BloombergNEF’s latest six-monthly study of the prices of different electricity technologies confirms that new onshore wind and solar power plants have reached parity with average wholesale prices in California and parts of Europe. In China, its price is even below that of coal energy, the reference price in the country.
BloombergNEF conducts the Electricity Cost Level Update (LCOE) every six months, a global assessment of the cost competitiveness of different energy generation and storage technologies, excluding subsidies. According to the analysis just presented, the costs for onshore wind and photovoltaic projects financed in the last six months are $47 and $51/MWh, representing a decrease of 6% and 11%, respectively, compared to the first half of 2019.
In the case of wind energy, this is mainly due to the fall in the price of wind turbines, which is 7% cheaper on average worldwide compared to the end of 2018. In China, the world’s largest solar market, the cost of photovoltaic plants on an industrial scale has fallen by 11% in the last six months, reaching 0.57 million dollars per MW. Low demand for new plants in China has left developers and engineering, procurement and construction companies eager to do business, putting pressure on capital.
BloombergNEF estimates that some of the cheaper photovoltaic projects recently funded may reach an even lower LCOE of 27-36 $/MWh. They are located in India, Chile and Australia. Best in class wind farms in Brazil, India, Mexico and Texas can already reach level costs as low as $26-31/MWh.
Offshore wind energy has experienced the fastest cost decline, with a 32% drop from the previous year and 12% compared to the first half of 2019, achieving an LCOE of $78/MWh. New offshore wind energy projects in Europe are using turbines with powers of up to 10MW, unlocking capital investment and opex savings. In Denmark and the Netherlands, BNEF estimates that the most recently funded projects will reach 53-64/MWh, excluding transmission.
“This is a three-stage process. In the first phase, new solar and wind power plants are cheaper than new coal and gas plants on the basis of energy costs. In the second phase, renewable energies reach parity with energy prices. In phase three, they are even cheaper than existing power plants,” said Tifenn Brandily, author of the report. “Our analysis shows that the first phase has already been reached for two-thirds of the world’s population. The second phase began with California, China and parts of Europe. We expect the third phase to be global in 2030.
BNEF’s LCOE 2H 2019 analysis covers nearly 8,000 projects in 20 technologies and 46 countries worldwide. All updated technology costs and performance inputs are available on BloombergNEF’s digital platforms.