Financing
Battery Power’s Latest Plunge in Costs Threatens Coal, Gas
Two technologies that were immature and expensive only a few years ago but are now at the center of the unfolding low-carbon energy transition have seen spectacular gains in cost-competitiveness in the last year.
The latest analysis by research company BloombergNEF (BNEF) shows that the benchmark levelized cost of electricity,[1] or LCOE, for lithium-ion batteries has fallen 35% to $187 per megawatt-hour since the first half of 2018. Meanwhile, the benchmark LCOE for offshore wind has tumbled by 24%.
Onshore wind and photovoltaic solar have also gotten cheaper, their respective benchmark LCOE reaching $50 and $57 per megawatt-hour for projects starting construction in early 2019, down 10% and 18% on the equivalent figures of a year ago.
Elena Giannakopoulou, head of energy economics at BNEF, commented: “Looking back over this decade, there have been staggering improvements in the cost-competitiveness of these low-carbon options, thanks to technology innovation, economies of scale, stiff price competition and manufacturing experience.
“Our analysis shows that the LCOE per megawatt-hour for onshore wind, solar PV and offshore wind have fallen by 49%, 84% and 56% respectively since 2010. That for lithium-ion battery storage has dropped by 76% since 2012, based on recent project costs and historical battery pack prices.”
The most striking finding in this LCOE Update, for the first-half of 2019, is on the cost improvements in lithium-ion batteries. These are opening up new opportunities for them to balance a renewables-heavy generation mix.
Batteries co-located with solar or wind projects are starting to compete, in many markets and without subsidy, with coal- and gas-fired generation for the provision of ‘dispatchable power’ that can be delivered whenever the grid needs it (as opposed to only when the wind is blowing, or the sun is shining).
Electricity demand is subject to pronounced peaks and lows inter-day. Meeting the peaks has previously been the preserve of technologies such as open-cycle gas turbines and gas reciprocating engines, but these are now facing competition from batteries with anything from one to four hours of energy storage, according to the report.
Tifenn Brandily, energy economics analyst at BNEF, said: “Solar PV and onshore wind have won the race to be the cheapest sources of new ‘bulk generation’ in most countries, but the encroachment of clean technologies is now going well beyond that, threatening the balancing role that gas-fired plant operators, in particular, have been hoping to play.”
Offshore wind has often been seen as a relatively expensive generation option compared to onshore wind or solar PV. However, auction programs for new capacity, combined with much larger turbines, have produced sharp reductions in capital costs, taking BNEF’s global benchmark for this technology below $100 per MWh, compared to more than $220 just five years ago.
Giannakopoulou said: “The low prices promised by offshore wind tenders throughout Europe are now materializing, with several high-profile projects reaching financial close in recent months. Its cost decline in the last six months is the sharpest we have seen for any technology.”
Although the LCOE of solar PV has fallen 18% in the last year, the great majority of that decline happened in the third quarter of 2018, when a shift in Chinese policy caused there to be a huge global supply glut of modules, rather than over the most recent months.
BNEF’s LCOE analysis is based on information on real projects starting construction and proprietary pricing information from suppliers. Its database covers nearly 7,000 projects across 20 technologies (including the various types of coal, gas and nuclear generation as well as renewables), situated in 46 countries around the world.
[1] LCOE measures the all-in expense of producing a MWh of electricity from a new project, taking into account the costs of development, construction and equipment, financing, feedstock, operation and maintenance.
Banks / Funds
EIB and Haizea sign €35 million green loan boosting European wind energy sector component manufacturing
The European Investment Bank (EIB) and Haizea Wind Group, a Spanish company specialising in the manufacture of components for the wind energy sector, have signed a €35 million green loan.
The loan will enable Haizea to implement advanced manufacturing technologies, automate and digitalise processes and move forward with research and development applied to the manufacture and assembly of large metal structures for wind turbines such as wind towers, monopile foundations and offshore wind park transition pieces.
The project reinforces the EIB’s role as the EU Climate Bank, backs the development of a major renewable energy technology and the international competitiveness of Europe’s offshore wind industry, and strengthens the European supply chain for renewable energy.
“Loans like the one we are signing with Haizea today reflect the EIB’s commitment to innovation and the development of renewable energy technologies enabling us to move forward with the energy transition and strengthening the competitiveness of our companies,” said EIB Director of Operations for Spain and Portugal Gilles Badot. “A robust renewable technology manufacturing sector is vital to guaranteeing the European Union’s energy security and autonomy.”
This loan is part of the EIB’s innovation support and falls under its cross-cutting climate action and environmental sustainability priority. Given Haizea’s role as an equipment and structures provider to the energy sector, the operation also contributes to the REPowerEU plan’s goal of increasing energy security and reducing EU dependence on fossil fuel imports. This loan is backed by the InvestEU programme to mobilise public and private sector funds in support of EU policy goals.
Haizea Wind Group Finance Director Alvaro Quintana added: “The signing of this loan with the EIB is part of Haizea Wind Group’s goal of helping its clients work towards a more sustainable economy by supplying large metal pieces like towers, transition pieces and large-diameter monopiles – currently key parts of the offshore wind power supply chain to achieve the green transition. The trust the EIB has shown by signing with us this green loan will enable us to implement advanced manufacturing technologies and move forward with research and development applied to the manufacture and assembly of large metal structures for wind turbines.”
