Solar, onshore wind and storage keep getting cheaper - BNEF
Collocated solar and wind parks. Photo Credit: Istock
Solar photovoltaic (PV) and onshore wind projects currently have the cheapest levelised cost of electricity (LCOE) of all new-build generation for at least two-thirds of the world population, according to the latest analysis by BloombergNEF (BNEF).
In gas-importing regions, such as Europe, China or Japan, battery storage is now cheaper compared to other new-build peaker plants.
The global benchmark LCOE for onshore wind dropped by 9% to USD 44 (EUR 40.6) per MWh since the second half of 2019. For fixed-axis utility-scale PV systems, it went down 4% to USD 50/MWh in the same period, BNEF figures show.
At USD 150/MWh, the benchmark LCOE for battery storage with a four-hour duration came down by about half compared to two years ago.
The downward trend for all three technologies has been observed in all major markets across the world. For onshore wind, the competitive edge is mainly owed to improvements in turbine capacity, which now averages 4.1 MW, and a cost of around USD 700,000 per MW for recently financed projects.
Top wind projects in Brazil enjoy an LCOE of USD 24/MWh, the lowest in the world, followed by the US with USD 26/MWh, and India and Spain with USD 29/MWh, excluding subsidies.
In China, the PV benchmark LCOE is at USD 38/MWh, a 9% decline from the second half of 2019, whereas the running cost of coal-fired power plants averages USD 35/MWh.
Elsewhere in Australia, China, Chile and the UAE, the latest crop of financed PV projects will be able to bring the LCOE down to between USD 23 and USD 29 per MWh.
According to Tifenn Brandily, BNEF associate and lead author of the report, part of the reason for the lower LCOE is that onshore wind and solar have gotten better at utilising their resources.
“[O]ur analysis also suggests that since 2016, auctions are forcing developers to realise cost savings by scaling up project size and portfolios. Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment,” said Brandily.
Resorting to scale has also brought down costs of battery storage. The average capacity of storage projects reaches around 30 MWh currently compared to 7 MWh per projects four years ago. In China, the storage LCOE can go as low as USD 115/MWh, which is cheaper than the levelised cost of open-cycle gas turbines per MWh in the country.
BNEF based the analysis using information on real projects starting construction, proprietary pricing information from suppliers and deals concluded over recent months. Its report does not take into account changes in the LCOEs of different technologies in the post-coronavirus pandemic economy.
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