PV & Wind LCOE Cost-Competitive & Improving

Lazard: Solar PV & Wind Power Levelized Cost Of Electricity Continues Cost-Competitive Run Vis-à-vis Conventional Power Generation Technologies, Yet Storage Need To Improve Dispatch Characteristics
09:00 AM (Beijing Time) - 11. November 2019
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In its LCOE 13.0 analysis, Lazard sees declining costs for solar PV and wind energy helping them continue their cost-competitive run with the marginal cost of existing conventional generation technologies. (Source: Lazard)

Key Takeaways

  • Lazard has released its LCOE Version 13.0 and LCOS 5.0 analysing cost of producing power from renewables and storage technologies
  • It found renewables as solar PV and wind power continue to offer cost-competitiveness when compared with conventional power generation technologies
  • Decline in costs for both solar PV and wind power has slowed down over the recent past as these industries continue to mature
  • Without storage, renewables lack their dispatch characteristics, argue the analysts

Financial advisory and asset management firm Lazard’s Levelized Cost of Energy (LCOE) Version 13.0 analysis sees solar PV and wind energy as continuing their momentum of being cost-competitive with conventional generation technologies natural gas, nuclear, coal and gas combined cycle technologies, thanks to the continued cost decline for renewable energy.

The latest version of Lazard’s annual LCOE report shows these renewables continue their cost competitiveness run with the marginal cost of existing conventional generation technologies. However, without storage these technologies lack their dispatch characteristics and associated benefits.

We find that renewable energy technologies are complementary to conventional generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons, including to mitigate the environmental and social consequences of various conventional generation technologies, RPS requirements, carbon regulations, continually improving economics as underlying technologies improve and production volumes increase, and supportive regulatory frameworks in certain regions,” explain the authors of the report.

Some of the highlights of the report are:

  • The US government’s Investment Tax Credit (ITC) and Production Tax Credit (PTC) continue to play an important role in the levelized cost of renewable energy generation technologies
  • LCOE for conventional generating technologies remains sensitive to fluctuating fuel prices, however direct comparisons to competing renewables need to be based on dispatch characteristics
  • Cost and availability of capital for utility scale generating technologies is a key component to determine LCOE values
  • Both wind and utility scale solar PV have seen their LCOE decline dramatically backed by material decline in the pricing of system components and technological efficiencies achieved ($32 per MWh for unsubsidized solar in 2019 and $28 per MWh for unsubsidized wind; see graph), but the rates of decline have ‘diminished’ as these industries mature. However, this is still an improvement over Lazard’s 2018 report, when solar was as low as $36/MWh and wind at $29/MWh..

Storage

Lazard has also launched the Levelized Cost of Storage Analysis Version 5.0 (LCOS) that covers energy storage systems and conducts comparative and capital cost analysis for various such systems.

Over the years, lithium-ion technologies have had the maximum cost decline, it notes, especially for storage modules but limited cost improvements were observed in advanced lead and flow battery technologies.

Project economics analyzed for solar PV + storage systems are attractive for short-duration wholesale and commercial use cases but remain challenged for residential and longer-duration wholesale projects,” reads the report.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani