Costs and project development

USD (2018) billion

Investment by construction duration

350

300

250

200

150

100

50

0

Average power generation construction time

(capacity weighted)

Thermal power Renewable power All generation

2010 =100

180

160

180

160

A growing share of power generation investment has been in projects built in three years or less and average

construction times for new capacity have fallen. This trend is helped by policy support for renewables and (in some countries) for flexibility, improvements in project development and economics for some technologies, as well as industry competition and a greater focus on risk

management.

This shift is consistent with recent progress in capital cost reductions, which have mostly occurred in variable renewables (and batteries), benefitting from technology progress.

It is important to remember that cost curves for all technologies depend strongly on the location of deployment and annual pricing dynamics in equipment markets.

Capital costs for solar PV continued to decline in 2018

and are down three-quarters since 2010. Capital costs for onshore wind are down 20% since 2010. In offshore wind, dramatic capital cost declines have not yet appeared in operating projects, but expectations of

lower costs ahead, combined with better financing terms (IEA, 2018a) and increased capacity factors - with

the use of more advanced turbines and sites moving further out to sea - have driven auction prices lower (IEA, 2018b).

Developers have generally improved construction times for solar PV and wind. This partly reflects deployment in

areas with faster timelines but also technology and project design improvements and the increased role of competitive bidding in policies. Still, barriers before and after construction – e.g. permitting, land acquisition, and the timely signing of Power Purchase Agreements (PPAs)

and grid connections – persist in some markets.

The average costs for thermal power have changed little since 2010, but some new trends are emerging.

Gas power (CCGTs) is one area that has benefitted from recent improvements in project development and equipment pricing. These improvements have stemmed from intense competition among suppliers and engineering, procurement, and construction (EPC)

companies in the face of a slowing global market combined with the increased modularity and standardisation of project designs.

Costs and construction times have generally increased for coal power, reflecting in part larger plant sizes and

more complex project designs. A growing share of coal power investment is in high-efficiency plants with advanced pollution control systems, responding to local concerns over air quality but locking in potentially large future emissions of CO2.

However, with the slowing of China’s domestic coal power additions, industry sources have reported that increased competition from Chinese EPC companies

seeking business abroad is putting some downward pressure on pricing for new coal power plant costs in

places like Southeast Asia.

For hydropower, where costs are location specific, the share of deployment in China has decreased over the past decade, raising the global weighted average. Within different regions, costs have changed little. Construction

times for new capacity have risen, reflecting generally larger plant sizes but also land and water management requirements that can increase project complexity.