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Page added on September 16, 2013

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50% Reduction In Cost Of Renewable Energy Since 2008

Alternative Energy

Renewable energy becoming more cost-competitive with fossil fuels isn’t news – as technology improves and more clean power generation comes online, electricity without emissions gets cheaper. But one new analysis reveals just how shockingly cheap it’s gotten.

The levelized cost of electricity (LCOE) from wind and solar sources in America has fallen by more than 50% over the past four years, according to Lazard’s Levelized Cost of Energy Analysis 7.0recently released by global financial advisor and asset manager firm Lazard Freres & Co.

Lazard’s analysis compared the LCOE for various renewable energy technologies to fossil fuels on a cost per megawatt hour (MWh) basis, including factors like US federal tax subsidies, fuel costs, geography, and capital costs.

Unsubsidized LCOE for US energy

Unsubsidized LCOE for US energy graph via Lazard

Utility-Scale Solar, Wind Lead LCOE Charge

The LCOE analysis shows that even during one of the most turbulent times in recent memory for renewables, the environmental and economic benefits of clean energy continue to spur technological innovations and utility-scale deployments across the globe.

According to the analysis, utility-scale solar photovoltaics (PV) and leading types of wind energy are leading the surge – the LCOE of both power sources has fallen by more than 50% since 2008. Lazard estimates that utility-scale solar PV is now a competitive source of peak energy compared to fossil fuel power in many parts of the world without subsidies.

In fact, Lazard finds certain forms of renewable energy generation are now cost-competitive with many fossil fuel generation sources at an unsubsidized LCOE, even before factoring in externalities like pollution or transmission costs.

Specifically, solar PV and wind energy both fall within the range of $68-$104 per MWh, making them extremely competitive with baseload power from coal ($65-$145 per MWh), nuclear ($86-$122 per MWh), and integrated gasification combined cycle ($95-$154 per MWh).

Financial Incentives, Energy Storage Could Boost Fortunes

The LCOE of electricity from those renewable energy sources falls even further when US federal tax subsidies are included in the equation. Lazard realistically admits incentives are key to pushing renewables toward grid parity without subsidies, but finds wind ($23-$85 per MWh) and thin-film utility scale solar PV ($51-$78 per MWh) especially competitive.

LCOE for US energy with tax subsidiesLCOE for US energy with tax subsidies chart via Lazard

While wind is progressing quite well – generally speaking – against fossil fuel generation in Lazard’s analysis, it could get much cheaper much faster in the near future when combined with energy storage. The report cites numerous examples of existing battery storage combining with off-peak wind production to demonstrate value in load shifting and peak power applications.

And while utility-scale solar PV leads the LCOE charge, rooftop solar PV remains expensive by comparison – a trend evident in recent summaries of the US market. Ironically, Lazard says this may be attributable to the generous combination of multiple levels of tax incentives, which distort resource planning by excluding externalities in long-term outlooks.

Power generation rates for US metro areas

Power generation rates for US metro areas chart via Lazard

Interestingly enough, solar is becoming an economically viable peaking generation source in many geographic regions of the US. This trend is especially apparent in transmission-constrained metropolitan areas like New York City, Los Angeles, Washington DC, Chicago, and Philadelphia. Lazard estimates solar could become even more competitive as prices continues to fall, but the observation is somewhat muddled by factors like system reliability, stranded costs of distributed generation for existing systems, and social costs/externalities of rate increases.

“Increasingly Prevalent” Renewable Energy Use

But the most promising potential for the future of renewable energy sources may be their value as distributed small-scale generation. Lazard estimates that the expensive capital construction costs of fossil fuel generation boost their LCOE when utilities consider future resource planning across an integrated system, and make them less cost-competitive – without even considering externalities.

US energy capital cost comparison

US energy capital cost comparison chart via Lazard

Lazard concedes that the future of renewable energy is far from set though, and still faces significant challenges like establishing long-term financing structures in the face of falling subsidy levels, excess manufacturing capacity, and the globalization of markets.

However, renewable energy’s role in America’s energy mix is likely to continue growing despite these challenges, concludes the analysis. “We find that alternative energy technologies are complementary to conventional generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons.”


6 Comments on "50% Reduction In Cost Of Renewable Energy Since 2008"

  1. Arthur on Mon, 16th Sep 2013 11:51 am 

    I will order the 12 panels from my electricity provider before next spring:

    That’s 3000 peak watt for 6.666 euro all in, including feed-in capability. For Dutch conditions a conversion factor of 0.85 applies, meaning that 3000 peak watt translates into 2550 kwh/year or 600 euro savings against current electricity prices, that likely will increase in the coming years, leading to a payback time of max. 11 years on a guaranteed lifespan of 25 years. Considering my age, probably a lifelong companion, these panels.

    But maybe 12 panels is too much, as my historic consumption pattern is ca. 2000 kwh/year, so 9-10 panels would suffice. But I probably will cover my entire roofspace, the half facing south-west.

  2. Arthur on Mon, 16th Sep 2013 11:57 am 

    Somebody in my neighborhood has put his live solar data online:

    Today is a grey autumn day, but better than yesterday (3.6 kwh total daily yield). 3 kwh so far (1:50 pm) and counting.

  3. BillT on Mon, 16th Sep 2013 3:59 pm 

    And the beat goes on. Cheaper may just mean less quality, not a better price. If the panel costs half as much and lasts 1/4 as long … well. Be careful. Scams are everywhere. And brand names mean little today.

    When there is a glut, it may be a good time to buy. and guarantees mean nothing either as the company probably will not be in business in 20 years and maybe not even in one. Solyndra anyone?

  4. bobinget on Mon, 16th Sep 2013 4:33 pm

    My panels have endured several ‘light’ hail storms w/o damage.
    Facing South as they do in NA helps, as most hail storms are out of the north.

    Check with homeowners insurance, because damage is rare, premiums are fairly low.

    My biggest ‘problem’ has been drought. Dust collection
    cuts effective output. Bought a pressure washer and a long aluminum extension pole with a wide window washing brush attached. If you are doing a roof top, and have enough space, leave a foot path for cleaning access.\/ If dirt and grime are an issue.

  5. Arthur on Mon, 16th Sep 2013 4:43 pm 

    In Holland we enjoy a free reliable celestial cleaning service called rain.

  6. DC on Mon, 16th Sep 2013 5:55 pm 

    /Q “We find that alternative energy technologies are complementary to conventional generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons.”

    Exactly. This is the real ‘problem’ with renewables. They are being used not to provide primary energy or supplant dirty FF energy, but simply to grow the overall *total* energy supply, right along side all that ‘conventional’ energy. You know Oil, Coal, Nukes even, the stuff we want to be using a lot less of? Renewables are not helping reduce coal and oil useage regardless of their unit cost.

    CT clearly is admitting here renewables are not, now will they ever likely be used this way. So the reduction in cost, while of itself is not a bad thing, what is actually happening is, cost reductions allow ‘us’ to grow total energy consumption for a slightly lower cost.

    A more accurate title would be

    50% Solar And Wind Fossil Fuel Extenders Cost Reduction since 2008

    Or Even

    50% Drop in cost of subsidies to Fossil Fuel Energy consumption since 2008

    Both would be a more accurate description of what is really going on. The problem does not lie with wind or solar per se, but how they are actually being utilized. Wind and Solar are kind of like the Electric Car of the energy consumption world. On the surface, EVs sound wonderful, but in reality, they fix almost none of the problems cars create.

    Likewise, current wind and solar deployments, do almost nothing to reduce either total energy consumption or pollution or costs FF energy entails.

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