A tool you may find useful in your discussions with friends, relatives and coworkers about your careers might be the updated International Renewable Energy Agency (IRENA) projections for levelized costs of electricity (LCOE) from various sources. A lot of people are running around with numbers in their heads that might have been true a decade ago, but things are changing swiftly, and if we don’t keep up with current metrics, we can look dumber than usual.
First let’s open with a little story. There is good news across the spectrum, but these numbers also come laden with some new challenges and considerations for people considering entering these fields.
1990: Renewable Energy Promise
A story from my days as an engineering student: I have always idolized El-Wakil’s Powerplant Technology (1984). It spanned so many technologies, made rich with clear diagrams, formulas and illustrative curves.
That was the book I wanted to become. If only I could ram that capability and wisdom into my head, and use that to research, design and build all those different sorts of technologies. It’s fair to point out that another key influence on the way I think about power cycles was the Engineering Equation Solver (EES) software. EES and that textbook worked and played well together.
The limitation for a new graduate in 1990 was that so many of the renewable energy technologies were simply not economically competitive with fossil plants. There was some but less optimism on how rapidly they could displace carbon emissions. As a result, renewable energy opportunities were more limited to research or expensive pilot plant scales. There were exceptions of course – hydro and geothermal were quite competitive – but solar and wind seemed decades away from widespead commercial adoption. Graduates in 2020 now face different and hopefully encouraging prospects, so let’s look at some of the metrics.
2010-2019: IRENA and Renewable Power Generation LCOE
IRENA provides periodic updates on LCOEs for renewable versus fossil fuel technologies such as coal or natural gas. One of the most useful charts is shown leading off this article. This shows LCOE trends over the past decade. Every Spring before a short course on project development I take a look at the current trends, how far we’ve come and what might lie ahead. Before we dig in though, some caveats:
- The bands of expected outcomes are not that relevant to a specific project and its feasibility, since each site and its technical and commercial merits need to be evaluated on a case by case basis. That basic fossil range of 0.066-0.076 USD/kWh (66-76 USD/MWh) is a good benchmark to be familiar with and strive for however.
- LCOE is just that, a focus on bare electricity costs. It is not a tabulation of the broader benefits that different technologies can deliver such as combined electrical and thermal power. It also generally does not include real but usually willfully ignored negative externalities such as adverse impacts on public health through extraction, consumption and disposal activities. Looking at you, coal.
- The assumptions used for LCOE calculations such as the cost of capital influence the results. If applied consistently across technologies for this study this seems reasonable. It’s reasonable to ponder how organizations or consumers willing to accept lower costs of capital for green, self-reliant tech versus stinky old plants with imported fuel can nudge the LCOE playing field though.
Motivations and Hopes
What might these charts indicate for a new graduate? Couple things:
- Difference Makers: consider the 2010-2020 trend in solar PV LCOEs, from 0.378 to 0.068 USD/kWh. Concentrating solar and onshore/offshore wind also making good strides. Let’s give credit to the scientists & engineers, manufacturing lines and large scale project developers that were behind those efforts that resulted in such a dramatic reduction in LCOE. In 2010 the ratio of PV/fossil LCOE was on the order of 5-10:1. Yet those PV teams took on that daunting challenge despite the magnitude of the ratios and successfully brought it to its very competitive standing today. Huzzah. Perhaps standing here in 2020 you will hitch your wagon to one of these techs and have similar success driving costs down further over the next decade.
- Adam Smith: for years the defensive cry of fossil advocates was “renewables are not cost competitive.” Well folks, now they are, so it’s time to take the invisible dead hand of Adam Smith and beat fossil fuels with it back into an appropriate specialized role in our society. As the report notes, “with the global weighted average LCOE of utility-scale solar PV and onshore wind potentially set to fall to USD 0.039/kWh and USD 0.043/kWh in 2021, new renewable power projects are cheaper than the marginal operating costs of an increasing number of existing coal-fired power plants, raising the risk of a growing number of stranded assets.”
