Costs across the energy market are rapidly changing, but the picture remains patchy and contentious

The cost of renewable energy has fallen dramatically compared with power from fossil fuels and nuclear in the past five years, according to the International Energy Agency (IEA). The median cost of producing baseload power – i.e. power available at any time – from coal, natural gas and nuclear plants is about $100/MWh today, against about $200/MWh for solar, which has fallen by 60% from its 2010 level of $500.

Those costs include investment, maintenance, fuel and decommissioning over a plant’s lifetime and vary widely between countries and plants. For example, in Belgium power from commercial rooftop solar installations costs $312/MWh but in Spain solar costs $167/MWh because of Spain’s greater sunshine, states the IEA report, titled Projected Costs of Generating Electricity.

“The costs of renewable technologies – in particular solar photovoltaic – have declined significantly over the past five years,” the Paris-based IEA says. “These technologies are no longer cost outliers.” The study, based on figures from 181 power plants in 22 countries, concludes that no one technology is the cheapest in all circumstances, as costs depend largely on labour costs, available resources and local regulations.

Subsidy battles

Panasonic, a major supplier of solar panels in Britain, has urged the UK government to rethink plans to cut some feed-in tariff subsidies (Fits) by almost 90%, which could affect rooftop panel installations.

Daniel Roca, UK country manager for the company’s solar division, told the Guardian: “Let’s keep [the industry] alive, let’s help it further develop to become fully independent from state support, with energy storage and a closer involvement of utilities. But let’s not push the bird out of the nest before it can properly fly.”

The government should immediately open dialogue with the solar industry during the consultation period announced by Amber Rudd, the energy and climate change secretary, on plans to cut support for larger solar energy installations, Roca says. Ending the Renewable Obligation subsidy early, in April 2016, would “inevitably and irreversibly” cause substantial damage to solar installations up to 5MW, which can power 2,500 homes.

Ministers are also aiming to remove the guaranteed level of subsidy for coal or other fossil fuel power plants that switch to greener fuels such as biomass.

Frans van den Heuvel, CEO of solar panel manufacturer Solarcentury, says that in the four months since the Conservatives won power in the UK, the government had turned upside down the certainties that had characterised the UK renewables market and the cross-party consensus underpinning it. “If the consultation is enacted, we can expect to see a wholesale collapse in solar take-up by homeowners and businesses.”

Energy projections

The IEA report was published in early September, only months before international talks on a climate change deal, which are due in Paris in December. Average costs of power generation from gas and coal rose over the five years, the agency says. Nuclear energy costs are “roughly on par” with those reported in 2010, “thus undermining the growing narrative that nuclear costs continue to increase globally”.

Power costs are likely to shift significantly in the coming decades as new technologies become mainstream, the study predicted. Coal plants will become up to 70% more expensive if they include carbon capture equipment; offshore wind and solar, by contrast, are expected to fall in price, the IEA study says.

New utility-size solar installations could produce power below $100/MWh before 2025 in the sunniest regions, while panels on rooftops could reach that level five years later, it says. “The cost drivers of the different generating technologies … remain both market- and technology-specific. As such, there is no single technology that can be said to be the cheapest under all circumstances,” the report states.

The UK is in the process of deciding whether to build more nuclear plants. Germany has increased coal-powered generation, having phased out its own nuclear stations since the Fukushima disaster in Japan in 2011. 

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