Renewables cheaper than operating costs of coal

This is the eleventh edition of Lazard's calculation of LCOEs (levelised cost of electricity, a method used to calculate comparative costs for different energy generation sources).  You can read the news release here and the full report here.

I've selected some of the key technologies and put them in the chart below.  The green bars represent the range of costs for renewables, the red bars fossil fuels and nuclear.  The grey line represents the average (the mid point) of the ranges.  This is for the USA (except for CSP, which I'll explain in a minute), and assumes an 8% cost of borrowing and a 10% cost of capital.  If the cost of borrowing was lower, the slope would be steeper.  Low borrowing costs favour renewables because most of the costs are upfront, whereas the costs of fossil fuel generators are more skewed into the future.  The ranges depend upon location (wind is better in some places, for example), whether connections to the grid or long-distance power lines need to be built, etc.  Also, these are unsubsidised costings.

Wind is (by a whisker) still the cheapest.  Over the next couple of years, solar will take its place.  Solar costs are falling faster than wind.  Baseload gas, in the US is almost as cheap (this is less true in other countries).  Small wonder that the US grid is moving towards a mixture of renewables and gas.  Peaking gas however is very expensive, because you have to pay interest and depreciation and maintenance charges even if you only use it a few hours a day.  The next bar (from the left) shows wind plus the cost of peaking gas, assuming wind is 75% of the mix and peaking gas 25%.

Since there is no CSP project currently under construction in the USA, I have used data from the Copiapó concentrated solar power plant in Chile (US$63/MWh) with the higher value representing the cost at higher latitudes (45 degrees.)  However, since this is a PPA (effectively the same thing as the LCOE) with an agency of the Chilean government, the interest  rate that Solar Reserve could borrow at would have been lower than Lazard's assumptions, which would have reduced the PPA.  I have not used the PPA for the new Solar Reserve plant in South Australia which is lower than $63/MWh ($56/MWh), because there may be planned arbitrage profits reducing the costings.  The point is that CSP with 12 hours of storage costs pretty much the same wind with gas "firming".  And CSP produces no CO2 emissions, nor any "fugitive emissions" of methane, a very powerful greenhouse gas.

Solar with 10 hours of storage comes in at the top end of the CSP band.  I've calculated storage using Musk's tweet that the cost of the big battery in South Australia was US$50 million. That gives a cost per MWh delivered of US$107.  Battery costs are likely to halve over the next 3 years. That will move the cost of solar with 10 hours storage to the bottom end of the CSP band, though CSP will prolly keep on falling in cost too.

Power-to-gas may be necessary for high latitudes where wind is the main renewable power source, but could potentially not blow for a day or a week (the longest wind-free spell in Denmark was 7 days).  I've assumed that it might be needed for 10 weeks of the year; that the CO2 for the creation of synthetic natural gas (methane) comes from the escape flues of gas burners; that 50% of the energy is lost during electrolysis; and that the peaking gas otherwise costs the same.  I discussed seasonal storage and power-to-gas here.

The remaining bands are for coal and nuclear.

Lazard says:

As LCOE values for alternative energy technologies continue to decline, in some scenarios the full-lifecycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear. This is expected to lead to ongoing and significant deployment of alternative energy capacity.

Of course, that excludes the cost of "firming"/storage, but even if you add those costs in, as I have done, renewables are cheaper than baseload (except for gas, and then, only in the USA.)

Denialists persist in telling anyone who'll listen that renewables will "break the economy", "are much more expensive than fossil fuels" etc.  This is false.  Even with generous provisions for different kinds of storage, it is crystal clear that renewables are cheaper than coal.