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Renewable Energy –

Technology Learning and Cost

Reductions

Koen Schoots, Francesco Dalla Longa,

James Rawling, Jaap Jansen and Karina Veum

(ECN)

Towards 2030 Roundtable

March 10, 2016, Clingendael, The Hague

2

Intro & Motivation

Clingendael - March 10, 2016 Koen Schoots (ECN)

Global RE trends • Rapid growth of globally installed RE technologies capacity

• Largest growth rates in Asia

• Largest growth in power sector (wind and solar)

• Future cost reductions through technology learning?

• Consequences for EU RE policy framework?

Source: Own elaboration on data from IRENA (2015)

• Brief review of technology learning based on the example of PV

• More on PV: – Cost bandwidth

– Grid parity

– Investors risks and costs

• Wind: – Historical trends

– Expected cost reductions

• Policy implications

3

Outline

Clingendael - March 10, 2016 Koen Schoots (ECN)

4

PV: Technology Learning and

Cost reduction

Clingendael - March 10, 2016 Koen Schoots (ECN)

Source: Fraunhofer ISE, Agora-Energiewende (2015): Current and Future Cost of Photovoltaics

module

inverter

Balance of system

5

PV: Cost Bandwidths

Clingendael - March 10, 2016 Koen Schoots (ECN)

Source: Own elaboration on data from IEA (Technology Roadmap PV, 2014)

• Different systems have different costs LCOE bandwidths

• Costs are significantly different for utility scale vs roof-top systems

• Projections show shrinking of cost bandwidths and general cost decrease

• Combined action of decreasing capital costs and more efficient technologies

Levelized Cost of Electricity Projections

6

PV: Grid Parity

Clingendael - March 10, 2016 Koen Schoots (ECN)

• Large cost differences across countries

• Due to irradiation and levels of support

• Cost reductions around the globe grid parity in several countries

Levelized Cost of Electricity (Residential)

Source: IEA/SLT(2013) : Solar PV reaching grid parity

7

PV: Effect of (Perceived) Risk

Clingendael - March 10, 2016 Koen Schoots (ECN)

Source: Fraunhofer ISE, Agora-Energiewende (2015): Current and Future Cost of Photovoltaics

Sensitivity Analysis: Effect of Weighted Average Cost of Capital for large-scale PV systems in Spain

• Risk aversion can overrule benefits of better irradiation

• Important to maintain stable and transparent regulatory frameworks

8

Wind: Cost Trends

Clingendael - March 10, 2016 Koen Schoots (ECN)

• Onshore capital costs decreased steadily till ~2000

• Upward capital costs trend 2000-2010 for both techs

• Offshore: still large spread in costs, but signs of levelling off

• Main capital cost components: - Onshore : turbine costs - Offshore: installation, grid

connection and financing • Onshore and offshore: very

different levels of maturity

Evolution of EU offshore wind farm capital costs

Source: IEA (2013): Technology Roadmap Wind Energy

9

Offshore Wind: Cost Reduction

Potential

Clingendael - March 10, 2016 Koen Schoots (ECN)

Source: The Crown Estate (2012): Offshore wind cost reduction pathways study

10

Policy Implications

Clingendael - March 10, 2016 Koen Schoots (ECN)

Key factor Global development scenario

Implications for EU 2030 RES policy objectives

Energy security GHG reduction Competitiveness

Cost of RES (LCOE) Large global deployment driving costs down

Technological innovation

Major technological innovations developed outside the EU

New regulation Emergence of novel regulation schemes

Positive effect Positive effect under certain conditions

Negative effect under certain conditions

• Large global deployment of wind and solar…

• … accompanied by overall cost reduction trend

• The trend is likely to continue, but keep in mind: – Complex systems complex cost structure and several “routes” for cost reductions

– Costs vary within the same technology family

– Externalities can (temporarily) reverse the cost decline

– Perceived investment risk can greatly affect costs

• Decreasing costs and innovations on the technical and regulatory side have in general a positive impact wrt EU RE policy objectives

• Important role for policy to support technology innovation and create stable and transparent regulatory frameworks for RE investments

11

Conclusions

Clingendael - March 10, 2016 Koen Schoots (ECN)

Questions?

12 Clingendael - March 10, 2016 Koen Schoots (ECN)