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Wind and solar beating conventional fuels on costs – Lazard

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The latest study by US investment bank Lazard has highlighted the extent to which wind and solar technologies are beating conventional fuels – coal, gas and nuclear – on costs of production, and also on abatement.

The study, the “Levellised Cost of Energy Analysis 9.0 notes that utility scale solar PV has fallen 25 per cent in the last year alone, since its most recent study. Since 2009, when it began the analysis, solar and wind energy have fallen by 80 per cent and 60 per cent respectively.

Lazard says that because of this, and despite big falls in the cost of natural gas in the US, wind and solar are beating conventional fuels in most situations, as revealed in their success in competitive capacity auctions.

And so, to its graphs (please click on them to enlarge and see them better).

The first (below) illustrates the cost falls since 2009 in wind and large-scale solar. Note that these are $US and for US deployment. Wind in the best situations is now at $US32/MWh, while large-scale solar PV is down to best scenario of $US58/MWh. And the curve is still heading down.

It should be noted that some prices quoted in US auctions are lower than those reported here (wind in the $US20/MWh range and solar in the $US40/MWh range). but these include tax credits.

lazard 2015 wind solar

So, how does this compare with other technologies? This graph below shows that (apart from energy efficiency) wind and solar are much cheaper than gas and coal, and less than half the cost of nuclear, and one-third the cost of peaking gas (which explains why big solar plants are displacing planned peaking plants in the US).

It is interesting to note that compared to Lazard’s previous reports, wind, solar and gas costs have fallen, coal has remained static, while nuclear is the only technology to show a significant increase.

The middle cost here ($US124/MWh) represents the Vogtle plant in Georgia, which is running over time and over budget, and is the subject of fierce court action between the utility and the technology providers over those delays and rising costs.

It should also be noted that the costs of rooftop solar are significantly higher in the US than they are elsewhere, mostly due to “balance of system” costs, such as installation, approvals etc, which the Department of Energy is trying to reduce. Rooftop solar costs in Australia, for instance, are about half the price quoted here.

lazard LCEO 2015

The low end brings the cost difference into further relief, particularly in light of the fact that wind and – and other renewable energy technologies – will continue to fall in cost in coming years.

Lazard low end

The next graph is also interesting. Many critics of renewable energy – conservatives, the fossil fuel lobby and nuclear boosters – say that wind and solar, even if cheaper on costs, does not provide cheap abatement.

Lazard says that is not so. Wind and large-scale solar PV provide negative abatement costs, compared to nuclear ($US34/MWh). “(This) analysis … suggests that policies designed to promote wind and utility scale solar deployment could be a particularly cost effective way of limiting carbon emissions,” it says.

Lazard abatement 2015

Still, despite all this, Lazard is yet to get its mind around the idea of 100 per cent renewable energy systems, even though its analysis of battery storage suggests that it will be cost effective at utility scale, helping integrate renewables and providing ancillary services such as frequency and voltage.

“Even though alternative energy is increasingly cost-competitive and storage technology holds great promise (see our story on its first storage costs assessment) alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future,” Lazard says.

“Therefore, the optimal solution for many regions of the world is to use complementary traditional and alternative energy resources in a diversified generation fleet.”  

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  • Professor Ray Wills

    Curiously Lazard’s upper end estimate of rooftop solar has gone up in v9.0, not down while most other metrics have remained static or declined.

    v8.0 residential rooftop solar $180-265, v9.0 higher cost, bigger range $184-300

    C&I v8.0 $126-177 v9.0 $109-194

    If solar cost is still falling, how does this make any sense?

    • Ronald Brakels

      Maybe they have simply improved their information collecting. Or maybe, due to the popularity of solar leasing in the United States the cost of rooftop solar actually has actually gone up since people end up paying a lot more than if they had just bought the system. Looking at the low interest rates in the United States makes me think buying should be the popular option but that doesn’t seem to be the case.

    • Ian

      It makes sense if rooftop suppliers and installers are finding plenty of customers, giving them the leverage to increase their margins.

    • JeffJL

      Or perhaps it is the State Governments in the country introducing legislation to hinder the growth of Solar PV.

  • Jacob

    Geothermal is cheap at night.

    Is it really available in USA.

  • digicle

    Just noticed 1/4 of the power generated across the country a minute ago was renewable. Surprised to see such high PV prices given recent auctions worldwide.