Solar and wind reach parity with wholesale power prices in California, China, parts of EU
New solar and onshore wind power plants have now reached parity with average wholesale prices in California and parts of Europe, says the latest Levelised Cost of Electricity (LCOE) Update from Bloomberg New Energy Finance (BNEF).
The report, a worldwide assessment of the cost-competitiveness of power generating and energy storage technologies, excluding subsidies, also finds that the LCOE of new solar and onshore wind power in China are below the average regulated coal power price – the reference price tag in the country.
BNEF’s analysis reveals that the global benchmark LCOE for onshore wind and photovoltaic (PV) projects financed in the last six months are at $47 and $51 per MWh, down 6% and 11% respectively compared to the first half of 2019.
For wind power, this decrease is mainly due to a 7% drop in the price of wind turbines compared to Q4 2018. Offshore wind power has seen the most rapid cost declines, down 32% from just a year ago and 12% compared to the first half of 2019.
In China, the world’s largest solar market, the price of utilityscale PV plants has dropped 11% in the last six months, reaching $0.57mn per MW. Weak demand for new plants in China has left developers and engineering, procurement and construction firms eager for business.
BNEF estimates that some of the cheapest PV projects financed recently – found in India, Chile and Australia – will be able to achieve a levelised cost of $27–36 per MWh, assuming competitive returns for their equity investors.
Best-in-class onshore wind farms in Brazil, India, Mexico and Texas can reach levelised costs as low as $26–31 per MWh already, it reports.
‘This is a three-stage process. In phase one, new solar and wind get cheaper than new coal and gas plants on a cost-of-energy basis,’ says Tifenn Brandily, an associate in BNEF’s Energy Economics team and the report’s author. ‘In phase two, renewables reach parity with power prices. In phase three, they become even cheaper than running existing thermal plants.’
BNEF’s analysis show that phase one has now been achieved for two-thirds of the global population. Phase two started with California, China and parts of Europe. The organisation expects phase three to be reached on a global scale by 2030.
‘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,’ Brandily continued.