Renewable Energy More Competitive Than Ever In Terms Of LCOE

Posted by Lauren Tyler on May 03, 2016 No Comments
Categories : New & Noteworthy

Wind and solar energy have experienced significant improvements in the cost of electricity in all major markets, despite historically low fuel pricing, making renewable energy in today’s market cost-competitive with conventional fossil fuels, according to MAKE Consulting.

MAKE states that added costs of environmental controls have reduced the cost effectiveness of many fossil fuels, despite record-low fuel prices. Wind and solar have reached significant economies of scale in many countries, and performance and cost positions are continuing to improve, providing a positive outlook for future levelized cost of energy (LCOE) gains.

According to MAKE’s recent report, the robust U.S. wind energy market is the most competitive in the world, in terms of LCOE, due to the tremendous economies of scale that have been established in Texas and the Midwest region. The latest generation of blades that are being deployed are able to realize new levels of productivity, placing wind power generated in the U.S. in direct competition with the cost position of new natural gas plants, and more competitive in some areas of the country. The report asserts that this bodes well for the looming phaseout of the production tax credit, providing line-of-site to wind being able to stand competitively without any federal subsidies.

In terms of LCOE, other regions of the Americas are not far behind the U.S., the report claims. Mexico, Brazil and Canada have slightly higher cost positions, due to some of the regional supply chain dynamics present in these markets.

In Brazil, significant currency risk threatens to increase LCOE over the long term, but the country currently experiences the second best LCOE position due to very productive wind resources.

The German onshore market tops the list of European countries in terms of LCOE performance. The latest generation of 3 MW+ turbines positions the German wind energy market well for the looming auction system of renewables pricing that will replace the feed-in-tariff as part of the German energy policy restructuring.

In Asia Pacific, the LCOE of onshore wind in China and India are hampered by significant curtailment that reduces production in these countries. As grid infrastructure improves, MAKE anticipates that the two Asian powers will utilize their local supply chain and favorable cost position to realize significant improvements in LCOE.

MAKE forecasts that the offshore market will experience a significant improvement in LCOE, as infrastructure investments in the North Sea and the latest generation of 7 MW+ turbines will significantly reduce wind LCOE over the next five years. The report expects the rapidly emerging Chinese offshore market to be favorably positioned, versus western rivals, due to substantial nearshore development and low cost position.

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