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Wind, solar costs continue fall, and fossil fuels can’t stop them

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The latest update for energy technology costs put together by global investment bank Lazard have been released and show a growing advantage for wind and solar technologies over fossil fuels such as coal, gas and nuclear.

Lazard’s latest levellised cost of energy (LCOE) analysis – the eleventh version – notes that wind and solar costs have both fallen by another 6 per cent in another year, with coal remaining around about flat and the cost of nuclear jumping sharply.

“The gap between the costs of certain alternative energy technologies (e.g., utility-scale solar and onshore wind) and conventional generation technologies continues to widen,” the report says.

“In some scenarios the full life-cycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear.

“This is expected to lead to ongoing and significant deployment of alternative energy capacity.”

renewable energy-historical cost decline.

This graph above illustrates the growing gap between the cost of generation of what are still branded “alternative” technologies such as wind and solar, and “conventional” or “traditional” generation such coal, gas and nuclear.

The graph is a global average, and the actual cost will vary significantly from country to country depending on the cost of gas (cheap in the US, very expensive in Australia), the cost of capital, and the nature of the wind and solar resources.

The most striking aspect of the graph is the dramatic fall in the cost of large-scale solar, of course, which has fallen from an average $US178/MWh to an average $US50/MWh – half the cost of coal generation.

In some countries, the cost of solar is far cheaper, with contracts being written at around $US21/MWh in Chile and possibly even lower in Saudi Arabia, thanks to their excellent solar resources.

The cost of nuclear is moving in the other direction, with Lazard noting that costs had increased 35 per cent versus prior estimates, “reflecting increased capital costs at various nuclear facilities currently in development.”

gas vs solar chart copy

Much is made about the cost of providing “firming” power to wind and solar, although most commentary ignores the cost of back-up and “peaking” power required for coal-dominated grids, which do not have the flexibility to meet changes in demand.

This is where gas comes into the equation – and various forms of storage in the future. What is interesting here is the comparison between solar and gas peaking plant across the world, and why some areas are looking for large-scale solar to reduce the amount of gas peaking plant needed.

According to Lazard, Australia has the cheapest cost for large-scale solar (which may be better than some would think at the lower end) – but it is the difference between average solar costs and gas costs that really stands out. (And that is including Lazard’s low-ish assumed cost of gas in Australia).

storage cost comparison copy

Interestingly, Lazard has also released its latest estimate of storage costs, LCOS 3.0, where it puts the cost of lithium-ion storage at around the same point as gas peaking plants.

This explains why some areas, such as California, are installing battery arrays rather than gas peaking plants. Batteries are winning on costs, let alone on issues such as safety (explosions and massive leaks recently experienced in Los Angeles) and emissions.

And, of course, battery arrays are significantly smarter and quicker than gas generators, and can perform numerous other functions – such as network benefits and avoiding spending on new poles and wires, creating micro-grids, and time shifting the output of cheaper wind and solar.

“Industry participants expect costs to decrease significantly over the next five years, driven by scale and related cost savings, improved standardization and technological improvements, supported in turn by increased demand as a result of regulatory/pricing innovation, increased renewables penetration and the needs of an aging and changing power grid,” the report says.

Lazard says lithium-ion continues to provide the most economical solution across use cases analysed in the Levellised Cost of Storage study, although competing flow battery technologies claim to offer lower costs for certain applications.

“Energy industry participants remain confident in the future of renewables, with new alternative energy projects generating electricity at costs that are now at or below the marginal costs of some conventional generation,” said Jonathan Mir, the head of Lazard’s North American Power Group.

“The next frontier is energy storage, where continued innovation and declining costs are expected to drive increased deployment of renewables, which in turn will create more demand for storage.”  

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  • George Darroch

    Presumably improvements in efficiency and technology are lowering the LCOE of both solar and wind. How much impact is this having?

    • trackdaze

      Turned a small section of the population crazy. Largely contained to a small but voiciferous portion of the LNP.

      • Joe

        They / LNP / COALition still have this ‘Wind Commissioner’ dude trying to find all these people who have been turned crazy by wind turbines. If there truly were a problem then all of Europe would be stark raving mad by now.

        • trackdaze

          Cant imagine living next to a coal powerstation is entirely pleasant.

        • Ian

          So that’s the problem with the Germans. I thought it was the beer and Bratwurst.

