Lazard Releases Annual Levelized Cost of Energy and Levelized Cost of Storage Analyses
Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE 13.0) shows that as the cost of renewable energy continues to decline, certain technologies (e.g., onshore wind and utility-scale solar), which became cost-competitive with conventional generation several years ago on a new-build basis, continue to maintain competitiveness with the marginal cost of existing conventional generation technologies.
Lazard’s latest annual Levelized Cost of Storage Analysis (LCOS 5.0) shows that storage costs, particularly for lithium-ion technology, have continued to decline faster than for alternate storage technologies.
- The cost of generating energy from onshore wind and utility-scale solar projects fell by 3.5% and 7.0%, respectively, over the past year.
- While the reductions in costs continue, their rate of decline has slowed, especially for onshore wind. Costs for utility-scale solar have been falling more rapidly (about 13 percent per year) compared to onshore wind (about 7 percent per year) over the past five years.
When US government subsidies are included, the cost of building new onshore wind and utility-scale solar (with values averaging
$28/MWh and $36/MWh, respectively) is competitive with the marginal cost of coal and nuclear generation (with values averaging $34/MWh and $29/MWh, respectively).
- Regional differences in resource availability and fuel costs can drive meaningful variance in the LCOE of certain technologies, although some of this variance can be mitigated by adjustments to a project’s capital structure, reflecting the availability, and cost, of debt and equity.
- Lithium-ion, particularly for shorter duration applications, remains the least expensive of energy storage technologies analyzed and continues to decrease in cost, thanks to improving efficiencies and a maturing supply chain.
- Solar PV + storage systems are economically attractive for short-duration wholesale and commercial use cases, though they remain challenged for residential and longer-duration wholesale use cases.
LCOE 13.0 and LCOS 5.0 reflect Lazard’s approach to long-term thought leadership, commitment to the sectors in which we participate and focus on intellectual differentiation. The two studies are posted at www.lazard.com/perspective/LCOE2019.
+1 212 632 6963