We all know that renewable energy sources are becoming more cost-competitive with fossil fuels as time progresses. The economic and environmental benefits that clean energy offers provides a constant incentive to drive technological innovation and utility-scale deployment around the world.
The recently released Levelized Cost of Energy Analysis 7.0 from the financial advisor and asset management firm Lazard Freres & Co., shows that the levelized cost of electricity (LCOE) for wind and solar installations across the U.S. has fallen by over 50 percent in the past four years.
This has led them to estimate that utility scale solar PV is a competitive source of peak energy compared to fossil fuels for most parts of the world before subsidies are even taken into account. In fact Lazard believes that many forms of renewable energy generation are already cost-competitive with fossil fuel generation at an unsubsidized LCOE level.
They calculated that solar PV and wind energy produced electricity at a cost of $68-$104 per MWh, similar to baseload power from coal at $65-$145 per MWh; nuclear at $86-$122 per MWh; and integrated gasification combined cycle at $95-$154 per MWh. When including the federal tax subsidies offered in the U.S., the LCOE for wind falls to $23-$85 per MWh, and thin-film utility scale solar PV comes in at just $51-$78 per MWh.
Lazard predicts that as energy storage technologies improve, and become more commonplace, the LCOE of renewable energy sources will fall even further. And whilst utility-scale solar PV installations have one of the lowest LCOE figures, rooftop solar PV panels remain one of the most expensive energy sources in comparison.
Lazard has also suggested that the future of renewable energy sources likely lies in the role of distributed small-scale generation as the expensive capital investment needed to construct large fossil fuel plants leads to far higher LCOE values, whereas renewable energy can be installed on a much smaller scale, nearer to their market, and avoiding the huge energy carrying infrastructure.
Originally written for OilPrice.com, a website that focuses on news and analysis on topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.