EXPRESS #4 - November 13, 2018
“Wind and solar technologies have extended their lead over fossil fuel generation on costs of new plant, and are now as cheap, or even cheaper, than existing coal, gas and nuclear power plants – even compared to existing and fully-depreciated fossil fuel generators.”
That’s the major takeaway from the 12th edition of the annual Lazard Levelized Cost of Energy Analysis, which has become one of the major global industry benchmarks, according to Giles Parkinson of Reneweconomy.com.
“We have reached an inflection point where, in some cases, it is more cost effective to build and operate new alternative energy projects than to maintain existing conventional generation plants,” said George Bilicic, the vice chairman and global head of Lazard’s Power, Energy & Infrastructure Group.
“As alternative energy costs continue to decline, storage remains the key to solving the problem of intermittency and we are beginning to see a clearer path forward for economic viability in storage technologies.”
Lazard’s figures are based on US data and in US conditions, but give an insight into global trends, notes Parkinson. “Over the past year, Lazard has seen a further 13 per cent fall in the cost of solar, and another 7 per cent fall in the cost of wind energy. This has extended its big advantage over the cost of building new coal, nuclear, or even gas plants – even in the US where the cost of gas is well below that of Australia [and Europe]”.
The new element is that wind and solar LCOE is now beating existing coal and nuclear plants, even those which have been fully depreciated.
Lazard says that the low end levellized cost of onshore wind-generated energy is $US29/MWh, compared to an average illustrative marginal cost of $US36/MWh for existing coal generators.
“The levellized cost of utility-scale solar is nearly identical to the illustrative marginal cost of coal, at $US36/MWh,” Lazard says.
In the US, tax incentives increases the advantage of wind and solar, pushing their costs to as low as $US14/MWh for wind, and $US32/MWh for solar. This compares to the cost of $US60/MWh-$US140/MWh for new coal, $US112/MWh-$189/MWh for new nuclear, and $US41-$US74/MWh for gas-fired generation (gas is comparatively cheap in the US).
“Such an outcome would have been unthinkable for many people a decade ago – around the time of Copenhagen climate conference – but Lazard estimates that since 2009 solar has fallen in cost by 88 per cent and wind has fallen by 69 per cent”, notes Parkinson.
However, Lazard cautions that while storage technology holds great promise, “alternative energy systems alone will not be capable of meeting the base-load generation needs of a developed economy for the foreseeable future.”
Parkinson does not fully agree with this point. “It is important here to note that Lazard only canvasses the various battery storage technologies, and not the cost of storage of other technologies for longer durations such as solar thermal, pumped hydro, or even hydrogen”, he writes.