17 November 2014: The World Resources Institute (WRI) has launched a factsheet that enables better cost comparisons of electricity from renewables and fossil fuels by identifying key factors to consider, namely: type of user; supply options; and factors that impact additional costs and benefits, such as environmental risks or financial incentives.
The publication, titled ‘Understanding Renewable Energy Cost Parity,’ seeks to provide a simple, “go-to” resource for information on appropriate comparisons of renewable and “traditional” electricity supply options. The factsheet constitutes the first in a series of three publications that aim to support clarity and precision in cost analyses of renewable energy options made by decision makers in companies, residences, governments and advocacy organizations. In particular, the guide is intended for electricity buyers looking for financial savings, and electricity system planners, regulators and policy makers seeking economic and social benefits for end-users.
The publication argues that, in order for decision makers to know where and when renewable energy is the cheapest solution, they should establish: “with what should a renewable energy option be compared”; and “which factors need to be considered in determining cost parity.”
Among the publication’s key messages are that: for end-use consumers, on-site generation is cost-competitive when its average cost of energy is lower than or equal to the retail electricity price over the project’s lifetime; for large industrial and/or commercial consumers, power purchase agreements (PPAs) are cost-competitive when the price paid for generated electricity is lower than or equal to the retail electricity price over the project’s lifetime or contract; and, for utilities and other wholesale buyers, a renewable energy project is cost-competitive if its cost of energy and/or risk is lower than or equal to that of other technologies providing the same service during the same period of time.
The factsheet also argues for the need to take into account potential additional factors, including fluctuations in electricity prices, different time periods used in comparisons, assumptions and methodologies relating to levelized cost of energy (LCOE) calculations, technology-specific subsidies, possible PPAs, and costs of compliance with environmental regulations. [WRI Blog Post] [WRI Publication Webpage] [Publication: Understanding Renewable Energy Cost Parity] More