Solar PV and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population, according to new statistics.
Battery storage is now the cheapest new-build technology for peaking purposes in gas-importing regions, like Europe, China or Japan, said the latest analysis by research company BloombergNEF (BNEF).
The report showed that the global benchmark levelised 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 a megawatt-hour (MWh), respectively
The benchmark LCOE for battery storage has tumbled to $150/MWh, about half of what it was two years ago.
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 4.1MW, and priced at about $0.7m per MW 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 suggests that lending rates more recently have fallen back to levels seen before that crisis.
“This means that best-in-class onshore wind projects can achieve an LCOE of $24 per MWh, the lowest globally. Meanwhile top projects in the U.S., India and Spain follow at $26, $29 and $29 per MWh respectively, excluding subsidies such as tax-credits,” the report said.
“In China, the largest PV market, our 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 running 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,” it said.
Globally, BNEF estimates that some of the cheapest PV projects financed in the last six months will be able to achieve an LCOE of $23-29 per MWh, assuming competitive returns to their equity investors.
Those projects can be found in Australia, China, Chile, and the UAE, where they will challenge the existing fleet of fossil fuel power plants, BNEF said.
Lead author of the report Tifenn Brandily commented: “There have been dramatic improvements in the cost-competitiveness of solar and wind. Part of it is due to photovoltaic and wind technology getting better at extracting renewable resources.
“But our analysis also suggests that since 2016, auctions are forcing developers to realise cost savings by scaling up project size and portfolios. Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment.”
Globally, BNEF estimates that the average onshore wind farm has doubled its capacity from 32MW in 2016 to about 73MW today. Solar farms are a third more powerful today, at 27MW on average, compared to 2016.
China is home to the cheapest storage levelised costs globally, at $115 per MWh. This competitive advantage hinges mainly on the proximity of developers to the equipment supply chain and the more widespread use of cheaper lithium iron phosphate chemistries.
In comparison, the levelised cost of open-cycle gas turbines per MWh sits today between $99 in the US and $235 in Japan, with China at $145.
Chief economist at BNEF Seb Henbest said the coronavirus will have a range of impacts on the relative cost of fossil and renewable electricity.
Henbest said: “One important question is what happens to the costs of finance over the short and medium term. Another concerns commodity prices – coal and gas prices have weakened on world markets. If sustained, this could help shield fossil fuel generation for a while from the cost onslaught from renewables.”