What nation or investor wants the burden of investing in a plant that will consume a lifetime of fuel (often imported from outside the region) at varying and difficult-to-predict costs? Hydrocarbons are too essential for other purposes (transport fuels, polymers) to be simply burned, when other methods can deliver electricity cheaper and cleaner. - Which Horse? At this moment in time many different technologies are competitive. As a result, Figure 1.12 of the report shows billions in investments flowing into a wide range of projects. A new graduate has a plethora of competitive renewable tech out there to hitch their career wagon. Perhaps it matters less right now which horse one chooses, as there are many available options (ah, perhaps not coal or fission). 20 years ago, or perhaps 20 years from now, the fields may be narrower. A talented engineer can pivot from one project type to another without much difficulty regardless, but it’s a rich time to be in the energy field now with such diverse opportunities. Will a dominant technology like fusion emerge in decades, drive everything else out? Perhaps…but seems a looong way away yet.
It’s a great time to be exploring careers in renewable energy. Displacing carbon is sorely needed, and there are varied and plentiful commercial opportunities.
What are parts about the IRENA report that might give one pause however?
Some Reservations
Looking over these IRENA data there are some reservations one might apply to one’s studies or career. In some sense these are the products of the success many of these technologies are having. Consider:
- Diversity and Specificity: the same wide array of technologies that make this period and sector so interesting, with comparable LCOE bands, can also be a challenge for a young engineer trying to map out their career. For now you might be studying hydraulics and turbomachinery, but there is no guarantee that wind turbines will continue to outperform other quite different tech such as solar PV or thermal over the years, which you could perceive as calling for very different skill sets. You might be concerned that your studies and commitment to one track would render you less capable of switching to another later. To that end, it helps to develop your capabilities that span the more generalized aspects that are involved in all projects: feasibility studies, permitting, management of the design process, tuning financial models or running an operations team. Your skills will be more easily transferable between tracks if they span those higher level talents. This is why a multidisciplinary renewable energy background such as one from places like the Iceland School of Energy would have appeal. Plus tasty fish.
- Affection for the Laggards: Certainly there are people that loved horses and carriages that were sad to see them displaced on the roads. There are those that love coal or nuclear. For me it would be geothermal, biomass and hydro, given their complex site-specific challenges. But we can see their cost curves, and those technologies have not been improving as rapidly as others. One has to come to grips with the fact that their preferred technology may not necessarily be the world leader, although they still have a role to play. If you are heartened by your small or niche projects benefiting people, then it should not matter if that tech is not dominant everywhere. Do what you can with your 2 MW village scale hydro plant and put aside concerns about flat LCOE curves. Now, if you can drop it tenfold like PV, more to the good, but helping people on whatever scale is the goal, not simply “who is winning.”
- LCOE can be a Limiting Perspective: What’s usually missing from LCOE or esoteric discussions about power plant efficiencies or capacity factors are the wider benefits beyond electricity that projects can deliver. If you can identify additional value streams, such as conserving water, district heating, employment and technical capacity building, grid stability or other benefits, then you can create a more diverse “resource park.” Tools such as Envision can help designers maximize the value of their infrastructure projects. Those aspects can be overlooked if viewing projects solely with the LCOE lens. Those other value streams can also help narrow the competitive gaps between technologies, and perhaps that will help your pet technology play the right role for a specific community. Our research and designs become more complex, challenging and fun when we can incorporate broader sustainability considerations. As we should.
Summary
The IRENA report and the metrics behind it are coming at precisely the right time to highlight to a broader audience these massive shifts to our energy production and consumption patterns. The LCOE data show that we have better, more competitive options than ever before. Some people we deal with simply aren’t aware of how much has changed in the past ten years, and if they go plodding along with the same script, their planning around increasingly noncompetitive tech will be caught unawares by the march of time. Indeed, dramatic improvements are being made so fast in some of this tech such as energy storage systems that it can be hard to keep up with the best project configurations even for those of us actively engaged in the industry.
As a result of this dynamism, we have a dizzying array of great career choices for people interested in working in this sector. It’s a great time to pivot to and lean into these projects, and Adam Smith will give us an invisible hand.
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