Historically, widespread uptake of renewable energy has been limited by relatively high costs as compared to traditional energy sources. A 2011 IEA report argued that “renewable energy … is becoming cost-competitive in an increasingly broad range of circumstances, in some cases providing investment opportunities without the need for specific economic support.” Several recent trends, and recently announced business ventures, seem to support the IEA’s finding that some renewable energy sources are approaching cost-competitiveness.
Prices for distributed solar have plummeted recently – due largely to economies of scale, government support and policy-driven demand – leading in 2011 to a record 1,855 MW, or $8.4 billion, of installed U.S. photovoltaic projects. A November 2011 Duke University study found that in mid-2010 residential solar photovoltaic systems in North Carolina were able to produce electricity at an average of $0.16/kWh. North Carolina’s average electric rate in 2010 was $0.10/kWh, but states like New York, California, Connecticut and Hawai’i had average rates higher than $0.16/kWh.
Another technology, ocean thermal energy conversion (OTEC), seems after decades of promise to be approaching cost-effectiveness. In a recent Forbes article about a Bahaman plan to build two 10 megawatt commercial OTEC plants, the first of their kind, a representative of one of the companies building the plant is quoted as saying “OTEC systems are becoming cost competitive because the technology for pipes, heat exchangers and other equipment has improved greatly, thanks in part to innovations by the oil and gas industry. Meanwhile, creating electricity on remote islands is expensive as ever.”
A recent New York Times article highlights U.S. company Solazyme’s agreement to partner on a commercial-scale algal biofuel plant in Brazil. To date, algal biofuels have failed achieve commercialization due largely to cost. This venture believes it will succeed where others to have failed because Solazyme’s proprietary biotechnology keeps production costs relatively low. The plant is expected to produce 100,000 metric tons of oil annually.
Do examples like the above show that renewables are becoming more competitive? Or are they exceptions that prove the rule? What’s driving advances in renewable energy technology?