The spectacular falls in the cost of wind and solar energy continued in 2017, dropping another 18 per cent across the globe, according to the latest report from Bloomberg New Energy Finance.
The report also highlights the falling cost and growing uptake of battery storage, which together are mounting an unprecedented challenge to fossil fuel power, particularly as batteries start to encroach on the flexibility and peaking revenues enjoyed by those fossil fuel plants.
The new report from BNEF highlights Australia as one of the key countries to have led the cost reductions in both wind and solar. India is also cited for both wind and solar.
“Coal and gas are facing a mounting threat to their position in the world’s electricity generation mix, as a result of the spectacular reductions in cost not just for wind and solar technologies, but also for batteries,” the BNEF report says.
It notes that the cost of solar has fallen by 77 per cent to a benchmark global average of $70/MWh over the last seven years, while the cost of wind has fallen 38 per cent to a benchmark global average of $US55/MWh.
The benchmark price for lithium-ion batteries has also fallen nearly 80 per cent from $US1,000 per kWh in 2010 to $US209/kWh in 2017.
To be sure, there are countries where the cost of wind and solar is significantly cheaper than this, but it is interesting to note that these correspond roughly to the cost of wind and solar in Australia – if the $A was substituted for the $US calculation.
“Our team has looked closely at the impact of the 79 per cent decrease seen in lithium-ion battery costs since 2010 on the economics of this storage technology in different parts of the electricity system,” says Elena Giannakopoulou, head of energy economics at BNEF.
“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing, as wind and solar penetration increase.
“But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants.”
The BNEF report says that fossil fuel power is now facing an unprecedented challenge in all three roles it performs in the energy mix – the supply of ‘bulk generation’, the supply of ‘dispatchable generation’, and the provision of ‘flexibility’.
In bulk generation, as energy authorities in Australia have long recognised, the threat comes from wind and solar photovoltaics, both of which have reduced their LCOEs further in the last year, thanks to falling capital costs, improving efficiency and the spread of competitive auctions around the world.
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