Unsubsidised wind and solar competitive with coal, Lazard says

Wind and solar power are set to be cost competitive with coal-fired stations, even without subsidies, a new study from leading US investment bank Lazard has found.

The study presents an ongoing trend; utility-scale solar and wind power are increasingly cost-competitive with traditional energy sources, such as coal and nuclear, even in the absence of subsidies.

American financial advisory bank, Lazard, released its eighth annual update, Levelized Cost of Energy Analysis, which presents its findings on the US alternative and traditional markets.

Falling costs and rising efficiency has been credited for the production of solar and wind energy that is cost competitive with natural gas and coal-fired power stations.

According to an article in the Financial Times, in areas of strong sun or winds, these technologies can provide energy cheaper than fossil-fuel plants, for example. New solar plants will deliver energy at US$72-86 per megawatt-hour, and wind turbines beat that with a cost of $37-81/MWh, the FT says, quoting from the Lazard report.

This compares with numbers from five years ago with energy costs sitting at US$169-101 and US$394-323 for wind and solar, respectively which equates to a cost decrease of 58 per cent and 78 per cent (2009-2014).

The costs of generating electricity from all forms of utility-scale solar photovoltaic (PV) technology continue to decline dramatically.

The FT says the Lazard study estimates that the levelized cost of energy (LCOE) of leading PV technologies has fallen by nearly 20 per cent in the past year, and nearly 80 per cent in the last five years.

The report speculates that on average solar PV presents a capital cost of US$3,500 to US$4,500 compared to coal which spirals upwards to US$8,400. Wind is even cheaper, sitting at around US$1,400-1,800.

“The economics of alternative energy have changed dramatically in the last decade,” George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group told the FT.

“Utilities still require conventional technologies to meet the energy needs of a developed economy, but they are using alternative technologies to create diversified portfolios of power generation resources.”

Land-based wind-generation costs also continue to decline dramatically. Lazard estimates that the cost of energy of leading technologies has fallen by more than 15 per cent in the past year, and nearly 60 per cent in the last five years. However, offshore wind generation is currently at least twice as expensive as land-based, and therefore not cost-competitive without subsidies.

Battery storage, integral in transforming the solar and wind markets, continue to be costly without subsidies, however, next generation battery storage technologies could decline by as much as 40 per cent by 2017, according to the report, thanks to expected reductions in capital costs, operation and maintenance costs, and improvements in efficiency.