The EIB and energy security
In 2023, the EIB Group provided more than €21 billion in financing for energy security in Europe. In the same year, it allocated €4.5 billion to this goal in Spain, financing projects in areas including renewable energy, energy efficiency, power grids and storage systems. These investments are helping Europe speed up its transition to sustainable energy and reduce its reliance on fossil fuel imports.
In July 2023, the EIB Board of Directors raised the amount earmarked for REPowerEU projects to €45 billion. REPowerEU is the plan designed to end Europe’s dependence on fossil fuel imports. To boost financing for the EU manufacturing industry, the EIB will also expand the range of eligible sectors to include leading strategic technologies with net-zero carbon emissions, as well as extraction, processing and recycling of critical raw materials. The additional financing will be disbursed between now and 2027. In total, it is expected to mobilise more than €150 billion in investment in the target sectors.
Global finance to developing countries in support of clean and renewable energy reached USD 21.3 billion in 2017. This almost doubles the level from 2010 when international financial flows were at USD 10 billion, according to latest figures of a new indicator under the Sustainable Development Goal 7 (SDG).
The new indicator, jointly monitored by the International Renewable Energy Agency (IRENA) and the Organisation for Economic Co-operation and Development (OECD), tracks global capital flows to developing countries in pursuit of affordable, reliable, sustainable, and modern energy for all.
By tracing international financial flows to developing countries, the new SDG7 indicator aims to enhance international co-operation and promote investment in energy infrastructure and clean energy technology by 2030. Despite recent fluctuations, the long-term trend for investment keeps increasing and could reach more than USD 20 billion annually in the years to come.
Between 2000 and 2017, total investment to developing countries for clean and renewable energy reached a cumulative sum of USD 138.9 billion. The total flows continued to grow since 2010, from USD 10.0 billion to USD 21.4 billion in 2017. Depending on the timing of large-scale investments in hydropower, these flows can vary considerably from year to year. However, the broad trend shows a fifteen-fold increase over the period of 2000 – 2017, reflecting an increased focus of development aid on clean and renewable energy.
While hydropower has historically received the lion’s share, investments in wind, geothermal and, especially, solar energy have grown significantly in the last few years.
Investments in hydropower accounted for about 60% of international investment flows in renewables in the first decade. Flows to other technologies were generally small, with most projects focusing on providing technical assistance or supporting small-scale infrastructure developments.
Since 2009, the share of hydropower has fallen to 45%, while wind, geothermal and, especially, solar energy has gained ground. The scale of projects has also increased over the period, from an average of USD 10 million per project in 2000-2009 to USD 19 million in the last four years (2014-17).
The EBRD is launching a new mobile app, Tech Selector, which will change how the Bank delivers climate finance to meet the needs of clients who are increasingly using mobile devices for commerce during and beyond the coronavirus pandemic.
Technology and digitalisation continue transforming the way in which the financial sector is operating. Innovative applications of digital technology for financial services such as the Tech Selector are altering the interface between financial institutions and their clients while improving access to information about green technologies and climate finance.
Businesses and homeowners will be able to use their phones to find more than 18,000 green technologies that improve energy efficiency, provide renewable energy, and reduce water use and soil erosion.
Users will also be able to easily identify the technologies that benefit from EBRD support –from the EBRD’s Green Economy Financing Facility (GEFF), the Green Trade Facilitation Programme (Green TFP) or the Finance and Technology Transfer Centre for Climate Change programme (FINTECC).
“The coronavirus pandemic is speeding up the shift to online retail and we see this as an opportunity for greening economies,” explained Ksenia Brockman, EBRD Associate Director for Energy Efficiency and Climate Change.
“Our new app improves access to information in economies where mobile internet is often more advanced than broadband services. The Tech Selector brings green technologies to the fingertips of businesses and homeowners wishing to cut their utility bills, increase their productivity and competitiveness and improve the comfort of their homes or premises,” she added.
The Tech Selector will accelerate the delivery of climate finance under GEFF and other financial instruments of the EBRD with the support of international donors and partners such as the European Union (EU), the Green Climate Fund (GCF) and the Climate Investment Fund (CIF).
The innovative app is based on the Green Technology Selector, the first e-commerce tool launched by the EBRD in 2018. This online shopping-style platform allows users to access a global directory for green technologies and is available across the EBRD regions and beyond.
Among the more than 70 technologies included on the platform and the app, the selection ranges from energy efficient heat pumps and solar panels that produce renewable energy to water efficient drip irrigation systems and no-till seeding machines that support sustainable land management.
Together, the app and the Green Technology Selector platform are creating a marketplace that makes green technologies more easily available while promoting cross-border trade between economies in the EBRD regions.
Manufacturers from around the world can submit their products to the Green Technology Selector and local vendors can register their products and locations. If the offers meet the performance requirements, the EBRD makes them available for clients to search on both the app and the platform.
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