This paper presents an alternative comparison model for RE and coal, and suggests that a portfolio approach, with both playing a role in the near future, will lead
to superior planning. Here are some highlights of the full paper.
Comparing Renewable Energy and Coal
A number of publications proclaim Renewable Energy (RE) is cheaper than coal. A newspaper will often show two cost curves, a rising one for coal, and a falling one for RE, especially solar (Figure 1). At some point they cross-over, an intersection dubbed “grid parity”. It’s a separate question whether this has already occurred, or is imminent. This framing falls short of capturing crucial aspects at play — it is unlikely there is a simple cross-over after which coal goes away. The reality is one that needs to factor in time of day, location, and share of RE, even before considering additional issues of contracting, technical constraints such as ramping capabilities, and frameworks for who will pay for the transition.
A simple claim that RE is already cheaper masks system-level costs as well as disproportional impact on selected states, generators, and stakeholders. This paper presents an alternative comparison model for RE and coal, and suggests a portfolio approach, with both playing a role in the near future, will lead to superior planning.
Figure 1: Generic (typical) cost comparison of Coal and RE
Figure 2: Ladder of competitiveness for Renewable Energy vs. Coal
A better framing of RE’s competitiveness versus coal is to consider four steps of competition:
- New RE vs. New Coal – VRE only
- New RE vs. Existing coal (meaning just fuel cost comparison) – VRE only
- New RE with storage vs. New Coal
- New RE with storage vs. Existing coal (meaning just fuel cost comparison)
The reality will not be so discrete, and another key factor will be location, given the cost of fuel varies significantly with transportation costs. The hardest coal for RE to displace will be pithead plants.
Figure 3: Battery costs with a solar panel
Figure 4: Renewables generation by type in Germany. Germany includes hydro as renewable energy. During this period, demand growth has been nearly flat.
The good news is with about 8 percent RE generation in 2018, meeting the 175 GW RE target by 2022 would only mean about 19 percent share of RE – absorbable without any substantive need for storage. Even this level will take concerted effort of coordination and improved policies and regulation, especially to increase inter-state flows of power. The real challenge will start after the low-hanging fruit of VRE is done, when India starts to move to the higher steps of the ladder and far more RE, which becomes important as we aim for deep decarbonizing.