Utility-scale PV cheapest power source in Asia Pacific, says WoodMac

Wood Mackenzie says the levelized cost of electricity (LCOE) in the Asia-Pacific region hit an all-time low in 2023, as utility-scale PV beat coal to become the cheapest power source. It predicts a further drop in costs for new-build solar projects, driven by falling module prices and oversupply from China.

Image: Wood Mackenzie

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LCOE in the Asia-Pacific region significantly declined to an all-time low in 2023. According to new analysis by Wood Mackenzie, renewable energy costs were 13% cheaper than conventional coal last year and are expected to be 32% cheaper by 2030.

“Utility PV solar has emerged in 2023 as the cheapest power source in the region, while onshore wind is expected to become cheaper than coal after 2025,” said Alex Whitworth, vice president, head of Asia-Pacific power research at Wood Mackenzie. “Renewables firmed with battery storage is becoming competitive with gas power today but will struggle to compete with coal before 2030.”

Big PV emerged as the cheapest power source in 11 out of 15 countries in the Asia Pacific in 2023. According to WoodMac, PV power costs saw “a significant decline of 23% in 2023, marking the end of two years of supply chain disruptions and inflation.”

Looking ahead, Wood Mackenzie predicts that new-build solar project costs will drop by another 20% by 2030, driven by falling module prices and increasing oversupply from China.

Meanwhile, distributed solar costs fell 26% in 2023, with the technology now 12% cheaper on average than residential power prices. Wood Mackenzie said this creates large potential for more rooftop solar applications.

“This trend has made distributed solar increasingly attractive for end-users in many markets in Asia Pacific, with costs already 30% below rising residential tariffs in China and Australia,” said Sooraj Narayan, senior research analyst, APAC power and renewables at Wood Mackenzie. “However, some markets like India with subsidised residential power tariffs will need to wait until 2030 or later to achieve competitive distributed solar prices.”

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Overall, China is leading the way in bringing down the cost of renewables, with utility-scale PV, onshore wind, and offshore wind being 40% to 70% cheaper when compared to other Asia-Pacific markets.

Concerns about profitability, grid integration, backup, and energy storage persist among investors, even though declining costs are supporting investment in renewables.

“Government policies will play a crucial role going forward to support upgrading grid reliability, transmission capacity, and promoting battery storage to manage the intermittent nature of renewables,” said Whitworth.

In December, Ernst & Young said in a report that the global weighted average LCOE for PV is now 29% lower than the cheapest fossil fuel alternative.

Earlier this year, Wood Mackenzie predicted strong yet flat global PV growth through to 2032. It estimated that around 350 GW of global solar will be annually installed for the next eight years.

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