Taken from the latest version of Lazard's Levelized Cost of Energy.
Once before, I have written a post about the financial firm Lazard and their surveys of the levelized (meaning, over the full lifetime of the source) cost of different types of energy generation. Lazard did not publish a new edition in 2022, but instead waited until April 2023. (The above diagram is from the newest edition, and the information presented below is mostly based on it.) Some costs have remained essentially the same, which is both good and not-so-good news. But Lazard also reported a significant drop in the cost of one facet of energy production.
New utility scale solar ($24-96/MWh) and onshore wind ($24-75/MWh) drop on the lower end, but have risen significantly on the higher end. The lower end in both cases is extremely competitive compared to new coal ($68-166/MWh, with the high end including carbon capture) and gas ($39-101/MWh). But the sharp upward revisions on the high end suggest that the cost is more sensitive to location than previously reported. Intermittency remains a serious practical concern with both solar and wind, but the cost of battery storage is definitely going down. The cost of solar plus storage ranges from $46-102/MWh, after it was estimated at $85-158/MWh in 2021. Onshore wind plus storage fares even better, with a cost of $24-75/MWh. Offshore wind, by contrast, is still quite expensive at $72-140/MWh (not even including storage). That is a significant obstacle. But as long as there are parts of the country where onshore wind would compete for land with housing and agriculture, or where the potential for wind power is significantly greater a few miles offshore than a few miles onshore, there will be enough demand for offshore wind that people will continue to look for ways to get that cost down.
The cost of nuclear and coal have been evaluated both in terms of overall cost and the cost once construction has been accounted for (see the orange diamonds above). For coal, the latter cost is $52/MWh. This is higher than the lowest estimates for solar and wind plus storage. Why is that significant? Because it means that there are already at least some locations in the country where it would be cheaper (taking the cost of construction of the coal plant to be set, and something which will necessarily be paid, regardless of how long the plant operates) to decommission the coal plant in favor of renewables plus storage right now. And that assumes that storage of a significant portion of the power generated by the renewables is needed; where this is not true, a greater portion of coal plants could be decommissioned quickly. For nuclear, the cost of continuing to run a plant whose construction has been accounted for is only $31/MWh. But the total cost of nuclear is heavily skewed toward construction of the plant, ranging from $141-221/MWh (compared to $131-204/MWh in 2021). Simply put, new nuclear plants are not cost-competitive right now with anything, the most expensive offshore wind included. And with the cost of battery storage for renewables dropping sharply, it would take a major innovation in the construction of nuclear facilities to put nuclear back in the picture at all. (Keep in mind also that nuclear plants take more than seven years to build on average, while solar and wind farms can be installed in a year or two.) But existing nuclear plants are still cheap to run, and as long as a plant continues to run well and safely without requiring major renovations, I don’t see any benefit to closing it.
Recently, Lazard has started to take a closer look at the cost of hydrogen as an energy source. The burning of hydrogen does not directly emit disruptive amounts of any greenhouse gases (burning it will release some water vapor, but not in proportions that will noticeably affect the total atmospheric amount). However, most present means of creating molecular hydrogen do involve the combustion of fossil fuels. The one exception would be the electrolysis of water using electricity generated from non-emitting sources. For combined cycle gas, Lazard estimates the cost of generating 20% of the power using “blue” hydrogen (meaning the hydrogen is produced by burning methane) at $116/MWh and using “green” hydrogen (from electrolysis) at $156/MWh. This is obviously too large for now, but hydrogen technology is at the state of development where solar and wind were about 15 years ago and battery storage was about 5 years ago. Significant innovation is needed, but the precedent is there.
So where does this leave us, relative to two years ago? The big positive is that battery costs have come down, bolstering the feasibility of a quick transition to renewables. That being said, the cost of wind and solar remains very heavily dependent on location. And given the space required for renewables relative to more conventional power plants, it will take some very good planning to optimize costs in a way that doesn’t interfere with housing and agriculture or cut into nature. Coal and nuclear are still losing the cost battle, to if anything an even bigger degree than in 2021. Barring a major technical breakthrough, it will never be cheaper to produce “clean coal” than it will to be to generate the same amount of energy without emissions in the first place. And solar and wind with storage are clearing technical and cost hurdles much more rapidly than nuclear is. There is room for hydrogen in the transportation sector, but while the cost of hydrogen could drop substantially with increasing demand like it has for renewables and batteries, there’s no guarantee that it will.
Over the last decade, progress has been made on a number of fronts to bring down the cost of a clean energy transition. More progress would help, to be sure, but I honestly don’t think the price tag is holding it back at this point.
