Offshore wind costs have fallen 32% from just a year ago and 12% compared with the first half of 2019, according to new research from BloombergNEF.
In its latest Levelized Cost of Electricity (LCOE) Update, BloombergNEF said its current global benchmark LCOE estimate for offshore wind is $78 a megawatt-hour.
“New offshore wind projects throughout Europe now deploy turbines with power ratings up to 10MW, unlocking CAPEX and OPEX savings,” BloombergNEF said.
In Denmark and the Netherlands, it expects the most recent projects financed to achieve $53-64/MWh excluding transmission.
New solar and onshore wind projects have reached parity with average wholesale power prices in California and parts of Europe, while in China levelised costs are below the benchmark average regulated coal price, according to BloombergNEF.
The company’s global benchmark levelized cost figures for onshore wind and PV projects financed in the last six months are at $47 and $51 a megawatt-hours, down 6% and 11% respectively compared with the first half of 2019.
BloombergNEF said for wind this is mainly down to a fall in the price of turbines – 7% lower on average globally compared with the end of 2018.
In China, the world’s largest solar market, the CAPEX of utility-scale PV plants has dropped 11% in the last six months, reaching $0.57m per MW.
“Weak demand for new plants in China has left developers and engineering, procurement and construction firms eager for business, and this has put pressure on CAPEX,” BloombergNEF said.
It added that estimates of the cheapest PV projects financed recently – in India, Chile and Australia – will be able to achieve an LCOE of $27-36/MWh, assuming competitive returns for their equity investors.
Best-in-class onshore wind farms in Brazil, India, Mexico and Texas can reach levelized costs as low as $26-31/MWh already, the research said.
BloombergNEF associate in the energy economics team Tifenn Brandily said: “This is a three- stage process. In phase one, new solar and wind get cheaper than new coal and gas plants on a cost-of- energy basis.
“In phase two, renewables reach parity with power prices. In phase three, they become even cheaper than running existing thermal plants.
“Our analysis shows that phase one has now been reached for two-thirds of the global population.
“Phase two started with California, China and parts of Europe. We expect phase three to be reached on a global scale by 2030.
“As this all plays out, thermal power plants will increasingly be relegated to a balancing role, looking for opportunities to generate when the sun doesn’t shine or the wind doesn’t blow.”