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European utility says wind now cheapest form of generation

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The falling cost of renewables is not news to those who have paid attention to analysis from green-focused thin tanks, or groups like Bloomberg New Energy Finance. But it is when a major European utility, with equal exposure to fossil fuels, wind, and hydro, says that onshore wind is the cheapest of any new utility scale technology.

That is the assessment of Portugal’s EDP, which has around 24GW of generation, of which around 8.7GW is in onshore wind.

In a recent presentation to analysts, EDP’s head of renewables Joao Manso Neto presented this slide below, which shows that the levellised cost of electricity of onshore win in Europe is 20 per cent cheaper than gas and one third cheaper than coal. (The figure assumes 25 per cent wind capacity factor).

EDP wind estimates

 

These estimates are for Europe, but Neto suggested the cost difference is even greater in the US, where recent contracts have been struck between $20/MWh and $40/MWh. That’s despite the so-called shale gas boom, which brought down costs of gas-fired generation for a short period, but still cannot compete with wind.

“It is clear, more and more, that our product (wind energy) is good, not just because it is green, but because it is cheaper,” Neto told the analysts. (You can see the presentation here). He said wind energy is also cheaper than gas in key emerging markets such as Brazil, South Africa, Mexico, and major Asian markets.

Neto admits that the short term outlook in Europe remains challenging because there remains a perception

He might have been referring to the likes of former Queensland Treasurer Keith De Lacy, who in the front page lead for The Australian today said renewables had “no place in a modern society”. And he might have been referring to people like Institute of Public Affairs’ Alan Moran, who insists that that wind energy is “three times” the cost of coal.

Neto says “the less educated” typically refer to the spot price, but this only reflects market dynamics and the level of supply and demand, not the cost of the technology. New build coal is also “three times the market price”.

In Australia, and other similar countries, incumbent generators and those that seek to protect them, are simply trying to stop the introduction of new generation – be it green or brown or black – because it will make older and less efficient coal and gas generator uneconomic. The Minerals Council of Australia makes this clear in its submission to have the renewable energy target dumped.

“Wind is not only competitive, it is prepared to compete,” Neto says. But to do that, it would need an equal playing field, such as the removal of the fossil fuel subsidies that add to half a trillion dollars worldwide. If the world is to decarbonise, and accelerate the withdrawal of polluting power stations, then wind will clearly be a winner.

Bloomberg New Energy Finance said in a note to clients that statistics already show that onshore wind can have a lower cost than gas or coal. The cost of onshore wind is in the range €42–€78/MWh, compered to CCGT (base load gas) at €62–€98/MWh and coal at €75–€90/MWh.

“The conclusion is clear: wind is competitive in many locations,” BNEF says. “The competitiveness of wind is not a new story.”

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  • Alen

    Ignoring the variations in leaking emission reports, the gas boom was ideal for decarbonising the US. Many have claimed that natural gas is a good transition gas, and in the US it is doing just that. Coal generators are getting phased out and renewables are starting to get chosen even over gas, eg court case ruling in favour of building a PV facility rather than a gas-fired power plant in Minnesota. Prices in PV will keep dropping, prices of gas will keep fluctuating and well no one has bothered mentioning new coal plants that I’m aware of. It really says it all when renewables are chosen over gas while going through a gas boom.

    Also the ignorance of some of these deniers never seizes to amaze me.

    • JonathanMaddox

      > Ignoring the variations in leaking emission reports

      That’s a lot to ignore…

      “Using these new, best available data and a 20-year time period for comparing the warming potential of methane to carbon dioxide, the conclusion stands that both shale gas and conventional natural gas have a larger greenhouse gas footprint than do coal or oil, for any possible use of natural gas and particularly for the primary uses of residential and commercial heating.”

      (my emphasis)

      http://onlinelibrary.wiley.com/doi/10.1002/ese3.35/full

      • Alen

        I’ll have look at the report once I get home tonight, but my point that
        although switching between two FF is like going to the lesser evil, it also gave the RE some ground. The shale boom disrupted the coal dominance in the energy mix, made people aware there’s other solutions available than just coal-fired power and now emphasises the point that even in FF boom some RE technologies are more suited and reliable to deliver a better price in the long term. Focus is on financial outcome and benefit, and it is harder
        for opponents to argue against something which is a move from financial terms than if something is done purely from climate related reasons.

        • JonathanMaddox

          Agreed on all counts. But please don’t go discounting fugitive emissions. They’re distressingly large.

      • Alen

        Thank you for that, the comparison footprint graphs were particularly insightful.

  • MorinMoss

    25% capacity factor is old news. Run the numbers using 33% – 40% capacity factor to see how wind really stacks up.

  • http://basissap.com martin_english

    “Neto admits that the short term outlook in Europe remains challenging because there remains a perception”

    a perception of what ? I assume it’s something to do with cost…..

    I would like to know how the report “levelises” the costs across the different generation methods. One example is that a given set of Photo Voltaiic cells has a much shorter lifespan than the equivalent Hydro plant. Another issue is that coal / gas / uranium are bought and sold in a market; having built our wind farm or hydro plant we know how “fueling” it is going to cost over the next 10, 15, 50 years, compared to the cost of the fuel for non renewables.

    hth