Future cost development of renewable energy
How will the cost of the various renewable energy systems evolve in the future? That is a question a great many people are concerned about. To make the transition to a sustainable energy economy, the development and deployment of renewable energy systems will be indispensable. While all of these technologies presently have a higher cost than traditional energy systems, it is generally believed that they will become cheaper once they have gone through their learning curve.
Predicting this cost development curve was the goal of the NEEDS project (New Energy Externalities Development for Sustainability). The accuracy of decision support tools depends on the reliability of such predictions. It provides investors and policy makers alike with knowledge as to what degree investing in a particular renewable technology is likely to be worthwhile.
How do you predict the future if you don’t happen to be Nostradamus? One way is to look at historical cost development curves and extrapolate from them. This can be done for a complete system, but the results will become more accurate when predictions are made that include various subsystems and are then aggregated. For example, the learning curve of wind power should include the learning curves of wind turbine components, site cost, wind capture, and maintenance costs.
A key figure characterizing the experience curve is the 'experience ratio' or 'progress ratio'. This ratio expresses the evolution of the cost for each doubling of the cumulative production. An experience ratio of 80% means that the cost is reduced to 80% for each doubling of the cumulative production.
The future is never an exact repetition of the past, so predictions based solely on extrapolation risk being far off the mark. The NEEDS project therefore added two additional input channels to adjust their prediction. One is a bottom-up approach analysing the evolutions that are happening in the field. The second are expert assessments about possible future development within their domain.
In three upcoming articles, we will summarize the conclusions of the NEEDS paper as well as a few other sources on the cost development of wind energy, photovoltaic energy, and solar thermal energy.