Renewables are the cheapest power option today – Carbon Tracker

The costs of renewable power generation are already lower on average worldwide than the costs of fossil fuel power generation, even without assumptions on the cost of carbon – according to a recently published sensitivity analysis from the Carbon Tracker Initiative.

The analysis, outlined in a report, End of the load for coal and gas?, compares the levelised cost of electricity (LCOE) of new-build coal, gas, wind and solar plants under three scenarios – a reference case, a new scenario for 2016 and a 2020 scenario with a 2°C emissions pathway.

The study says that reduced load factors and shorter lifetimes for coal and gas plants due to decarbonisation trends significantly undermine these plants’ economics – something Carbon Tracker says is not factored in with other models. Meanwhile, a lower cost of capital and falling technology costs for solar and wind power improves the relative economic attractiveness of these options.

Reference case scenarios typically use utilisation rates of 80% for coal and 60% for gas, but Carbon Tracker used data for 2013 where average plant capacity factors were 59% and 38% respectively in its updated scenario. In its 2020 scenario, it forecasts capacity factors of 42% for coal and 31% for gas. This increases the costs per MWh. Rising capacity factors for solar and wind have the opposite effect.

Commenting on the analysis, Carbon Tracker’s Head of Research James Leaton said: ‘Policymakers and investors really need to question out-dated assumptions on technology costs that do not factor in the direction of travel post-Paris. Planning for business-as-usual load factors and lifetimes for new coal and gas plants is a recipe for stranded assets.’