Lazard Inc. has officially published results from the 18th edition of its Levelized Cost of Energy+ (LCOE+) report, which happens to be a widely-cited, annual analysis resource that provides insights into the cost competitiveness of various energy generation technologies.
Going by the available details, this particular report would explore key aspects of energy generation, energy storage, and system-level considerations, while simultaneously reflecting on significant developments over the past 12 months.
Talk about the given report on a slightly deeper, we begin from a piece of detail claiming that renewables remain competitive, with unsubsidized wind and solar emerging as lowest cost generation sources for last 10 years.
You see, despite facing challenges on the macro level, utility-scale solar and onshore wind were found to be the most cost-effective forms of new-build energy generation on an unsubsidized basis (i.e., without tax subsidies). Moving forward, too, renewable energy will continue to play a key role in the buildout of new power generation across US as the lowest-cost and quickest-to-deploy generation.
Next up, the report uncovered a steep increase in cost of gas-fired generation, which has now reached its 10-year high LCOE. Basically, high energy demand and increasing renewable LCOEs have went up a long distance to orchestrate continued cost competitiveness of operating existing baseload gas generation, causing the cost of building a new combined cycle gas turbine to reach historically high levels..
Even for the future, turbine shortages, rising costs, and long delivery times are tipped to continue driving steep LCOE increases for gas technologies, at least in the near term. Having said so, productivity enhancements and supply chain normalization could very well offset such increases over the longer term.
“In today’s rapidly evolving energy landscape, the relevance of data-driven decision-making has never been more critical and the LCOE+ serves as an invaluable resource for industry stakeholders, policymakers, and investors,” said George Bilicic, Vice Chairman of Investment Banking and Global Head of Power, Energy & Infrastructure, Lazard.
Another detail worth a mention is rooted in how YOY declines across storage cost successfully offset 2021 – 2024 increases, letting the LCOE drop to 2020 Level. We get to say so because this year’s report shows sharp declines for battery energy storage systems throughout hybrid and standalone storage projects. As for key drivers of such results, they are understood to include both market dynamics (e.g., lower-than-expected EV demand and the resulting oversupply of cells) and technological advancements (e.g., increased cell capacity and energy density).
Rounding up would be a fact that more renewables have now spelled the need for more sophisticated capacity accreditation. The same is evident in the way, as renewable penetration increases, several independent system operators have kickstarted the refinement of their capacity accreditation methodologies to incorporate seasonal adjustments and diversity benefits, components that have generally driven up firming costs.
All in all, such a consistent development of more sophisticated capacity accreditation frameworks can very well go on to have significant impacts on future firming costs.
Contextualizing the importance of this report would be the growth levels renewable energy has achieved in recent times. In essence, renewable energy now accounts for more than 20 percent of the US electricity system,
Founded in 1848, Lazard’s rise up the ranks stems from dispatching advice on mergers and acquisitions, capital markets and capital solutions, restructuring and liability management, geopolitics, as well as asset management and investment solutions. The company’s excellence in what it does can also be understood once you consider it is currently relied upon by various institutions, corporations, governments, partnerships, family offices, and high net worth individuals across North America, South America, Europe, the Middle East, Asia, and Australia.
