According to a new analysis by Bloomberg New Energy Finance (BNEF), this year has seen a shift in the generating cost comparison between renewable energy and fossil fuels. The report, “Levelised Cost of Electricity Update,” for the second half of 2015 based on extensive data and global projects shows that onshore wind and crystalline silicon photovoltaics – the two most widespread technologies- have both seen significantly reduced costs while costs have gone up for gas-fired and coal-fired generation.
The BNEF study shows finds that the global average levelised cost of electricity, or LCOE, for onshore wind nudged downwards from $85 per megawatt-hour (MWh) in the first half of the year, to $83 in the second half of the year, while that for crystalline silicon PV solar fell from $129 to $122.
In the same period, the LCOE for coal-fired generation increased from $66 per MWh to $75 in the Americas, from $68 to $73 in Asia-Pacific, and from $82 to $105 in Europe. The LCOE for combined-cycle gas turbine generation rose from $76 to $82 in the Americas, from $85 to $93 in Asia-Pacific and from $103 to $118 in EMEA.
“Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs,” said Seb Henbest, head of Europe, Middle East and Africa at Bloomberg New Energy Finance. “Meanwhile, coal and gas have got more expensive on the back of lower utilisation rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform.”
Levelised costs take into account not just the cost of generating a marginal MWh of electricity, but also the upfront capital and development expense, the cost of equity and debt finance, and operating and maintenance fees.
Among other low-carbon energy technologies, offshore wind reduced its global average LCOE from $176 per MWh, to $174, but still remains significantly more expensive than wind, solar PV, coal or gas, while biomass incineration saw its levelised cost stay steady at $134 per MWh. Nuclear, like coal and gas, has very different LCOE levels from one region of the world to another, but both the Americas and the Europe, Middle East and Africa region saw increases in levelised costs, to $261 and $158 per MWh respectively.