Solar and wind are the cheapest new sources of energy says BNEF: Battery storage levelized costs are about half of two years ago

Apr 29, 2020 0 This story first appeared on Renewable Energy World.

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Solar PV and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population. Those two-thirds live in locations that comprise 71% of gross domestic product and 85% of energy generation.

Battery storage is now the cheapest new-build technology for peaking purposes (up to two-hours of discharge duration) in gas-importing regions, like Europe, China or Japan.

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The latest analysis by research company BloombergNEF (BNEF) shows that the global benchmark levelised cost of electricity, or LCOE, for onshore wind and utility-scale PV, has fallen 9 per cent and 4 per cent since the second half of 2019 – to $44 and $50/MWh, respectively. Meanwhile, the benchmark LCOE for battery storage has tumbled to $150/MWh, about half of what it was two years ago.

Figure 1: Cheapest source of new bulk electricity generation by country, 1H 2020
Source: BloombergNEF. Note: LCOE calculations exclude subsidies or tax-credits. Graph shows benchmark LCOE for each country in $ per megawatt-hour. CCGT: Combined-cycle gas turbine.

Wind: Larger turbines = lower cost of energy

Onshore wind has seen its most significant drop in cost since 2015. This is mainly due to a scale-up in turbine size, now averaging 4.1 MW, and priced at about $0.7m per MW for recently financed projects. In Brazil for instance, where wind resources are ample, the economic crisis of 2016 onwards saw the cost of capital for wind projects increase by up to 13 per cent. BNEF’s analysis suggest that lending rates more recently have fallen back to levels seen before that crisis. And this means that best-in-class onshore wind projects can achieve an LCOE of $24 per MWh, the lowest globally. Meanwhile top projects in the U.S., India and Spain follow at $26, $29 and $29 per MWh respectively, excluding subsidies such as tax-credits.

Solar PV: Costs down 9 per cent

In China, the largest PV market, our solar benchmark is at $38/MWh, down 9 per cent from the second half of 2019, following a rapid uptake in better performing monocrystalline modules. New-build solar in the country is now almost on par with the running cost of coal-fired power plants, at an average of $35/MWh. This is significant as China advances on its deregulation agenda, opening up competition in the power sector.

Globally, we estimate that some of the cheapest PV projects financed in the last six months will be able to achieve an LCOE of $23-29 per MWh, assuming competitive returns to their equity investors. Those projects can be found in Australia, China, Chile, and the U.A.E., where they will challenge the existing fleet of fossil fuel power plants.

Wind and solar farms are getting larger

Tifenn Brandily, lead author of the report said that scale up has helped drive down costs. “Our analysis also suggests that since 2016, auctions are forcing developers to realise cost savings by scaling up project size and portfolios. Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment,” he said.

Globally, BNEF estimates that the average onshore wind farm has doubled its capacity from 32 MW in 2016 to about 73 MW today. Solar farms are a third more powerful today, at 27 MW on average, compared to 2016.

Brandily added: “On current trends, the LCOE of best-in-class solar and wind projects will be pushing below $20 per MWh this side of 2030. A decade ago, solar generation costs were well above $300, while onshore wind power hovered above $100 per MWh. Today the best solar projects in Chile, the Middle-East and China, or wind projects in Brazil, the U.S. and India, can achieve less than $30 per MWh. And there are plenty of innovations in the pipeline that will drive down costs further.”

Figure 2: Global LCOE benchmarks – PV, wind and batteries
Source: BloombergNEF. Note: 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.

Battery energy storage average size up to 30-MWh

Battery storage is another example of how scale can unlock cost reductions. Today, BNEF estimates that the average capacity of storage projects sits at about 30 MWh, a fourfold rise compared to just seven megawatt-hours per project four years ago. Since 2018, increasing project sizes combined with a rapidly expanding manufacturing base and more energy dense chemistries, have halved the LCOE of energy storage. BNEF’s global LCOE benchmark sits now at $150/MWh for battery storage systems with a four-hour duration.Sign up to our newsletter

China is home to the cheapest storage levelised costs globally, at $115 per MWh, said BNEF. This competitive advantage hinges mainly on the proximity of developers to the equipment supply chain and the more widespread use of cheaper LFP (lithium iron phosphate) chemistries. In comparison, the levelised cost of open-cycle gas turbines per MWh sits today between $99 in the U.S. and $235 in Japan, with China at $145.

BNEF’s LCOE analysis is based on information on real projects starting construction, and proprietary pricing information from suppliers. Its database covers nearly 7,000 projects across 25 technologies (including the various types of coal, gas and nuclear generation as well as renewables), situated in 47 countries around the world.

