Renewable Energy Provides Relief From Rising Power Prices
The summer of 2022 has not been a stable season for global energy. Fossil fuel supplies are short, demand is skyrocketing thanks to heat waves, and the worst may be yet to come, the International Energy Agency said this week. Some events may be localized, but global supply and demand brings challenges –potentially crises – to the entire world.
Renewable power is not exempt from global trends that are pressuring prices upwards. Thanks to inflation and supply-chain challenges, the cost of building new onshore wind farms has risen 7% in the past year. Solar costs have risen twice as much; battery storage costs have risen more than 8%. The resulting price of power from a new wind or solar project built today has risen to 2019 levels, a reversal in a decade-long trend of decreasing costs of electricity from wind and solar power.
But at the same time, renewable power could provide some relief from rising power prices. Absolute cost figures are important, but perhaps more important are the details of the power markets in which new wind and solar projects operate. Onshore wind and solar costs have risen year on year At the same time, the cost of power from coal and gas have risen even more. The result is that the gap in between wind and solar (generally the lowest-cost options in most developed grids) and coal and gas has widened, not closed. The gaps between wind and solar, and coal-fired power, are greater than a year ago but still not as big as in 2020. The gaps between wind and solar, and gas-fired power, have never been greater.