Conventional energy needed even as green energy costs fall - Lazard

The full-lifecycle costs of building and operating renewables are lower than the operating costs alone of coal or nuclear power plants in some scenarios by Lazard Ltd (NYSE:LAZ), but the financial advisory says the optimal solution for many regions is still a combination of new and conventional energy.

The levelised cost of energy (LCOE) for both utility-scale onshore wind and solar photovoltaic (PV) power has contracted by roughly 6% from last year, according to Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE 11.0). Meanwhile, the cost profiles of conventional generation remain flat, which is the case for coal, or even increase, which is being observed in the nuclear energy sector. Thus the gap between the costs of alternative energy and conventional generation keeps widening.

Lazard says alternative energy sources alone would not be able to meet a developed economy’s baseload generation needs “for the foreseeable future”, so the solution is a diversified generation fleet with both renewable and conventional sources.

“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,” said Jonathan Mir, head of Lazard’s North American Power Group.

Battery storage costs are expected to go down significantly over the next five years, mainly thanks to manufacturing and engineering improvements. Industry participants see lithium-ion capital costs falling by as much as 36% in the next five years, Lazard’s study shows.

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