Page 8 - AsiaElec Week 02 2022

AsiaElec RENEWABLES AsiaElec

Green power still cheaper

than fossil fuels in Asia

ASIA RENEWABLES energy became more expen- However, offshore wind LCOE in Asia-Pa-
sive in Asia in 2021 because of strong demand cific will not be competitive against gas-fired
and supply chain tightness, but green power still power (CCGT) until the 2030s, except for China,
managed to undercut the of fossil fuel-derived which will hit this milestone in the early 2020s.
electricity. Looking at other low-carbon power tech-
The levelised cost of electricity (LCOE) for nologies, Wood Mackenzie’s analysis reveals
renewable power in the region broke historical that nuclear, hydro and geothermal are among
trends and rose in 2021 but still gained ground the cheapest low-carbon dispatchable power
against fossil fuel power, Wood Mackenzie said options costing between $84 per MWh and $93
on January 11. per MWh in 2021.
Asia’s 2021 power crisis sent fossil fuels This is already cheaper than gas-fired power,
and renewable sources into a frenzy as prices which remains flat at around $105 per MWh.
spiked amidst strong demand and supply chain These conventional technologies are likely to
tightness. maintain a cost advantage of over 30% compared
Spot market fuel prices averaged over the year to carbon, capture and storage (CCS) and green
pushed up costs of coal and gas power by 19% fuel blending by 2050.
and 46% respectively, making renewables (util- Renewables integrated with battery storage
ity PV and onshore wind) appear more competi- has a 50% premium over gas power today but
tive. However, increased equipment and logistics will be competitive by around 2030, becom-
costs meant that solar and wind power were also ing an increasing threat to gas power. CCS is
hit by cost inflation. expected to add 70% to 100% to generation costs
“The average LCOE across Asia-Pacific for and struggles to compete with firmed renewa-
new solar projects increased by 9% to $86 per bles and other low-carbon options in the longer
MWh and for onshore wind projects by 2% to term.
$103 per MWh last year,” said Wood Mackenzie Research director Alex Whitworth said:
senior analyst Rishab Shrestha. “Economics is a key factor in choosing options
“Renewables’ supply chain bottlenecks are to reduce the fossil fuel share of the Asia-Pa-
expected to ease in 2022 and beyond, and the cific power system, which sits at around 70%
respective LCOE will return to a declining today. Although wind and solar costs are falling,
trend.” options for reliable and dispatchable power to
Currently, renewable power costs in Asia-Pa- support decarbonisation are still very expensive.
cific are about 16% more expensive on average “Take Japan, for example: a fuel mix of 20%
compared to fossil fuel power costs over the pro- green or blue ammonia plus 80% coal as pro-
ject lifetime. posed will cost around $150 per MWh, even
India, China and Australia are the top three by 2030. This is more expensive than gas power
leaders, with renewable power being between while still emitting almost twice as much car-
12% and 29% cheaper than the lowest-cost fossil bon. A combination of offshore wind and dis-
fuel, coal. Other major markets still have a signif- tributed solar backed up by storage and gas units
icant renewables premium. would have a similar price tag. Is Japan ready for
Shrestha added: “Interestingly, China is the a potential doubling of the average power gen-
only Asia-Pacific market which has bucked the eration costs in 2030 compared to recent years?
renewables premium cost inflation trend in “Japan is a very expensive market but across
2021, supported by a mix of factors, including Asia-Pacific there are similar challenges. A
rising fossil fuel prices, domestic manufacturing, ‘firmed’ or dispatchable combination of low-
zero-tolerance COVID policy, and its commit- cost renewables, gas peakers and batteries costs
ment towards climate change.” around $120 per MWh today, about 60% higher
Wood Mackenzie forecasts that by 2030, elec- than new coal power projects. It will take time
tricity from renewables (mostly utility PV) will to bridge the gap – the cost of this combination
be at a 28% discount to coal across the region. will fall to below $70 per MWh by 2050 and will
India, Australia and China remain low-cost become competitive with gas in the 2020s and
champions for renewable power with LCOE coal in the 2030s.
discounts ranging between 50% and 55%. “At the end of the day, economics is driving
Both onshore wind and solar will be at a dis- a higher share of wind and solar, but low-cost
count or at parity with gas and coal power in intermittent renewables cannot replace fossil
these markets. fuel power alone.”™

P8 www. NEWSBASE .com Week 02 12•January•2022