Renewable Energy Costs Continue to Decrease
Updated: Jun 9, 2021
The cost to produce new renewable energy continues to fall below the cost to produce energy from non-renewable fuels.
Why and what does this mean for the future of the energy industry?
Many consumers may be surprised to learn that the cost of producing new renewable energy, including solar and wind, is frequently lower than the cost to produce energy from traditional fossil fuels.
Data from Lazard’s 2019 Levelized Cost of Energy (LCOE) Analysis shows how solar and wind generation technologies are cost-competitive with conventional generation technologies (see graph below). If you’re not familiar with the term LCOE, it is the present value of the total cost of building and operating a power plant over an assumed lifetime and is commonly used to evaluate the cost of power generation.
According to Lazard, the LCOE for wind has decreased by 70% over 10 years and solar has decreased by 89%. These dramatic declines have been driven by decreasing capital costs, improving technologies and increased competition.
Capital costs for solar power have decreased as the production of first-generation crystalline silicon cells has become a mature industry. Increased competition in the production space has led to significant increases in efficiency. Although the chart from the National Renewable Energy Laboratory (NREL) might be a bit of an eye-sore, the key takeaway is that cell-efficiency has greatly increased over time. Meanwhile, new technologies have emerged and are at varying stages of production including thin-film solar cells, dye-sensitized solar cells, and organic solar cells.
As the below chart shows (also from Lazard), rooftop residential PV still has significant costs even when federal tax subsidies are taken into account. However, utility scale crystalline and thin film, are very cost competitive to fossil fuels.
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These low renewable energy prices mean that more and more of the nation’s electricity will be generated from renewable energy. In fact, the U.S. Energy Information Administration (EIA) projects that renewables will provide nearly half of the world electricity by 2050.
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