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date: 26 September 2022

Economics of Renewable Energy: A Comparison of Electricity Production Costs Across Technologieslocked

Economics of Renewable Energy: A Comparison of Electricity Production Costs Across Technologieslocked

  • Govinda R. TimilsinaGovinda R. TimilsinaWorld Bank
  •  and Kalim U. ShahKalim U. ShahUniversity of Delaware


The levelized costs of electricity generation for renewable energy technologies differ and fluctuate depending on factors including capital costs, operation and maintenance costs, utilization factors, and economic lives. In addition to these factors, In the case of fossil fuels, prices and heat rate are also responsible for fluctuations. There is a global movement in favor renewable energy. Many countries have announced carbon-free electricity within the next 30–40 years, which implies massive expansion of renewable energy technologies. The newer investment trends in electricity generation technologies indicate the same. Technological breakthroughs and cost reductions of energy storage technologies would further favor renewable energy technologies and would decrease their intermittency hurdles. Developments that expand the scaling effect of renewable energy and the potential improvement in efficiency through continued research and development could bring the cost of renewable energy further down in the future. When the levelized costs of electricity generation are estimated, the declining trends of renewable energy costs are observed and can to a large extent (but not fully) be explained by certain potential drivers. Particularly for wind and solar, these drivers include technological innovation/improvements that have increased efficiency, policy supports such as research and development funding, economy of scale both in the manufacturing of equipment (solar panels, wind turbines) and installation of plants, and monopoly rent dissipation due to increased number of manufacturers and suppliers. Competition among equipment manufacturers and project developers may also contribute to cost decline as could cost reduction through improved product efficiency related to technological improvements and innovations.


  • Environmental Economics

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