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Levelized cost of energy analysis finds role for hydrogen

22 November 2020 Kevin Adler

Lazard Ltd.'s annual Levelized Cost of Energy Analysis (LCOE 14.0), released in late October 2020, shows that the cost of renewable energy continues to decline and improve its cost-competitiveness with conventional generation. The analysis incorporated the use of hydrogen blends for combined cycle gas generation for the first time, with Lazard calling it "potentially disruptive and strategic role in managing the intermittency of renewable power generation."

The LCOE in the US of generating energy from onshore wind and utility-scale solar projects fell by 2% and 9%, respectively, over the past year, Lazard reported. "While the reductions in costs continue, their rate of decline has slowed, especially for onshore wind. Costs for utility-scale solar have been falling more rapidly (about 11% per year) compared to onshore wind (about 5% per year) over the past five years," it said.

When US government subsidies are included, the cost of onshore wind and utility-scale solar is competitive with the marginal cost of coal, nuclear and combined cycle gas generation (though regional differences can change the relationships):

  • Utility-scale solar: $31/MWh

  • Utility-scale wind: $26/MWh

  • Coal: $41/MWh

  • Nuclear: $29/MWh

  • Combined cycle gas generation: $28/MWh

Lazard also released an update to its Levelized Cost of Storage analysis (LCOS 6.0), showing that storage costs have declined across most use cases and technologies, particularly for shorter-duration applications.

"Sustained cost declines were observed across the use cases analyzed in our LCOS for lithium-ion technologies (on both a $/MWh and $/kW-year basis). The cost declines were more pronounced for storage modules than for balance of system components or ongoing operations and maintenance expenses," it said.

"Project economics analyzed for standalone behind-the-meter applications remain relatively expensive without subsidies, while utility-scale solar PV+ storage systems are becoming increasingly attractive. Long-duration storage is gaining traction as a commercially viable solution to challenges created by intermittent energy resources such as solar or wind," it said.

Posted 22 November 2020 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit

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