Pandemic creates uncertain price trajectory

The data used for the latest report come from actual deals over recent months, and therefore do not reflect what may happen to the LCOEs of different generation technologies as a result of the economic shock created by the coronavirus pandemic.

Seb Henbest, chief economist at BNEF, said: “The coronavirus will have a range of impacts on the relative cost of fossil and renewable electricity. One important question is what happens to the costs of finance over the short and medium term. Another concerns commodity prices – coal and gas prices have weakened on world markets. If sustained, this could help shield fossil fuel generation for a while from the cost onslaught from renewables.”

This story first appeared on our sister site, Renewable Energy World.


Colorado’s clean energy workers are hurting in these coronavirus times


Special to The Colorado Sun See moreWhitney Painter

Colorado’s clean energy workforce is massive, diverse and at the end of the fourth quarter of 2019 was more than 62,000 people strong. That’s according to a just-released report from the national, nonpartisan business group E2 (Environmental Entrepreneurs), which listed Denver and Boulder as home to about two-thirds of these jobs.

We know Colorado’s clean energy sector well, and we approach it from different perspectives – one of us is a utility-scale wind energy developer based in Boulder, the other a small solar business owner living in Golden.

Despite the difference in the scales of the clean energy projects we work on – from solar arrays on suburban rooftops to towering wind turbines dotting thousands of acres of rolling ranchland – we’re both seeing the same thing as Colorado reels from coronavirus’ economic fallout: Clean energy workers are hurting, and they’re hurting badly.

That’s why Congress needs to act now.

According to E2’s report, late last year there were 3.4 million clean energy jobs nationwide, making it one of the fastest-growing workforces across the economy. In March alone, more than 106,000 of these clean energy workers lost their jobs. This includes more than 1,000 Coloradans, some of whom are our own friends, neighbors and colleagues.

Whitney Painter, a partner at Buglet Solar Electric

In the wind industry, a lack of public hearings and distracted regulatory agencies has meant critical permits are unable to move forward. Banks, meanwhile, are experiencing their most sudden and acute struggles since the financial crisis, leading to delays or even cancellation of financing for big wind projects.

Nationwide, an estimated 25 gigawatts of wind projects are at risk. This represents $35 billion in investment; the potential loss of more than $8 billion to rural communities in state and local tax payments and lease payments to private landowners (including Colorado farmers and ranchers); and the loss of more than 35,000 jobs like wind turbine technicians, construction workers and factory workers.

Already hamstrung by tariffs the Trump administration put in place in 2018, the solar industry is hurting, too. Companies are struggling to source parts as coronavirus disrupts supply chains. According to the Solar Energy Industries Association, a trade group, the industry’s workforce could be halved.

If that happens, 38,000 to 120,000 jobs could vanish, compared to the 250,000 employed in solar at the end of 2019. All these losses would be attributed to coronavirus; prior to this crisis, the solar workforce was expected to grow this year to 294,000.

READ: Colorado Sun opinion columnists.

So what, exactly, can Congress do to support clean energy jobs, most of which are in construction or at small businesses?

Congress must take quick action to keep clean energy going. It should reinstate a program like Section 1063 used during the last financial crisis that monetizes tax credits directly for clean energy investors and project owners at a time when financial institutions may not be able to do so.

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Congress should also extend the safe harbor from four to five years for Production Tax Credits for wind and the Investment Tax Credit for solar to accommodate for COVID-19 delays, while also investing up to $90 billion to modernize our electric grid to increase renewable energy carrying capacity.

Colorado has been a national leader in zero-emission vehicle legislation. The federal government can build upon our own bold local efforts by creating a national car charging and clean fuels network.

Congress can also fund community colleges and other institutions to create new or expand existing certified clean energy training programs. With wind turbine technicians and solar installers, the two fastest-growing occupations when coronavirus hit, these programs could help train displaced workers seeking new careers.

Finally, Congress can increase funding for the Advanced Research Projects Agency-Energy. ARPA-E has already jump-started 475 clean energy technologies, leading to $1.25 billion in follow-on private funding. With the National Renewable Energy Laboratory based in Jefferson County since 1974, Colorado is already at the center of clean energy innovation.

We are under no illusions: tough days lie ahead, with more clean energy job losses coming. But both of us are working hard to keep our own businesses on track, and we remain optimistic. Congress has a role to play, too. Now it’s time to act.

Michael Rucker, of Boulder, is CEO of Scout Clean Energy, a renewable energy development company. Whitney Painter, of Golden, is a partner at Buglet Solar Electric, a solar installation business. Both are members of the Rocky Mountains chapter of the national, nonpartisan business group E2 (Environmental Entrepreneurs).