New PV and onshore wind power plants have now reached parity with average wholesale prices in California, China and parts of Europe. These technologies are winning the race as the cheapest sources of new generation with two-thirds of the global population living in countries where PV or wind are cheaper than coal and gas power plants.
New solar and onshore wind power plants have now reached parity with average wholesale prices in California and parts of Europe. In China, their levelised costs are now below the average regulated coal power price, the reference price tag in the country.
For wind the figures are mainly due to the fall in the price of wind turbines, 7 percent lower on average globally compared to the end of 2018. In China, the world’s largest solar market, the capex of utility-scale PV plants has dropped 11 percent in the last six months, reaching $0.57 million 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.
BNEF estimates that some of the cheapest PV projects financed recently will be able to achieve an LCOE of $27-36/MWh, assuming competitive returns for their equity investors. Those can be found in India, Chile and Australia. Best-in-class onshore wind farms in Brazil, India, Mexico and Texas can reach levelised costs as low as $26-31/MWh already.
Offshore wind has seen the fastest cost declines, down 32 percent from just a year ago and 12 percent compared to the first half of 2019. BNEF’s current global benchmark LCOE estimate is $78/MWh. New offshore wind projects throughout Europe now deploy turbines with power ratings up to 10 MW, unlocking capex and opex savings. In Denmark and the Netherlands, BNEF expects the most recent projects financed to achieve $53-64/MWh excluding transmission.
“This is a three-stage process” said Tifenn Brandily, associate in BNEF’s energy economics team and the report’s author. “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.”
Mr Brandily added that 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.
BNEF’s 2H 2019 LCOE analysis covers nearly 8,000 projects across 20 technologies and 46 countries globally. All updated technology costs and performance inputs are available on BloombergNEF’s digital platforms.
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