Oct 19, 2020 - Energy & Environment

Renewables gain ground as costs fall

Reproduced from Lazard; Chart: Axios Visuals
Reproduced from Lazard; Chart: Axios Visuals

The financial advisory firm Lazard is out with its latest analysis of costs for competing energy technologies, and it says a lot about where the U.S. and global power sectors are heading.

Driving the news: The annual analysis shows continued cost declines for wind and solar, albeit not as dramatic anymore, as the chart above shows.

Why it matters: It underscores how these growing sources, already attractive compared to building new fossil-fueled generation, are increasingly competitive against even existing coal and gas-fired plants.

The big picture: The International Energy Agency's long-term outlook notes that "solar projects now offer some of the lowest cost electricity ever seen."

  • More broadly, its most conservative model — which uses only nations' existing and announced policies — sees renewables meeting 80% of global power demand growth over the next decade.

Where it stands: One part of Lazard's analysis looks specifically at how wind and solar fare against existing plants in the U.S. when you include current federal tax credits.

  • With those credits, "the cost of onshore wind and utility-scale solar is competitive with the marginal cost of coal, nuclear and combined cycle gas generation," a summary notes.
  • It's not even close when you compare coal and renewables.
  • The "values average $31/MWh for utility-scale solar and $26/MWh for utility-scale wind, while the latter values average $41/MWh for coal, $29/MWh for nuclear, and $28/MWh for combined cycle gas generation," Lazard notes.

How it works: The annual report looks at the "levelized" costs of power sources — that is, an inclusive cost comparison of building, running, supplying and maintaining different types of facilities over time.

  • However, it doesn't cover some considerations, like new transmission needed and grid integration costs.
  • Renewables' intermittency also means more storage is needed as deployment grows.
  • Lithium-ion batteries dominate the short-duration market, while a number of technologies are competing for a foothold in the younger long-term market, Lazard notes.
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