- Wind and Solar
- Renewable Energy
- solar PV
Renewable Energy Continues to Be Cheaper Than Natural Gas and Coal
For the past few years, financial advisory firm Lazard has released an annual comparative assessment of levelized cost of energy (LCOE) across all forms of power generation in the US. It has shown steady declines in the relative cost of renewables against traditional forms of power generation—with and without subsidies and other incentives.
Lazard’s latest version of the assessment (LCOE 12.0) shows that the cost of generating energy from utility-scale solar PV and onshore wind technologies continues to decline. The LCOE of utility-scale PV technologies is down approximately 13% from 2017 and the mean LCOE of onshore wind has declined close to 7%.
More impressive are the long-term declines in cost of energy; over the last 9 years, unsubsidized wind has declined by 69% and unsubsidized utility-scale solar PV has declined by 88%. These figures are all in current dollars, so price differences between years would be even more impressive if adjusted for inflation.
As seen in the figure below, the latest unsubsidized cost figures show the levelized cost of onshore wind-generated energy is between $29/MWh and $56/MWh, whereas coal is between $60MWh and $143/MWh. The levelized cost of utility-scale solar is between $36/MWh and $46/MWh.
This comparison is accentuated when subsidizing onshore wind and solar, which results in low end LCOE at $14/MWh and $32/MWh, respectively.
Lazard LCOE Version 12.0 Unsubsidized Cost of Energy per Megawatt Hour by Generation Source
Subsidies will be phased out in coming years, and wind and solar will still be competitive purely on cost. Meanwhile, both industries are building as much as possible. For wind, there is currently over 20,798 MW of wind power capacity in various stages of construction in the US. Assuming an average turbine rating of 2.5 MW, this is around 8,319 separate wind turbines (more of the build boom and the subsidy phaseout). Average wind turbine ratings installed in 2017 and previous years are calculated by Navigant Research’s annual World Wind Energy Market Update report.
Shift to Only Lowest Cost Energy Not Advised
Lazard does not advocate a shift to only the lowest cost wind and solar because it cannot meet the baseload generation needs due to the natural variability of how these energy types are generated. Instead, Lazard states the optimal solution for many regions of the US and the world is to use complementary conventional and renewable energy resources in a diversified generation fleet.
“Although diversified energy resources are still required for a modern grid, 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, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group.