Why will wind energy, solar energy and energy storage play a central role in transforming Canada’s energy mix? The key reason is affordability.
There is no doubt that wind and solar energy are experiencing substantial growth in Canada, and around the world.
The 2020 New Energy Outlook from Bloomberg New Energy Finance (BNEF) projected that wind and solar energy will grow from meeting 9% of global electricity demand today to an impressive 56% of global electricity demand by 2050. This is consistent with the findings of DNV-GL’s 2020 Energy Transition Outlook, which projects that wind and solar energy will meet 62% of global electricity demand by 2050.
What might surprise you about these studies is that the primary driver of such staggering growth is economic, over and above its power to confront climate change.
Wind and solar energy have become the dominant choice for new electricity generation globally because they provide new electricity at the lowest cost. Keeping electricity costs low for Canadians will require adding a lot more solar and wind energy to the mix.
According to Lazard’s 2020 Levelized Cost of Energy Analysis, the cost of solar energy has fallen 90% since 2009 and the cost of wind energy has fallen 71%. Solar and wind energy now have a levelized cost lower than any other form of new electricity generation in the United States.
It’s a similar situation in many other parts of the world. According to BNEF, either wind or solar energy is now the lowest-cost form of electricity generation in countries representing three-quarters of the world’s economy. The International Energy Agency’s 2020 World Energy Outlook calls solar energy “the new king of electricity supply,” and the cheapest source of electricity in history.
Here in Canada, wind and solar projects are competitive with any form of new electricity generation. We are seeing contracts signed for wind energy in Alberta and Saskatchewan at prices below $40/MWh, and solar energy contracts signed in Alberta at prices averaging $48/MWh.
Incredibly, these low costs are projected to fall still further thanks to continued technological evolution. BNEF projects that electricity from new wind and solar energy facilities will become cheaper than electricity produced from existing coal and natural gas-fired power plants as soon as the mid-2020s.
Some will argue that these costs are understated because the variability of wind and solar production means they will need to be paired with other technologies to achieve high levels of penetration in the electricity grid, but Canada’s massive existing hydroelectric resources are an excellent, low-cost partner to facilitate wind and solar energy integration in many parts of the country.
At the same time, BNEF, DNV-GL and Lazard all report significant declines in the cost of many other energy-storage technologies. For example, BNEF found that the cost of lithium-ion batteries fell by almost 90% in the last decade, while DNV-GL predicts it will drop another two-thirds by 2030.
A future blog will explore in more detail the most cost-effective ways to ensure reliable grids with high penetrations of wind and solar energy. It is increasingly clear that today’s low-cost wind and solar energy, coupled with existing hydropower and increasingly economical energy-storage options, represent the most affordable and best path forward for Canada’s electricity future.
Get more data on solar energy, wind energy and energy storage in Canada on our By the Numbers page.