Lazard analysis shows wind and solar becoming the cheapest new generating capacity
Energize Weekly, November 14, 2018
The cost of building and running wind and utility-scale solar projects is now beginning to undercut the major forms of baseload generation—natural gas, coal and nuclear, according to analysis by the financial consulting firm Lazard Ltd.
Lazard’s 12th annual “levelized cost of energy” (LCOE) analysis, released Nov. 8, for the first time shows large-scale wind and solar beating fossil fuel and nuclear generation.
A levelized cost analysis takes the cost of building generation and the cost of operating it over its lifetime, including fuel, and divides that figure by the number of megawatt-hours the facility generates to come up with a dollar-per-megawatt-hour figure.
Lazard puts the range for unsubsidized new utility-scale photovoltaic installations at $40 to $46 a megawatt-hour. Thin-film utility-scale solar is even cheaper at $36 to $44 a megawatt-hour. Wind was $29 to $56 a megawatt-hour.
By comparison, a new unsubsidized gas peaking plant would cost $152 to $206 a megawatt-hour and nuclear plant $112 to $189 a megawatt-hour. The levelized cost for a new coal-fired unit is $60 to $189 a megawatt-hour.
Only a natural-gas combined-cycle plant was competitive with wind and solar coming in at $41 to $74 a megawatt-hour.
Wind and solar were also getting close to being competitive with operating coal and nuclear facilities. Lazard calculated the midpoint of the marginal cost of operating a fully depreciated coal or nuclear facility at $28 a megawatt-hour for nuclear and $36 a megawatt-hour for coal.
This calculation assumes the salvage value for decommissioning a plant is equal to the decommissioning costs and site restoration costs.
“While capital costs for a number of Alternative Energy generation technologies are currently in excess of some conventional generation technologies, declining costs for many Alternative Energy generation technologies, coupled with uncertain long-term fuel costs for conventional generation technologies, are working to close formerly wide gaps in LCOE values,” the Lazard analysis said.
In 2009, the Lazard analysis pegged the cost of utility-scale wind at $101 to $169 a megawatt-hour and solar at $323 to $394 a megawatt-hour. The costs have dropped steadily every year since.
One element that could tip the comparative costs would be an emphasis on reducing carbon emissions from fossil fuel generation, which are linked to global climate change.
“This analysis suggests that policies designed to promote wind and utility-scale solar development could be a particularly cost-effective means of limiting carbon emissions; providing an implied value of carbon abatement of $26–$34/Ton vs. Coal and $10–$25/Ton vs. Gas Combined Cycle,” the study said.
The Lazard study found that residential rooftop solar remains one of the most expensive forms of generation with a levelized cost of $160 to $267 a megawatt-hour. Community or shared solar was $73 to $145 a megawatt-hour.
Geothermal, one of the few types of renewable energy that replaces continuous baseload generation, such as nuclear and fossil fuel-fired plants, was $71 to $111 a megawatt-hour.