Already lowest cost, wind energy costs trimmed a further five per cent, according to new Lazard analysis
November 27, 2019
Wind energy hits lowest cost point among both non-renewable and renewable new electricity generation options
The sustained downward progression in the cost of wind energy remains a dominant theme in the newest release of an authoritative annual analysis of comparative energy costs. U.S. investment firm Lazard has found a further five per cent crop in the price of wind energy in 2019 and a total decline of 70 per cent since 2009.
That’s a remarkable achievement, which is to the great credit of the wind energy industry and to the great benefit of electricity customers across Canada and indeed around the world. Key conventional energy sources, in contrast, have at best seen much more modest cost improvements in the same period.
The full “levelized cost” (LCOE)* for a megawatt-hour of onshore, utility-scale wind energy in the United States is now between US$28 and $54 on an unsubsidized basis. Among conventional energy sources, only combined cycle natural gas comes close to being competitive, with a range of US$44 to $68. Even among other renewable options, none have a cost range that extends as low as the wind cost range.
The key factors behind this ever-improving cost structure remain declining capital costs, improving technology and increasing competition within the industry. And while the pace of the ongoing year-over-year cost reductions is more moderate as our industry matures, the Lazard research confirms that costs continue to decline.
Paying less for more
Again this year, the Lazard research underscores the remarkable finding that new-built wind and solar generation are approaching competitiveness with even the marginal cost of continued operation of fully depreciated coal and nuclear generation. That makes for a potentially stark choice: pay less to bring new renewable generation online or pay more for continued conventional generation.
Record low prices in recent Canadian wind-energy procurement rounds – specifically in Alberta and Saskatchewan – confirm that the trends Lazard documents in the U.S. and other countries are also playing out here at home. The end result is an increasingly compelling value proposition for Canadian system operators and other customers who anticipate demand growth, and those who want to meet it not just cleanly but also affordably.
You can read the full Lazard analysis here: Lazard’s Levelized Cost of Energy Analysis – Version 13.0.
And you may want to check out my earlier blog post on the four big trends – affordability among them – that are positioning wind energy as the competitive choice for the future, and increasingly rendering it immune to politics.
* Levelized Cost of Energy is the net present value of the unit-cost of electricity over the lifespan of a generating asset. It indicates the average market price that the generating asset needs to earn.