Onshore wind and solar 'cheapest' form of energy for two-thirds of global population
Utility-scale solar PV and onshore wind are now the cheapest forms of new-build energy generation across two-thirds of the global population, according to new analysis from BloombergNEF (BNEF) that shows that costs for renewables and battery storage have plummeted in recent years.
Latest BNEF analysis shows that the global benchmark levelised cost of electricity (LCOE) – the all-expense cost of produce one MWh of electricity from a new-build project – has fallen by 9% for onshore wind and 4% for solar PV since the second half of 2019. It now costs $44 and $50 per MWh for these technologies across countries accountable for two-thirds of the global population, 71% of GDP and 85% of global energy generation.
BNEF’s lead author of the analysis Tifenn Brandily said: “There have been dramatic improvements in the cost-competitiveness of solar and wind. Part of it is due to photovoltaic and wind technology getting better at extracting renewable resources. But 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.”
BNEF estimates that the average onshore windfarm has doubled in capacity since 2016 to around 73MW today. Solar farms are now, on average, 33% more powerful compared to 2016 levels, at 27MWs.
Onshore wind has experienced its most significant drop in cost in 2015, while some of the newly financed solar PV projects will be able to achieve an LCOE of $23-29 per MWh across Australia, China, Chile and the UAE. In China, the world’s largest PV market, the LCOE benchmark has reduced in cost by 9% since 2019 to $38 per MWh, because of the improved efficiency of monocrystalline modules.
New-build solar in China is almost on par with the running costs of coal-fired power plants at $35 per MWh.
In contrast, government subsidies are set to support nearly 500GW of new coal plants worldwide at a cost of $638bn – even though 46% of global coal plants will be running at a loss in 2020, rising to 52% by 2030 and 71% will cost more to run than building new renewables.
Almost three-quarters of new electricity generation capacity built in 2019 uses renewable energy - an all-time record.
BNEF also analysed the LCOE of battery storage, revealing that it is now the cheapest new-build technology for peaking purposed in gas-importing regions, including Europe and China.
The LCOE of battery storage has fallen to $150 per MWh for systems with a four-hour duration, almost half of its LCOE cost recorded in 2018.
BNEF now estimates that the average capacity of storage projects is around 30MWh, a fourfold rise compared to four years ago. The increase in project size and an expanding manufacturing market has helped reduce costs.
BNEF states in the report that battery costs have been dropping for several years, with average lithium-ion prices having fallen by 76% since 2012, based on recent project costs and historical battery pack prices.
Global investment in all energy storage technologies is set to reach $1.2trn by 2040 as technology costs fall. This prediction is based on a forecast that lithium-ion batteries will have an upfront cost which is 52% less in 2030 than it was in 2017.
Similarly, some experts in the industry are now predicting that the energy storage sector will grow on a trajectory comparable to the solar industry during the early 2000s, as more large-scale renewable arrays come onto the grid.