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,

Australia's first commercial vanadium grid battery

From the ABC (Australian Broadcasting Corporation)

Australia's first commercial vanadium-flow battery has been completed in South Australia's mid north and is expected to be running and exporting power by August.

Yadlamalka Energy has been undertaking the Spencer Energy Project at Bungama, outside of Port Pirie, where the 2-megawatt/8MW-hour battery is connected to a grid of solar panels.

The battery will store around 10 gigawatts of dispatchable solar power each year and charge from excess electricity produced by the solar panels when the sun is at its peak.

The power will be delivered to households at night when the grid loads are high from demand and when no solar generation is available.

Yadlamalka Energy chairman Andrew Doman said this would also be the first commercial use of the battery in the Southern Hemisphere.

"This is a battery that has significant advantages over lithium-ion ones; the most important one is the duration of this battery is four hours, unlike lithium batteries which typically last half-an-hour or two hours," he said.

"Introducing vanadium batteries will reduce peak energy prices in Australia.

"When electricity prices are negative, we'll be buying the electricity and that will help stabilise the grid, and when prices are high, we'll be selling power into the grid — that margin will have the effect to reduce prices.

The vanadium-flow battery was invented at the University of New South Wales during the 1980s.

Mr Doman said vanadium was ethically sourced as it was more widely abundant in Australia than other critical minerals like copper, nickel and cobalt.

The vanadium is then converted into an electrolyte which holds the ions and stores the electricity inside the battery.

University of Adelaide associate professor Nesimi Ertugrul will be monitoring the battery's performance and said the main difference between vanadium and lithium batteries was that the electrolyte could be replaced in a vanadium battery.

"That replacement simply makes them last longer," he said.

"Companies claim different life cycles for lithium batteries, but those life spans depend on environmental conditions as well as operating patterns.

"Lithium batteries last five to 10 years and vanadium batteries claim to last up to 20 years."

Associate Professor Ertugrul said lithium batteries were better for mobile objects like vehicles whereas vanadium was better suited to stationary conditions.

The vanadium-flow batteries are also non-flammable and are almost completely recyclable.

This text below is taken from the company's website:

Yadlamalka Energy comprises of co-located Vanadium Flow battery energy storage (2MW – 8MWh AC) and Solar Photovoltaic (PV) farm (6MWp DC), integrated behind a DC-coupled inverter. We want to commercialise breakthrough technology to help meet Australia and the world’s future energy needs.

Our first project Spencer Energy is located near Bungama Sub-Station, Port Pirie, South Australia, an area with very favourable solar radiation.

Spencer Energy Project will supply a combination of solar power and battery storage services to the grid. The vanadium flow battery will take advantage of the significant intraday price variation in South Australia to time shift power from midday to peak periods in the evenings and mornings.

The Project will also participate in the Frequency Control Ancillary Services (FCAS) market which helps maintain stability of the electricity system.

Through using breakthrough technology in the form of vanadium flow batteries, Spencer Energy Project, can deliver strong, economic infrastructure benefit to South Australia and at the same time support a low carbon economy.

Vanadium flow batteries are fully containerised, non-flammable units reusable over semi-infinite cycles, able to discharge 100% of the stored energy and do not degrade. In the words of Barack Obama “They are the multi-mega watt energy solution” and “one of the coolest things” he has ever spoken about.

Vanadium flow batteries have significant advantages over lithium in longer duration time shifting applications. The batteries will be able to discharge at a power of 2MW per hour for four hours. They are suitable for heavy cycling because, unlike lithium, they do not degrade.

The plan is to fully charge and discharge the battery at least once a day and possibly twice, depending on pricing conditions.

Spencer Energy Project, will contribute to solving the distributed and intermittent energy problems that exist in South Australia, which are expected to intensify as renewable energy sources are relied on more and more.

Yadlamalka Energy will monitor and report on the progress and outcomes of the first project, with the aim to continue to expand across Australia using this innovative breakthrough technology.

Largest vanadium-flow battery in the southern hemisphere.
Source: RenewEconomy

 Port Pirie is about 200 k's north of Adelaide and 50 k's south of Port Augusta (where a concentrated solar power plant is being built)  It all looks very green because it's mid-winter here in Oz, and it's the rainy season in the southern half of the country.