Solar energy costs decline in 2015 second half; fossil fuel costs climb
2015 has brought a significant shift in the generating cost comparison between renewable energy and fossil fuels, according to detailed analysis by technology and region, published this week by Bloomberg New Energy Finance.
The research company’s Levelized Cost of Electricity Update for the second half of 2015, based on thousands of data points related to individual deals and projects around the world, shows that onshore wind and crystalline silicon photovoltaics – the two most widespread renewable technologies – have both reduced costs this year, while costs have gone up for gas-fired and coal-fired generation.
The BNEF study shows that the global average levelized cost of electricity (LCOE) for onshore wind nudged downwards from $85 per MWh in the first half of the year to $83 in the second, while that for crystalline silicon PV solar fell from $129 to $122.
In the same period, the LCOE for coal-fired generation increased from $66 per MWh to $75 in the Americas, from $68 to $73 in Asia-Pacific, and from $82 to $105 in Europe. The LCOE for combined-cycle gas turbine generation rose from $76 to $82 in the Americas, from $85 to $93 in Asia-Pacific and from $103 to $118 in EMEA.
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“Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs,” said Seb Henbest, head of Europe, Middle East and Africa at Bloomberg New Energy Finance.; “Meanwhile, coal and gas have got more expensive on the back of lower utilization rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform.”
Levelized costs take into account not just the cost of generating a marginal MWh of electricity, but also the upfront capital and development expense, the cost of equity and debt finance, and operating and maintenance fees.
Among other low-carbon energy technologies, offshore wind reduced its global average LCOE from $176 per MWh, to $174, but still remains significantly more expensive than wind, solar PV, coal or gas, while biomass incineration saw its levelized cost stay steady at $134 per MWh. Nuclear, like coal and gas, has very different LCOE levels from one region of the world to another, but both the Americas and the Europe, Middle East and Africa region saw increases in levelized costs, to $261 and $158 per MWh respectively.
“Generating costs continue to vary greatly from region to region, reflecting influences such as the shale gas boom in the U.S., changing utilization rates in areas of high renewables penetration, the shortage of local gas production in East Asia, carbon prices in Europe, differing regulations on nuclear power across the world, and contrasting resources for solar generation,” said Luke Mills, analyst, energy economics at Bloomberg New Energy Finance. “But onshore wind and solar PV are both now much more competitive against the established generation technologies than would have seemed possible only five or 10 years ago.”
