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Are renewable energy technologies cost competitive for electricity generation?

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  • Timilsina, Govinda R.

Abstract

Renewable energy technologies (RETs), particularly solar and wind energy technologies, have experienced a rapid decline in their costs over the last two decades. Several studies claim that RETs are cost-competitive with fossil fuel technologies based on their levelized costs of electricity (LCOE), the most common indicator used to compare the cost competitiveness of electricity-generating technologies. However, no consensus exists due to the wide variations in factors influencing the LCOEs across countries and technologies. This study calculates more than 4000 LCOEs for 11 technologies, varying all input variables. It shows that the LCOEs for RETs, except concentrated solar and offshore wind, are lower than those for fossil fuel technologies at the lower range of capital costs and discount rates of 10% or lower. However, for a reasonable range of input variables, the study cannot justify the low auction prices for solar power, below US$20/MWh, recently observed in some parts of the world. The study illustrates how various factors influence the cost of electricity generation across technologies. It also compares the trends in electricity generation costs between RETs and fossil fuels over the last two decades.

Suggested Citation

  • Timilsina, Govinda R., 2021. "Are renewable energy technologies cost competitive for electricity generation?," Renewable Energy, Elsevier, vol. 180(C), pages 658-672.
    • Handle: RePEc:eee:renene:v:180:y:2021:i:c:p:658-672
    DOI: 10.1016/j.renene.2021.08.088
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