          • Joe

            The one Aussie dude that definitely has been ‘crazed’ by wind turbines is Rupert’s chief anti wind turbine campaigner…Terry McCrann. I touched on an article of his elsewhere in the very fine pages of RE, a piece that ‘Crackers’ wrote 2/11/17 for The Daily Telegraph. Can I add these selections from his scribble that day….”…these hideous,useless, bird slaughtering turbines”,
            “…. NASA turned up the opportunity to use wind turbines for liftoff…” The dude needs help…Bier und Bratwurst?

    • Andy Saunders

      Huge. That’s why (among other things) rooftop solar uptake is pretty much unstoppable, as compared with the retail cost of circa $300/MWh solar PV is a no-brainer.

  • Charles Hunter

    Might want to edit … “traditional” generation such asocial, gas and nuclear … to change “asocial” to “as coal”. Damned auto-correct, huh?

  • Roger Franklin

    Firstly many of the Canberra FIFO team have a long track record of never letting the facts get in the middle of the agenda that they have been asked to push by the various lobby groups – so expect that the only thing to change will be the tone of the FUD (Fear, Uncertainty and Doubt) message that they are pushing. Their agenda’s are relatively short term, whereas the average home/business owner is hopefully thinking longer and will see an investment in RE will return dividends over a relatively short period of time.

    Secondly I think it is a good time to do an article on the likely impact of automation on jobs including many of those involved in the mining sector. The 1000’s of jobs on the table are largely going to evaporate once the ink has dried on the contracts – particularly of some of the service work is contracted out to off-shore companies.

    Straight out manufacturing economics are going to drive down the cost of manufacturing equipment used in the renewable energy industry. What was considered leading edge will be considered the norm in 2-3 years.

    • Carl Raymond S

      People in mining are probably used to working where the work is. They are ideal to provide the manpower to deploy hundreds of solar, wind and storage installations on the road to 100% RE.

      • Roger Franklin

        Carl – 100% correct but it is a change that once people get ok with the fact that RE is likely to provide more jobs and not less – then attitudes will change. Add to this the level of innovation that will come about by having reasonably priced energy on tap from the sun or wind. We say we have a high solar update on houses, well there are a lot of industrial buildings that have acres of roof space with no solar.

        Then lets look at the supply chain and see where we can add value – be it some level of refining products for batteries or building the batteries themselves. That or pumped hydro – which again is engineering and construction jobs.

        The short story is that there is potentially more jobs in moving to renewable energy than in continuing to push the Coal Wheelbarrow – however that is the wheelbarrow that both sides of the house in Canberra have been told to push. Let’s hope the states keep Canberra going around in circles long enough to get the RE job message out there.

        • Carl Raymond S

          We don’t ultimately want *more* jobs in harvesting energy than in mining/releasing it from fossils. Better to start new industries made possible by a surplus of cheap (practically free) energy during daylight hours. Our abundant sunshine should deliver an economic trade advantage.
          Jobs, are another name for labour cost. At home, they are called chores.

      • john

        The people working in mining would not have a clue about Ni Co MN or any of the rest of it as they are operators not across the elements you mention.

        • Carl Raymond S

          You show little faith in the ability of people to learn new skills.

        • juxx0r

          Mn. I work in mining.

    • john

      True especially when you mention automation of jobs
      I have seen a workforce of 112 reduced to 7.

  • Alex Hromas

    It would be interesting to see the cost comparison between CSP with storage to large scale PV and battery storage with say 8 hours of dispatchable capacity

    • Mike Dill

      CSP is MUCH cheaper for longer term (8 to 12 hour) energy storage. Last I heard was under AUS$30/kWh, where Li-ion is currently about AUS$250/kWh or more.
      For CSP, the price per kWh actually goes down as the ‘storage time’ goes up, as the molten salt storage tanks are relatively inexpensive. The more expensive steam generator stays the same size, just running for a longer period of time.

      • Alex Hromas

        Thanks Mike interesting of course if you want to run your turbine a near full load during the day and store energy you have to increase your heliostat field but I expect that that is also not expensive. Beats me why all the talk on renewables is about wind and PV giving the Lib/Nats an opportunity to push the intermittency barrow

  • brucelee

    Surely the record low Saudi prices are founded in their predatory employment of immigrant labour rather than their “good sunshine “.

