The International Energy Agency predicts a large price drop in renewables

The International Energy Agency has released its first comprehensive study of renewable energy technologies, showing that location and capital cost based on technology status are the most important factors affecting competitiveness, and predicting a large cost reduction over the next two decades. The study "Renewables for Power Generation" gives insights into Status and Prospects, identifies the key resources, technical characteristics, costs and development trends of the renewables market, and provides an assessment of the current status and near term potential of six renewables used to produce electricity. At the launch of the publication, IEA Deputy Executive Director, William C. Ramsay, said: "Renewable electricity costs are highly dependent on the local resource, and are lowest where resources are plentiful. In such locations, renewables can now compete on a kilowatt hour basis with fossil fuels, even without taking environmental costs into account."

He added that reducing the cost of renewables further will require more research and development, as well as taking advantage of market experience. "Technology development and market experience are strongly inter linked," he said, adding that policy makers should focus on market-based incentives to build markets that result in improved technology. The report notes that, where resources are strong, technologies such as wind, bioenergy, small hydro and biopower, are competitive on a kilowatt hour basis with fossil fuels for electricity production. In off-grid market niches these sources can have a competitive advantage, particularly for small industrial and agricultural applications in developed countries, such as remote sensing, water pumping and railway switching. In developing countries, these energies, as well as solar, are used primarily for lighting, refrigeration and food preparation, the report notes.

The report goes on to predict that the best potential for future cost reduction among the renewable electricity technologies is about 20% for each doubling of installed capacity. Globally, solar technologies are expected to reduce their costs by some 30 - 50% for each of the next two decades as a result of learning and market growth. Wind is expected to reduce its costs by about 25% for each of the next two decades and geo-thermal by about 10 - 25%. The more mature technologies, such as small hydropower and biomass, are expected to drop by only 5 - 10% for each of the next two decades. This would bring costs further into the competitive range by 2010 in resource rich locations. This could result in prices of wind power at 2-4 cents/kWh, solar PV at 10 - 15 cents/kWh, geothermal power at 2 - 3 cents/kWh and biopower and small hydro power at 2 - 3 cents/kWh (all prices in US$ and cents) within the next two decades.