Friday, July 25 2014

How long until wind energy gets to the same price as fossil fuels in Canada?

Reaching cost parity with fossil fuels, where renewable power doesn’t cost any more than fossil fuels, is one of the holy grails for renewable power, and it looks increasingly possible. According to a recent study by Bloomberg New Energy Finance, in parts of Europe onshore wind energy will reach cost parity with fossil fuel-based electricity by 2016. The study argues that there are two main factors behind wind energy’s increasing competitiveness.

The first are the economies of scale and improved supply chains that result from more turbines being manufactured.  In Canada, the growth of wind across the country, including the generation for Bullfrog customers, is helping build the scale and experience the industry needs to be cost competitive.

The second cause of wind energy’s newfound competitiveness has to do with the technology itself. The technology is improving to the point that capacity factors – the ratio of the amount of energy that a turbine produces and the theoretical maximum amount of energy that a turbine can produce – are increasing. Improvements in the efficiency and effectiveness of wind turbines result in decreases in operations and maintenance costs and increases in the generating capacity of the average turbine. In the 1980s, the capacity of the average turbine was 1,800 MWh; today that number has increased to an impressive 2,900 MWh.

As a result, the cost of electricity from onshore wind turbines will drop 12 per cent in the next five years.  To put this in perspective, before any subsidies or forms of support are taken into consideration, the cost of energy from onshore wind turbines has dropped by 14 per cent every time that the installed capacity has doubled between 1984 and 2011.

The European situation is a little rosier than in Canada. Canadian terrain, distance and wind regime, among other things, make wind power more expensive here at home. In addition, conventional electricity prices are lower here in Canada than generally in Europe, so the cost of renewable power has further to fall in order to reach parity. However the trend is certainly in the right direction, and if not in 2016 then likely in the 2020s Canada could reach the point of cost parity for wind.

Bullfrog customers help reach this holy grail of cost parity not only by supporting the development of wind power economically, but also by empowering the government to support developing renewable power at scale. We need to continue to be vocal about our support for renewable energy alternatives.  If we do, Canada – like Europe – will reach a point where new wind power will be cost competitive with fossil fuels.

As Justin Wu, the lead wind analyst at Bloomberg New Energy Finance, put it: “In the next few years the mainstream world is going to wake up to wind cheaper than gas, and rooftop solar power cheaper than daytime electricity … we are clearly talking about a whole new game.”


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