    • 小杜 (xiao du)

      More their ultra cheap financing and low land cost (free?), tied together with some thought for the future.

  • john

    As i see it for Australia as soon as they build large scale concentrated solar and storage or concentrated solar or use concentrated solar and hydro near the coast or inland where there is sufficient water volume available the sooner the country will move to a very low cost of electricity delivery.
    Mind some of that power will be delivered by wind and conventional solar, which is cheaper than concentrated solar then all the better.
    Distribute this kind of power delivery systems all over the the network and then the end result is a huge lowering of cost of power.

    • Mike Dill

      Yes, I agree that solar and storage does cost less than what most of the utilities currently charge. Until those companies reorganize, and the excess transmission and coal and gas plants are written off, nothing will change here.

  • Ian Smith

    I love all of this chatter about cheaper this and that. What is still concerning is that residents and small businesses are still being gouged on their electricity (and gas) bills. So far this year we’ve seen a reduction in the general wholesale price, yet Mr and Mrs Average are still paying $360/MWh or more. The gouging is still happening, however it is now shifting to a more even spread between the generation, transmission, distribution and and increase for the retailer. Gentailers are still creaming it. Coal states have seen a remarkable jump in prices, significantly in wholesale. The situation hasn’t really changed.

    • Rupert Goldie

      I’m paying $203/MWh peak, $115/MWh off peak plus $1 a day with Origin in Victoria.

      • Mike Westerman

        Consider yourself lucky – Origin are not making that sort of offer now: I just put in some typical inner city numbers and their current offer is 34.6c/kWh peak, 26.2c shoulder and 17.8c offpeak.

  • Cooma Doug

    As the Chinese energy cleanup accelerates, the biggest early problem they will have to deal with is the huge costs of the interconnection of their large scale solar and wind. It will be tough if you have a quick think about it.
    But it will be good for the world. This will push the Chinese nerds into the utilisation of all possible load side control options. This will greatly increase and accelerate the development of options that will greatly reduce the interconnection requirements. I expect there will be innovations emerge there that would be blocked out of the industry here by politics and bad policy.

    • 小杜 (xiao du)

      UHV-DC interconnects (800kv – 1000kv), and lots of them.
      China loves infrastructure, and central planning helps.

      China is far ahead of you on that 🙂

  • Stefan

    Zinc Bromine flow batteries are already here, just not well known. (Disclaimer: I have bought small amount of shares.)

    Australian design, sold as ZCell (www.zcell.com)

    World’s smallest flow battery (10kWh / 100% DoD)

    No output capacity loss with age (unlike lithium)

    10-year warranty

    Made with reuseable and recyclable major components

    Intrinsically fire retardant electrolyte – not at risk of thermal runaway

    Smart, self-protecting battery with Internet enabled monitoring and control

    Battery strings with different charge levels coexist and sequence seamlessly

    On-ground outdoor enclosure for straightforward installation

    No damage if fully discharged for arbitrary periods

    Unique virtual genset mode (no energy loss with rapid reliable startup)

    • Mike Westerman

      Stefan Zn/Br looks good but still expensive even tho’ they’ve been around for a long time – what possibility do you see for significant price reductions? Have the dendrite problems been overcome? Has the low cycle efficiency been overcome or improved?

  • Bob Meinetz

    “…a growing advantage for wind and solar technologies over fossil fuels such as coal, gas and nuclear.”

    Nuclear is a fossil fuel?

    Giles, whether your mistake is inadvertent or a deliberate attempt to project guilt by association, you’re embarrassing yourself.

  • Roderick Williams

    Does anyone know of a big picture report that combines all of the current trends:

    * all conventional electricity from renewables 2030-2040, PV & wind the major generators, batteries for short-term storage, synth methane for seasonal storage
    * all ground transport battery powered over similar time scale
    * air transport/heating (industrial and domestic) moving to electric
    * energy efficiency improvements

    Is this enough to curtail CO2 emissions/reach Paris targets?
    What bad things will still happen e.g. further temp rises because of the CO2 already in the atmosphere and associated impact on agriculture, 2-3m sea rises by 2100

  • Bob Meinetz

    Why on earth would anyone expect an investment bank, with $billions invested in what they’re recommending, to be an accurate source of LCOE?
    Please. 100% hype.