London and New York: Recent research finds that solar PV and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population. Those two-thirds live in locations that comprise 71% of gross domestic product and 85% of energy generation. Battery storage is now the cheapest new-build technology for peaking purposes (up to two-hours of discharge duration) in gas-importing regions, like Europe, China or Japan.
Findings like these, in the latest analysis by research company BloombergNEF (BNEF), released April 28, show that the global benchmark levelized cost of electricity (LCOE), for onshore wind and utility-scale PV, has fallen 9% and 4% since the second half of 2019 – to $44 and $50/MWh, respectively. Meanwhile, the benchmark LCOE for battery storage has tumbled to $150/MWh, about half of what it was two years ago.
Note: the global benchmark is a country weighted-average using the latest annual capacity additions. The storage LCOE is reflective of utility-scale projects with fourn-hour duration, it includes charging costs. Source: BloombergNEF.
Onshore wind has seen its most significant drop in cost since 2015. This is mainly due to a scale-up in turbine size, now averaging 4.1 megawatts, and priced at about US$0.7 million per megawatt for recently financed projects. In Brazil for instance, where wind resources are ample, the economic crisis of 2016 onwards saw the cost of capital for wind projects increase by up to 13%. BNEF’s analysis suggest that lending rates more recently have fallen back to levels seen before that crisis. And this means that best-in-class onshore wind projects can achieve an LCOE of $24 per megawatt-hour, the lowest globally. Meanwhile, top projects in the U.S., India and Spain follow at $26, $29 and $29 per megawatt-hour respectively, excluding subsidies such as tax-credits.
In China, the largest PV market, the company’s solar benchmark is at $38/MWh, down 9% from the second half of 2019, following a rapid uptake in better performing monocrystalline modules. New-build solar in the country is now almost on par with the operating cost of coal-fired power plants, at an average of $35/MWh. This is significant as China advances on its deregulation agenda, opening up competition in the power sector.
Globally, BNEF estimates that some of the cheapest PV projects financed in the last six months will be able to achieve an LCOE of US$23-29 per megawatt-hour, assuming competitive returns to their equity investors. Those projects can be found in Australia, China, Chile, and the U.A.E., where they will challenge the existing fleet of fossil fuel power plants.
BNEF estimates that, globally, the average onshore wind farm has doubled its capacity from 32 megawatts in 2016 to about 73 megawatts today. Solar farms are a third more powerful today, at 27 megawatts on average, compared to 2016.
Battery storage is another example of how scale can unlock cost reductions. Today, BNEF estimates that the average capacity of storage projects sits at about 30 megawatt-hours, a fourfold rise compared to just seven megawatt-hours per project four years ago. Since 2018, increasing project sizes combined with a rapidly expanding manufacturing base and more energy dense chemistries have halved the LCOE of energy storage. BNEF’s global LCOE benchmark now sits at $150/MWh for battery storage systems with a four-hour duration.
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