Solar and wind are still the most affordable sources of electricity, but their LCOE has increased for the first time in 2023, according to a new report by US-based financial firm Lazard.
The report offers a comparative LCOE analysis for various generation technologies on a $/MWh basis, with exceptions for US federal tax subsidies, fuel prices, carbon pricing, and the cost of capital. The report also includes a cost-of-firming-intermittency analysis for the first time. Unlike in previous years, the LCOE for utility-scale solar omits thin-film technology and only focuses on crystalline silicon.
In a base comparison, without considering subsidies, fuel prices, or carbon pricing, utility-scale solar and wind have the lowest LCOE of all sources. Utility-scale solar PV comes in anywhere from $24/MWh to $96/MWh, while onshore wind registers the lowest possible LCOE over the shortest range, from $24/MWh to $75/MWh. Offshore wind’s LCOE ranges between $72/MWh and $140/MWh.
For comparison, under the same criteria, gas peaking comes in at $115/MWh to $221/MWh, nuclear is $141/MWh to $221/MWh, coal is $68/MWh to $166/MWh, and gas combined cycle is $39/MWh to $ 101/MWh, according to Lazard.
Unsubsidized residential rooftop PV has an LCOE between $117/MWh and $282/MWh, while the LCOE of community and commercial and industrial (C&I) solar ranges between $49/MWh and $185/MWh. When factoring in federal tax subsidies under the US Inflation Reduction Act, including domestic contest provisions, rooftop PV comes in at $74/MWh to $229/MWh, and community/C&I rooftop PV at $32/MWh to $155/MWh.
For the first time in the history of Lazard’s analysis, the average LCOE for both utility-scale PV and onshore wind increased. Inflation, supply chain challenges, and the global energy crisis all had a role to play in putting a stop to solar’s “race to the bottom.” Nevertheless, Lazard notes that “the LCOE of the best-in-class onshore wind and utility-scale solar has declined at the low-end of our cost range, the reasons for which could catalyze ongoing consolidation across the sector.”
For utility-scale PV, the LCOE range in 2021 was very small, at $30/MWh to $41/MWh. In 2023, it ranged from $24/MWh to $96/MWh, thereby increasing the average LCOE.
Lazard estimates that between 2016 and 2023, utility-scale PV’s LCOE increased by 3%, calculated as the average percentage increase of the high-end and low-end of the LCOE range. Between 2009 and 2023, however, solar’s LCOE decreased by 84% according to the same metric.
The new report also includes an analysis of the levelized cost of storage and hydrogen, which pv magazine will cover in separate articles.
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Look at the low end of the standard deviation bar.
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