Projected Renewable Energy Costs Fall

The government has revised forecasts for the cost of wind and solar power to 2040, predicting that the cost of deploying renewable energy generators will continue to fall.

The Electricity Generation Costs, published by the Department of Business, Energy and Industrial Strategy (BEIS), forecasts the levelised cost of energy (LCOE) across several electricity generation technologies.

The most recent edition, published Monday, shows dramatic falls in the projected cost of developing and running renewable technologies over the next two decades.

The government expects large-scale solar PV installations to be delivered at a cost of £44 per megawatt-hour (MWh) of electricity in 2025, a significant reduction from the £68/MWh cost forecast in 2016. The £30 of the £44/MWh figure comes from construction costs, with operation and management costs contributing another £10/MWh.

Costs for solar power will fall still further by 2030: to just £39/MWh, an even greater reduction from the £60/MWh projected in 2016. Costs will then fall to £33/MWh by 2040.

However, these costs are based on BEIS’ central estimate and could fall as low as £28/MWh or be as high as £39/MW in 2040.

Similarly, the government revised estimates for the cost of onshore wind, from £65/MWh to just £46/MWh by 2025.

Offshore wind has seen the biggest reduction in projected costs. Forecast to cost £106/MWh by 2025 four years ago, it’s now expected to cost just £57/MWh by mid-decade.

Combined Cycle Gas Turbine (CCGT) plants are expected to cost £85/MWh, significantly higher than the renewable technologies.

Chris Hewett, CEO of the Solar Trade Association (STA), said that while the industry has known “for a long time” that large-scale solar PV is one of the cheapest energy sources, the trade body is pleased that “this has now been officially recognised.”

“Now it is time for the government to set an ambitious target for the deployment of solar PV in the UK, as it has done with offshore wind. Our favoured goal, 40GW by 2030, aligns with recommendations made by the Committee on Climate Change and the National Infrastructure Commission, and is achievable with moderate policy support,” he added.

Last month, a study from Imperial College London predicted that the costs developers agreed for offshore wind at the Contracts for Difference (CfD) auction last September is very likely to be below the wholesale price of electricity by the time the generators come online later this decade. The wind farms will thus operate with a negative subsidy, paying money back to energy bill payers.