How developing countries can manage to reduce cost of renewables

With renewable energy generation being suggested as the way to  power the future, one of the most important issues will be its cost. Cost will greatly determine its acceptability and penetration - especially in developing nations. Indeed, the high cost of renewable energy has been the biggest impediment for its use in cutting down carbon emissions. While great advances have been made with regards to reduction of cost of utility-scale renewable energy projects, much remains to be done to make the option cheaper than other forms of energy in terms of installation and final consumer costs.

Utility-scale wind and solar plants have been associated with higher costs than alternatives to the effect that, in some countries, electricity from solar and wind sources costs as much as twice as that from traditional sources. In addition, only a few companies continue to invest in renewable projects despite massive subsidies offered by many governments around the world. These two, among other factors, have led to the question of how governments can effectively tackle the renewable energy cost problem. Below are a number of ways that have been proposed and advanced by different countries to help reduce the cost of renewable energy.

Energy Auctions

Also known also as reverse bidding, the method is being widely pursued as a policy option by many developing countries. Countries ask for competitive bids for large-scale energy contracts (power plants) and discover the real market prices and viable technologies. India is a well known case study after cutting down the cost of solar power projects by almost 65% since 2010. The International Renewable Energy Agency (IRENA) published a report last month known as Renewable Energy Auctions: a Guide to Design showing that the method has become popular in promoting renewable energy penetration. According to the report, over 60 countries around the world have adopted this trend. The report details how South Africa has managed to cut down the cost of photovoltaic and wind installations by 39% and 23% respectively.

Reducing the cost of installation is important towards reduction of the final cost of energy to the final consumer, with the report by IRENA showing how United Emirates has managed the lowest price ever on energy from a solar park - less that 6 U.S cents per kilowatt-hour without financial support. It is so successful that the final price is more competitive than that of electricity from new natural gas or coal power plants thus delivering the expectation. Other notable countries to have used the strategy according to the report include China, Peru and Brazil.

Countries asking for inclusion of local content and materials by bidders end up promoting their local industries and generating job opportunities. What's more about these auctions is that they are much more productive in reducing costs than incentives traditionally offered by governments to power producers, commonly known as power subsidies. Auctions also level the playing ground for different technologies to compete fairly, and the government to identify which could work best.

Technology innovation 

In 2000s, a world-leading photovoltaic researcher Martin Green did a cost calculation for all components making up photovoltaic panel and concluded that the final price of energy from the panel would never go below US$1/watt. At that time, a solar module costed US$4 per watt. Martin and others believed that the future was in thin film materials that could see reduction of the amount of raw materials in the panel and thus the final cost. Development of thin films then ended with reduction of the cost of crystalline silicon modules. Today, it is possible to achieve a price of 25 cents per watt for solar power.

Part of the reason a 200MW solar power plant in Dubai will manage such final low price on electricity is the use of innovative technology, thin-film cadmium telluride solar modules made by First Solar. The electricity will be sold at between 6.4 and 9.6 cents per kilowatt-hour. That marked a huge renaissance of thin film solar panel modules. Another promise is the use of 1366's wafer fabrication method that could come in the market in 2016.

Wind power proponents argue that the single most important driver in reducing wind energy cost is the blade or rotor size. Developments have seen production of blades of up to about 80 meters in length and could go to 100 meters. But the costs of transporting and installing huge turbines is getting higher as sizes increase, and technologies such as "space frame" - a steel lattice tower wrapped in fabric - hold the promise of reducing these costs.

Offshore installation

Land conflicts, lack of development spaces and pursuit of more wind resources have left people thinking of setting wind turbines above water bodies. In fact, land conflicts and lack of development spaces may continue to haunt countries for as long as the hunt for more renewable energy continues. Others pay heftily to tackle these challenges. Although offshore installation has presented another challenge since affixing massive turbines on seafloors is very expensive, technologies such as vertical axis turbine have been suggested. In this case, the main rotor shaft is vertically installed.

These are just a few of the methods proposed out there to show that technological innovations can bring in the desired reduction in the cost of renewable power. Thus by sourcing out such technologies, countries can get closer to the agenda.

Feed-in Tariffs

Increased deployment of renewable energy projects is an important aspect towards reduction of final cost of electricity from these sources. Feed-in-tariffs have been used even in developed countries to promote deployment of more renewable energy projects. Competition among various players is a market factor that will finally lead to lowering final cost of energy. In this case, power producers are either paid a certain amount per kilowatt generated (known as generation tariffs) or per kilowatt exported to the grid (called export tariffs). Feed-in-tariffs can be useful in developing countries where the catch of renewables from wind and solar sources is very low.

Lower Costs, More Clean Energy

Since there is no doubt that increased pursuit of renewable energy is an important step towards reducing carbon emissions, of the most important aspect in their development in future will be cost. Reducing the cost of installation and cost on consumers will not only increase deployment but also their acceptability since the final cost of electricity from the renewables will be competitive to that from other sources. The above methods will play an important role towards reducing these costs.