Competitiveness of Renewable Energy

Abstract

This thesis examines the competitiveness of renewable energy technology compared to conventional power generation methods by examining the relative cost of solar PV, wind, and coal. The findings of this analysis seek to answer the primary hypothesis: The unique application of Levelized Cost of Electricity (LCOE), entailing the manipulation of CAPEX and CO2 variables, reveals the points in time and the exact LCOE values where it becomes cost competitiveness to switch from a coal asset to a renewable asset within the context of the German electricity market. The results illustrate that cost competitiveness between new renewables (solar PV, onshore wind, and offshore wind) and coal in the German electricity market does cross at certain points. The research seeks to determine the precise scenarios under which new renewable plants are more cost competitive than existing coal plants. The LCOE calculation has been chosen as the methodology to estimate the relative cost competitiveness of these differing power generation methods, under predefined scenarios for both CAPEX-reduction for renewables and CO2-price increase for coal. New assets are compared to existing assets; therefore, LCOE has been chosen in order to compare operational costs (OPEX) plus the capital cost (CAPEX) of new assets, with only the operational cost (OPEX) for existing assets. i.e. the investment cost for coal-fired assets is denoted as a sunk cost. This allowed for the development of a simplified framework to analyze an electricity-producing firm involved in an investment decision, whether a new solar or wind project or the continuation of an existing coal power plant...