In energy-hungry China, new-build solar PV projects are almost on par with the running cost of coal-fired power plants, at an average of US$35/MWh. “This is significant as China advances on its deregulation agenda, opening up competition in the power sector,” BNEF notes in its latest technology benchmark report.
New-build tracking PV projects can be realized at a cost as little as US$26 per MWh, dependent on location, while technology cost for a combined-cycle units are $66-96 per MWh and as high as $146-309 per MW for open-cycle gas power units, also known as gas peakers.
And costs are bound to fall further, especially for solar PV where best-in-class projects financed over the past half year run a an levelized cost of energy (LCOE) between US$23 and US$29 per MWh. Such projects have been realized in Australia, China, Chile, and the UAE, where they challenge existing fossil power units.
Australia starts embracing hybrid power units
In sun-soaked countries like Australia, renewables have become the cheapest source of bulk generation by far. According to BNEF, the best LCOE for solar in Australia is A$40/MWh and for wind it is A$50/MWh.
However, the conservative Australian government is still keen to expand its gas reserve and use domestic coal production for several new coal power projects. Wind and solar power projects do not have the same level of public support as they have in Europe, although savvy utilities are starting to embrace hybrid power units.
Comparing technology costs, BNEF analysts point out that pairing renewables with battery storage is cheaper in Australia than flexible gas power units. Technology costs of wind and storage have fallen to A$77/MWh, and solar and storage to A$90/MWh.
Larger reverse auctions can benefit RES
The dramatic improvements in the cost-competiveness of solar and wind are attributed to technology improvement, manufacturing efficiencies, and the impact of policy instruments such as reverse auctions.
BNEF analysis suggests that since 2016, auctions are forcing renewable energy developers to realize cost savings by scaling up project size and portfolios. “Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment,” said lead author Tifenn Brandily.