What’s the Cheapest New-Build Power Technology?

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Onshore wind and photovoltaic (PV)solar power are the cheapest forms of new-build power generation for at leasttwo-thirds of the world's population, according to analysis published by researchcompany BloombergNEF (BNEF). Meanwhile, battery storage has become the lowest-costnew-build technology for peaking purposes in gas-importing regions, such asEurope, China, and Japan.

BNEF reported on April 28 that the global levelized cost of electricity (LCOE)-which measures the all-in expense of producing 1 MWh of electricity from a new project including the costs of development, construction and equipment, financing, feedstock, and operation and maintenance expenses-fell to $44/MWh for onshore wind and $50/MWh for utility-scale PV in its latest study. It said the cost has decreased 9% and 4%, respectively, since the second half of 2019.

There have been dramatic improvementsin the cost-competitiveness of solar and wind," Tifenn Brandily, lead author ofthe BNEF report, said in a statement. Part of it is due to photovoltaic andwind technology getting better at extracting renewable resources. But ouranalysis also suggests that since 2016, auctions are forcing developers torealize cost savings by scaling up project size and portfolios. Larger scaleenables them to slash balance-of-plant, operations and maintenance expenses-andhave a stronger negotiating position when ordering equipment."

An increase in onshore wind turbine sizes has been driving costs down in that sector. The average size of new wind turbines is 4.1 MW, with recently financed projects costing about $700,000/MW. BNEF said Brazil, which is flush with wind resources, has seen the lowest LCOE in the world ($24/MWh) for best-in-class onshore wind projects. Top projects in the U.S. are not far behind ($26/MWh), while projects in India and Spain were coming in at $29/MWh, according to the analysis.

In China, which has the largest PVsolar market, BNEF's solar benchmark was $38/MWh, a decrease of 9% from thesecond half of 2019. However, BNEF expects the LCOE for some recently financedPV projects will be between $23/MWh and $29/MWh.

A decade ago, solar generation costs were well over $300/MWh, while onshore wind power was more than $100/MWh (Figure 1). If current trends continue, the LCOE of best-in-class solar and wind projects will be less than $20/MWh before 2030, Brandily said. And there are plenty of innovations in the pipeline that will drive down costs further," he added.

1. Global LCOE benchmarks-PV, wind, and batteries. The global benchmark is a country weighted-average using the latest annual capacity additions. The storage LCOE is reflective of utility-scale projects with four-hour duration, it includes charging costs. Source: BloombergNEF

The LCOE of battery storage hasbeen cut in half since 2018 due mainly to larger project sizes, a rapidlyexpanding manufacturing base, and more energy-dense chemistries. BNEF's globalbenchmark for battery storage now sits at $150/MWh for systems with a four-hourduration. In China, where prices are the cheapest, battery storage is only$115/MWh.

While BNEF's analysis is basedon real projects starting construction and proprietary pricing information fromsuppliers, and the data used for the latest report came from actual deals overrecent months, it does not reflect what may happen to the LCOEs of differentgeneration technologies as a result of the economic shock caused by the COVID-19pandemic.

The coronavirus will have arange of impacts on the relative cost of fossil and renewable electricity. Oneimportant question is what happens to the costs of finance over the short andmedium term. Another concerns commodity prices-coal and gas prices have weakenedon world markets. If sustained, this could help shield fossil fuel generationfor a while from the cost onslaught from renewables," said Seb Henbest, chiefeconomist at BNEF.

-Aaron Larson is POWER's executiveeditor (@AaronL_Power, @POWERmagazine).

The post What's the Cheapest New-Build Power Technology? appeared first on POWER Magazine.