Lazard, one of the world’s leading financial advisor firm’s eleventh annual Levelized Cost of Energy (LCOE) Analysis showed that renewable energy costs will continue to decline.
However, the data also draw attention to another reality about the costs of renewables. Wind and solar energy are very competitive compared to conventional energy sources, however their cost reductions are slowing down. Within the last eight years LCOE has dropped by %86 in solar energy and %67 in wind energy.
However, most of these declines occurred in the first 4 years. Looking at only the last four year, LCOE in solar energy decreased by %36 and in wind energy by %24.
Focusing on the year 2017, it is seen that LCOE decreased by 9% in solar energy and by 4% in wind energy in the one-year period.
Despite the decline in cost reductions, renewable energies are still quite advantageous compared to conventional energy resources. However, the addition of battery storage removes the competitive cost element of clean energies.
To given an example, Lazard estimates that crystal-silicon PV now has an LCOE range of 46 to 53 dollars per megawatt-hour production, less than the lowest level of LCOE for coal. In addition, it is also less than natural gas’s $60-68 LCOE. However, if a battery and a bidirectional inverter are added to the PV system to provide 10 hours of storage with a 52% capacity factor, solar LCOE will increase to $82 per megawatt-hour.
Along with that, LCOE is based on several variables in energy production process. Although it is a calculation of the cost of producing electricity under certain conditions, it is necessary to take into account the value of the stored energy.
Lazard’s analysis shows that the competitive costs of renewable energies are limited by the storage capabilities. At this point, it is clear that technology development on energy storage will be very important for the future of clean energy.