Lazard: 50% reduction in cost of renewable energy since 2008

Clean Technica

Renewable energy becoming more cost-competitive with fossil fuels isn’t news – as technology improves and more clean power generation comes online, electricity without emissions gets cheaper. But one new analysis reveals just how shockingly cheap it’s gotten.

The levelized cost of electricity (LCOE) from wind and solar sources in America has fallen by more than 50% over the past four years, according to Lazard’s Levelized Cost of Energy Analysis 7.0, recently released by global financial advisor and asset manager firm Lazard Freres & Co.

Lazard’s analysis compared the LCOE for various renewable energy technologies to fossil fuels on a cost per megawatt hour (MWh) basis, including factors like US federal tax subsidies, fuel costs, geography, and capital costs.

While wind is progressing quite well – generally speaking – against fossil fuel generation in Lazard’s analysis, it could get much cheaper much faster in the near future when combined with energy storage. The report cites numerous examples of existing battery storage combining with off-peak wind production to demonstrate value in load shifting and peak power applications.

And while utility-scale solar PV leads the LCOE charge, rooftop solar PV remains expensive by comparison – a trend evident in recent summaries of the US market. Ironically, Lazard says this may be attributable to the generous combination of multiple levels of tax incentives, which distort resource planning by excluding externalities in long-term outlooks.

Interestingly enough, solar is becoming an economically viable peaking generation source in many geographic regions of the US. This trend is especially apparent in transmission-constrained metropolitan areas like New York City, Los Angeles, Washington DC, Chicago, and Philadelphia. Lazard estimates solar could become even more competitive as prices continues to fall, but the observation is somewhat muddled by factors like system reliability, stranded costs of distributed generation for existing systems, and social costs/externalities of rate increases.

“Increasingly Prevalent” Renewable Energy Use

But the most promising potential for the future of renewable energy sources may be their value as distributed small-scale generation. Lazard estimates that the expensive capital construction costs of fossil fuel generation boost their LCOE when utilities consider future resource planning across an integrated system, and make them less cost-competitive – without even considering externalities.

Lazard concedes that the future of renewable energy is far from set though, and still faces significant challenges like establishing long-term financing structures in the face of falling subsidy levels, excess manufacturing capacity, and the globalization of markets.

However, renewable energy’s role in America’s energy mix is likely to continue growing despite these challenges, concludes the analysis. “We find that alternative energy technologies are complementary to conventional generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons.”

Source: CleanTechnica. Reproduced with permission.