Wind and solar plus storage are challenging fossil fuels worldwide, Bloomberg says
Energize Weekly, April 11, 2018
Coal and natural gas are being hard pressed to compete as the comparative cost of wind, solar and battery storage continue to fall and in concert, can meet the power grid’s key needs, according to a Bloomberg New Energy Finance (BNEF) study.
“Fossil fuel power is facing an unprecedented challenge in all three roles it performs in the energy mix—the supply of ‘bulk generation,’ the supply of ‘dispatchable generation,’ and the provision of ‘flexibility,’” the Bloomberg report said.
Driving the competitivity are the falling prices for renewable generation and storage as measured by “levelized cost of energy” (LCOE), in which the cost of building and operating a unit over its lifetime is divided by the amount of electricity produced, giving a cost per megawatt-hour (MWh).
BNEF has been tracking LCOEs since 2009. During that period, the global benchmark for photovoltaic solar (PV), without tracking, has dropped 77 percent, and onshore wind generation is down 38 percent.
Lithium battery prices have fallen from $1,000 a kilowatt-hour (kWh) in 2010 to $209 a kWh in 2017, according to BNEF’s lithium-ion battery price index.
“LCOEs for older established sources, such as coal, gas, nuclear and large hydro, have seen only very modest reductions, at best, in that time—and in some countries, they have actually increased,” the report said.
The growing number of wind and solar installations, “thanks to falling capital costs, improving efficiency and the spread of competitive auctions around the world,” is now posing an alternative source for bulk generation, BNEF said.
“In dispatchable power—the ability to respond to grid requests to ramp electricity generation up or down at any time of day—the challenge to new coal and gas is coming from the pairing of battery storage with wind and solar, enabling the latter two ‘variable’ sources to smooth output, and if necessary, shift the timing of supply,” the report said.
Stand-alone batteries can provide the flexibility to switch on and off to meet grid shortfalls and surpluses. “Stand-alone batteries are increasingly cost-effective and are starting to compete on price with open-cycle gas plants, and with other options such as pumped hydro,” the report said.
“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing, as wind and solar penetration increase,” Elena Giannakopoulou, head of BNEF energy economics, said in a statement. “But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants.”
The trends are continuing in 2018 with prices continuing to fall, BNEF said. In the first half of 2018, the benchmark global LCOE for onshore wind is $55 per MWh, down 18 percent from the first six months of last year. The equivalent for solar PV without tracking systems is $70 per MWh, also down 18 percent. The LCOE for offshore wind in the first half of 2018 is $118 per MWh down 5 percent.
There are places in the world with even lower cost figures for wind and solar generation. Among the countries with competitive onshore wind prices are India, Australia, Brazil and Sweden. For solar, India, Australia, Chile and Jordan have below average LCOEs, BNEF said.
India had particularly low levelized electricity cost with onshore wind at 39 per MWh, a 46 percent drop in a year, and a cost for solar is $41 a MWh, a 45 percent reduction. By comparison, coal’s LCOE is $68 per MWh, and combined-cycle gas is $93 per MWh.
There is a wide cost spread for renewable generation plus storage projects in India. Wind-plus-battery systems range from $34 per MWh to $208 per MWh. The range for solar-plus-storage projects is $47 per MWh to $308 per MWh, according to Bloomberg.
“Thanks to this and to progressively more efficient technology, we are seeing record-low prices being set for wind and solar, and then those records being broken again and again on a regular basis,” Seb Henbest, head of Europe, Middle East and Africa for BNEF, said in a statement.