Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Wind and solar utility PV costs are expected to
consistently decline as technology continues to improve and local
project development experience builds globally.
As more and more countries are channeling their support to
renewable capacity buildup through tenders, fierce competitive
bidding has led contract prices for renewable power generation to
fall dramatically in recent years, with record prices being
announced every year. Bid prices have ranged between $20/MWh and
$85/MWh for wind and between $18/MWh and $77/MWh for solar for
projects expected to be online through 2022.
The ability to deliver on low costs has helped the credibility
of renewable projects and their potential to displace traditional
power, yet how durable will this trend be as technological and
economic drivers evolve?
IHS Markit forecasts that utility-scale PV, onshore wind, and
offshore wind prices will fall by 55%, 34%, and 51%, respectively,
by 2050, making the cost of the technologies converge globally and
increasing competition between technologies.
The main driver behind these price drops is technology. Cost
reductions will be fastest in countries moving away from fixed
subsidies and into tenders through competition and the convergence
of best practices. Despite such convergence, country differences
will remain, driven by local factors including resources, the
regulatory environment, labor costs, exchange rate fluctuation,
competition, and the level of supply chain and market maturity.
Wind and solar PV will become competitive with marginal
fuel costs of gas- and coal-fired plants by 2040 in many
markets.
Renewables have already emerged as the most cost-competitive
source of new generation in numerous markets across Latin America,
the Middle East, Europe, and Australia. Upward pressure on the cost
of conventional fuels will continue to drive the cost
competitiveness of renewables.
Even with no further cost improvements, onshore wind is already
competitive with marginal fuel costs of gas-fired generation in
most of the markets analyzed in this report, except Japan, the
United States, and Jordan. However, renewables will struggle to
displace coal-fired generation in markets such as Japan and China,
where coal will remain the most cost-competitive technology until
the mid-2030s (Figure 1).
Driven by accelerated cost declines, offshore wind could start
to displace gas-fired generation in Germany and China in the coming
years.
Figure 1: Wind and solar PV will be competitive with
marginal fuel costs of gas and coal-fired plants by 2040 in most of
the markets analyzed in this report
.png)
