Utility-scale solar and wind now deliver the cheapest electricity in the United States, even undercutting the cost of running an existing coal or gas plant, concludes the latest in a series of annual assessments by finance and asset management firm Lazard.
The report consists of a range of estimated “levelized costs” per megawatt-hour (MWh) of electricity from different sources, based on a series of assumptions about federal tax subsidies, fuel prices, carbon pricing, and the cost of borrowing money to get new capacity built, PV Magazine reports.
In a basic comparison, utility-scale wind comes in as low as 2.6¢ per kilowatt-hour, followed by the two most affordable solar options at 2.9 and 3.1¢. Lazard prices combined-cycle gas plants at 4.4 to 7.3¢, coal at 6.5 to 15.9¢, nuclear at 12.9 to 19.8¢, and natural gas peaker plants at 15.1 to 19.8¢.
“While solar and wind have been cheaper than new fossil fuel plants for years, the continued declines come at a pivotal time,” writes Bloomberg Quint. “Countries are developing more aggressive plans to battle climate change while also looking for ways to revive economies battered by the pandemic. That wasn’t the case during the financial crisis more than a decade ago, especially in the U.S. as the shale gas boom was starting to take hold.”
“It’s striking how the costs continue to go down,” George Bilicic, Lazard’s vice chair of investment banking and head of global power, energy and infrastructure, told Bloomberg. “If you look at the global economy, unemployment rates, and the need for investment, that renewables are economic and hydrogen is emerging is promising.”
Smaller-scale solar installations are on the higher end of the price scale, “yet it’s misleading to look at these base figures,” PV Magazine adds. “This is due partly to the fact that these types of facilities aren’t being built at the same scale as utility-scale solar or fossil generations assets, meaning that construction and customer acquisition costs are going to be much higher.” They’re also more reliant on the U.S. solar investment tax credit—so that it makes sense to factor in a subsidy that brings costs down as low as 6¢ per kilowatt-hour for community solar, 6.6¢ for rooftop systems on commercial or institutional buildings, and 13.5¢ for home rooftop installations.
But the “really telling figures” come from a comparison of construction costs for new renewables and operating costs for existing fossil and nuclear plants. PV Magazine says all the renewable options come in cheaper, except for unsubsidized onshore wind.
Bilicic added that Lazard sees hydrogen in much the same position solar and wind were in 15 years ago. By contrast, “coal is under bone-crushing pressure or is fundamentally dead,” he said.