The cost of new-build solar, battery storage and onshore wind has increased between 4% and 14% year-over-year, but the gap between renewables and fossil fuel power generation continues to broaden due to even quicker rises in fuel and carbon prices, BloombergNEF (BNEF) said on Thursday.
Supply chain difficulties and higher prices of materials, freight, fuel and labour have sent the cost of fixed-axis solar up 14% and of onshore wind up 7% compared to a year ago. The research firm puts the global levelised cost of electricity (LCOE) for utility-scale photovoltaics (PV) in the first half of 2022 at USD 45 (EUR 43) per MWh and for onshore wind at USD 46 per MWh.
According to BNEF, the cost rises are temporary. “These cost hikes mark a rough patch for renewables, but not an inflection point,” said Amar Vasdev, a co-author of the report at BNEF. “We see a return to long-term technology cost decline trajectories as demand continues to be strong, supply chain pressures ease and production capacity, particularly in China, comes back online,” the analyst added.
There were variations at country level as the first half of the year saw LCOE of USD 19 per MWh for some onshore wind farms in Brazil, USD 21 per MWh for tracking PV farms in Chile and USD 57 per MWh for offshore wind, including transmissions costs, in Denmark.
Compared to new coal- and gas-fired power, new-build onshore wind and solar projects are now some 40% cheaper. BNEF’s global benchmarks for new coal- and gas-fired power are USD 74 and USD 81 per MWh, respectively.
According to the analyst firm, renewables are the cheapest form of new bulk power in countries representing two-thirds of global population and nine-tenths of electricity generation.
BNEF’s David Hostert, however, warned of a risk of price hikes disproportionately affecting lesser-developed economies. “Leading up to COP27 in Egypt in November, extra attention should be paid to these markets as it will be crucial to make sure they don’t fall behind and lose valuable time in the race to net zero,” said Hostert.
(USD 1 = EUR 0.963)
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Image by BloombergNEF (bnef.com)
