The unsubsidized costs of utility-scale solar and wind power are now cheaper than the costs of natural gas power in the US, according to Lazard’s recently released Annual Levelized Cost of Energy and Levelized Cost of Storage Analyses. The annual report, now in its 10th year, found that as the cost of utility-scale solar fell 11 percent in the past year it’s levelized cost of energy (LCOE) fell as low as $46 per megawatt hour to $56 per MWh, making it less expensive than fossil fuel-based electric generation.
That’s less than the cost of unsubsidized natural gas power—the lowest-cost conventional generation source, which ranges from $48 per MWh to $78 per MWh. Unsubsidized coal was even higher in cost, starting at $60 per MWh and topping out at $143 per MWh.
Utility-scale wind power is even less expensive. Unsubsidized wind generation is costing between $32 MWh and $62 MWh.
With subsidies like the Investment Tax Credit for renewable energy like wind and solar that price falls even lower. But the fossil fuel industry’s prices are also lower as they have long-standing subsidies.
With subsidies, utility-scale solar falls to $36 per MWh to $44 per MWh, while wind falls to $14 per MWh to $48 per MWh. Natural gas falls to $42 per MWh to $85 per MWh while coal is at $57 to $148 per MWh.
Still, renewables can’t meet all the US’s energy needs, according to the report. “Even though alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future,” Lazard said. “Therefore, the optimal solution for many regions of the world is to use complementary traditional and alternative energy resources in a diversified generation fleet.”
“Our studies continue to demonstrate that there are no one-size-fits-all solutions in energy generation or storage,” said George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group. “The demands of a developed economy will continue to require both traditional and alternative energy sources as the technologies driving renewable energy evolve.”
The study noted that wind and solar still need backup power, unlike conventional generation. As such the study was complemented by Lazard’s Levelized Cost of Storage Analysis (LCOS 2.0), which showed cost declines in most battery storage technologies, but also showed wide variations based on application and battery technologies.
“The economic viability of commercial energy storage systems varies widely by application and on a regional basis,” said Jonathan Mir, Head of Lazard’s North American Power Group. “As manufacturers and customers identify optimal technologies for different use cases, we expect further innovation and a continued drop in costs, which will help drive increased use of renewables.”Tweet