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Cheap renewables are transforming global electricity business

February 01, 2018
Tim Buckley and Kashish Shah
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Key Findings

While wind’s recent cost decline has not been as universally stellar as solar’s, mostly because wind is a more mature sector, its price downtrend in 2016 and 2017 has been precipitous, particularly in countries with the most favorable conditions and policies.

The scale of offshore wind has moved from below 3MW per turbine at the start of this decade to a planned 12-15MW per turbine proposed for installation by 2024/25, a fivefold increase in 10 years.

A growing number of governments have decided to diverge from the legacy fossil fuel power generation, and this rampant, deflationary trend around renewable will give economic credence to this decision.

Executive Summary

Records were smashed in the energy sector in 2017, with a dramatic drop in solar and wind prices driving a global transformation across the global electricity sector.

Installations of wind and solar totaled almost 155 gigawatts (GW) last year, more than the entire installed power capacity in the U.K., meaning that renewables continue to far outpace coalfired power plant development.

Among the good news for consumers is that the lowest bids for solar dropped a remarkable 50% from records set in 2014 and 2015. The graph below illustrates the ongoing, record breaking down-trend (deflation) of solar power prices.

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Global solar deflation

The following graph provides a within-country, local comparison between the last two lowest solar bids, in 2016 and 107. Country-specific factors in pricing, taxes, inflation-indexation, subsidies and policies prevent a clean inter-country comparison. However, the general trend is common to all, driven by ongoing technology improvements plus gains in economies of scale in all areas of raw materials, manufacturing, procurement and construction, and debt and equity financing.

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Solar power bids

The transformation under way creates momentum for a rapid shift from fossil fuels by large utilities such as ENGIE in France, NTPC of India and NextEra in the US.

Press release: IEEFA Update: A Tipping Point Is Coming, and Fast

Please view full report PDF for references and sources.

Tim Buckley

Tim Buckley, Director, Climate Energy Finance (CEF) has 30 years of financial market experience covering the Australian, Asian and global equity markets from both a buy and sell side perspective.

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Kashish Shah

Kashish Shah is a Senior Research Analyst with Wood Mackenzie. Previously,
he worked as an Energy Finance Analyst with the Institute for Energy

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