Expansion of Renewable Energy Use:''' |
| − | | + | #The basic economics of renewable energy need to be artificially altered, either by increasing the cost of fossil fuel-based energy (e.g. through taxes or equivalent mechanisms), or by reducing the costs of renewable energy (e.g. subsidies), or by boosting the returns to renewable energies (e.g. through paying a premium for this form of energy) <ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>. |
| − | One unsurprising conclusion is that there is no unique cost of renewable or non-renewable power generation. Cost ranges associated with any power generation technology are relatively large and highly dependent on the regulatory and market contexts, the report said. It pointed to best-in-class plants — those with high <span data-scaytid="137" data-scayt_word="utilisation">utilisation</span> rates, low capital costs, and low rates of financing — rather than to any particular technology as having generation costs up to 50 percent lower than average plants. It singled out the case of large-scale PV, where comparing plants built several years apart and based on different technologies showed big differences in cost. Policies in some regions also significantly affect generation costs by offering a variety of reward mechanisms, such as R&D grants, assumption by the <span data-scaytid="138" data-scayt_word="TSO">TSO</span> of the cost of connecting to the grid, tax breaks and reduction of administrative burdens.
| + | #Developing countries should not necessarily be required to meet these costs. This is particularly so where the development of renewable energy capacity may place countries at a competitive disadvantage and/or these countries bear no responsibility for climate change. The costs should be met by countries that do bear these responsibilities. This case is even stronger while developed countries are [[Subsidies|subsidizing fossil-fuel energy]]<ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span><br/> |
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| − | Both new renewable and new non-renewable power plants find it difficult to compete in regions where the market prices of electricity remain low, said the report. This is driven in part by excess capacity, and also by an installed base that includes depreciated plants.
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| − | In general, the costs of both new renewable power plants and new non-renewable generation are higher than the market price of electricity, because of which the report stressed the necessity of maintaining current incentives in order to provide business cases that will interest investors. However, it noted that when incentives do not exist or are not appropriately defined, “the business case of new generation does not hold.”
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| | + | [[Category:Financing_and_Funding]] |
| | + | [[Category:Wind_Energy]] |
| | + | [[Category:Solar]] |
| | + | [[Category:Hydro]] |
| | + | [[Category:Geothermal]] |
| | + | [[Category:Bioenergy]] |
| | + | [[Category:Biomass]] |
Worldwide more energy is required to enable economic development. Fossil fuels are a finite resource that contribute to climate change and cause other problems like smog, extended supply lines and vulnerable power grids. Utilizing renewables would help to avoid these problems, create new job opportunities and reduce the drain on hard currency for poorer countries. Because conventional fuels have received long-term subsidies in the past, it is vital that governments support the development of renewables in the form of financial incentives that can create a level playing field [1].
In 2011, the global investment in renewable power and fuels increased by 17% to a new record of $257 billion dollars. Significantly, developing economies made up 35% of this total investment [3].
Generally the economics of renewable energy are not competitive, as production costs per unit of energy are usually higher than those for fossil fuels as depicted in the figure below, which shows the relative costs for renewable energy technologies compared with each other, and with non-renewable energy[5].
As shown in the figure, while non-renewable costs are found in the range of US$0.3–US$0.10/KwH (kilowatt hour), most renewables are more expensive and have a far greater cost range. This indicates the relative maturity of technologies and also the key significant cost difference of renewable energy production (which is dependent on factors such as wind speed and degrees of solar intensity.)
These factors suggest that there is scope to reduce the varying production costs of renewables.
On the other hand, the cost of gas and coal fired plants is increasing because they are being used less, largely due to policy support for renewables construction delays, higher financing rates, and the increasing cost of fuel in some European countries and in Japan.
Crucially, the higher capital costs involved in some new-build thermal plants due to emission reduction systems will be positively or negatively influenced by the shape and provisions of future policies for emission control[6].
It is significant that much of the global solar power is concentrated in developing countries, although other areas also have a high potential.
