Utility-scale Solar Costs Falling More Rapidly Compared to Onshore wind_ Report (1)

Financial advisory and asset management firm, Lazard, released its annual in-depth study comparing energy costs from various generation technologies in the United States.

With declining renewable energy costs, certain technologies such as onshore wind and utility-scale solar have become cost-competitive with conventional generation. Wind and solar technologies continue to maintain competitiveness with the marginal cost of selected existing conventional generation technologies, said the report.

For the first time, this year’s ‘Levelized Cost of Energy Analysis’ (LCOE) includes a study of hydrogen as a supplemental fuel component for combined-cycle gas generation. “For the first time, we have integrated green and blue hydrogen into our analyses, which recognizes the energy sector’s increasing appreciation of hydrogen’s potentially disruptive and strategic role in managing the intermittency of renewable power generation,” said George Bilicic, Vice Chairman and Global Head

According to the report, the cost of onshore wind ($26/MWh) and utility-scale solar ($31/MWh) is competitive with the marginal cost of coal ($41/MWh), nuclear ($29/MWh), and combined cycle gas ($28/MWh) generation when U.S. government subsidies are included.


While the reduction in costs continues, their rate of decline has slowed, especially for onshore wind. Prices for utility-scale solar have been falling more rapidly (about 11% per year) than onshore wind (about 5% per year) over the past five years.

LCOE - Historical utility-scale generationMeanwhile, selected regional differences, like resource availability and fuel costs, can drive meaningful variations in certain technologies’ LCOE values. However, some of this variance is mitigated by adjustments to a project’s capital structure to reflect market conditions that drive the availability, and cost, of debt and equity capital.

 

The analysis also shows that storage costs have declined across most technologies, particularly for shorter-duration applications, partly driven by evolving industry preferences regarding battery chemistry. The report observed sustained cost declines in LCOS for lithium-ion technologies. The cost declines were more pronounced for storage modules than for balance of system components or ongoing operations and maintenance expenses, the report added.

It further added that project economics analyzed for standalone behind-the-meter applications were relatively expensive without subsidies, while utility-scale solar PV + storage systems are becoming increasingly attractive.

Notably, the latest report published by the U.S. Energy Information Administration shows that the annual capacity-weighted average construction cost for solar and onshore wind decreased considerably between 2013 and 2018. Natural gas generation costs also slightly reduced in 2018. Between 2013 and 2018, the construction costs for solar, wind, and natural gas-based power projects fell by 50%, 27%, and 13%. These three power generation technologies accounted for more than 98% of the total capacity added to the United States’ electricity grid in 2018.

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