Wind and solar energy have emerged as more than just environmentally friendly options – they are now proving to be more cost-effective than electricity generated from fossil-fuel plants. This revelation comes from Lazard’s annual report on electricity generation costs, which measures the levelized cost of energy for various forms of electricity generation. Despite ongoing debates about subsidies, renewable energy is holding its own against power from gas and coal.
According to the report, renewables are now the most cost-competitive form of generation, even without subsidies. This is a significant finding, considering the push to eliminate tax credits for wind and solar by President Donald Trump and congressional Republicans. With energy forecasters predicting a surge in electricity demand due to data centers and artificial intelligence, the role of renewables in the power generation landscape is only set to grow.
Lazard calculates the levelized cost of energy (LCOE) by dividing a project’s lifetime energy production by its cost. The report highlights that renewables will continue to be a key player in new power generation in the U.S. due to their low cost and quick deployment. However, persistently low natural gas prices, rising renewable energy costs, and higher electricity demand have made existing gas plants economically appealing compared to renewables.
While onshore wind projects have an LCOE ranging from $37 to $86 per megawatt hour and utility-scale solar projects range from $38 to $78 per MWh, existing gas plants have a competitive cost range of $24 to $39 per MWh. Even existing coal plants are potentially cost-competitive, with a range of $31 to $114 per MWh.
Despite these findings, the report acknowledges the need for systemwide costs to provide backup power to wind and solar. Lazard has introduced a new calculation in its report that accounts for these backup costs, revealing prices ranging from $71 per MWh for unsubsidized wind in the Midwest to $164 for solar-plus-storage in the mid-Atlantic.
In conclusion, the renewable energy sector is proving to be a formidable contender in the power generation market, even without subsidies. As the demand for electricity continues to rise, wind and solar energy are poised to play a critical role in meeting this demand in a cost-effective and sustainable manner.
