Renewables costs rise .....

 .... but so do coal and gas costs. 

It seemed as if Lazard had stopped producing their famous LCOE (levelised cost of electricity) calculations when they released no estimates in 2021 and 2022.  This was a great pity, because although there are others (e.g., BNEF, IRENA) who produce estimates of the cost of electricity from renewables, Lazard has been doing it on a consistent basis for 15 years.  But all at once they came out with their latest estimates a few weeks ago.  There have been some small changes in format and some additional data.  For example, they now release the LCOEs of wind and solar with and without four hours of storage.  Four hours storage is enough to take us to 80-90% renewables on a mixed grid with a blend of wind and solar.  

To reach 100% requires seasonal storage for times when it is windless, cloudy, and cold, called (who knows why?) "dunkelflaute" (pronounced doonkelflowta, which is, mysteriously, German for "dark flute")  To put it differently, there are rare occasions (10 to 20 days a year) when renewables output, even with 4 hours of storage, will not keep the grid going in the face of high demand and low renewables output.  We might only need a couple of weeks of long-term storage and only use it a few times a year, but that is prodigiously expensive using li-ion batteries (it may be much cheaper using vanadium-flow batteries, which don't suffer from "vampire drain").  

Michael Liebreich here mentions green ammonia as a fuel for long-duration storage.  I've talked about using the Sabatier process before to produce green methane, for the same purpose.  But making green ammonia is easier, because it is much easier and cheaper to extract nitrogen from the atmosphere than to extract carbon dioxide.  Lazard does not cost green ammonia for long-duration storage, so I haven't included it.  I have however estimated a wind+solar system with 10% peaking gas, in effect using natural gas as long-term storage.  Actual green methane (synthetic natural gas) or ammonia would be at least twice as expensive.   On the other hand, most of the cost of peaking gas is capital cost, because the plant and equipment has to be ready to go at all times, but it's only used for 10% (or less) of the time.  In that context, fuel cost is less important.

Lazard no longer provides an estimate of the cost of CSP (concentrated solar power), presumably because the company now developing it is in Australia.  That company, Vast Solar, is cagey about the plant’s LCOE, but describes it as "competitive".  It will provide 10 hours+ of storage, which means it's not competing directly with wind and solar with just 4 hours of storage, but with long-duration storage, which is more expensive.  $140/MWh? That's what Lazard was estimated for CSP 5 years ago.  

In addition, I have added a column for NuScale's small modular reactor, assuming 80% wind and solar and 20% SMR nuclear, and using the most recent data for its LCOE.    As the percentage of wind and solar increases in the grid, the need for long-term storage increases, especially at high latitudes, so that's where nuclear may be needed to reach 100% carbon-free generation.   Unlike the giant old-fashioned nuclear plants, the NuScale SMR can be ramped up and down (by 40% per hour), which would make it easily fit in with a mostly renewable grid.  Given the costs of long-duration storage, the NuScale SMR would be cost-effective, provided NuScale can prevent any further rise in its LCOE, which like all other LCOEs has risen sharply in response to supply chain difficulties.

As always, Lazard covers only the US.  But these markets are global, except for gas, which is much cheaper in the US than in the rest of the world.

The rise in LCOEs of renewables is mostly due to supply chain difficulties, caused by Covid and the war on Ukraine.   I suppose we can assume that these difficulties will gradually disappear, and the trend of steady declines in costs will continue.  Even as they stand, however, new-build wind and solar, with 4 hours of storage, remain cheaper than new-build coal, and comparable to new-build baseload gas (remembering that gas is a lot cheaper in the US than in Europe)  Lazard also comments that a large gap has opened up between large and small projects, with larger projects located at the bottom of the costing columns in the chart below.

All these data are before tax and subsidy and also a price on carbon emissions.

Observe that even the marginal costs (i.e., ignoring capital costs, depreciation, debt repayment and interest rates)  of coal are on average above the total costs of brand-new wind and solar farms.   A mere 10% fall in the costs of new-build wind and solar with 4 hours of storage would make them cheaper than new-build baseload gas, even in the US.  

The rise in the renewable percentage is likely to continue, even though costs have temporarily risen,