Wind and solar beating conventional fuels on costs – Lazard

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.

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.

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.

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.

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.”