| [November 08, 2018] |
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Lazard Releases Annual Levelized Cost of Energy and Levelized Cost of Storage Analyses
Lazard Ltd (NYSE: LAZ) has released its annual in-depth studies
comparing the costs of energy from various generation technologies and
of energy storage technologies for different applications.
Lazard's latest annual Levelized Cost of Energy Analysis (LCOE 12.0)
shows that, in some scenarios, alternative energy costs have decreased
to the point that they are now at or below the marginal cost of
conventional generation. Lazard's latest annual Levelized Cost of
Storage Analysis (LCOS 4.0) shows significant cost declines across most
use cases and technologies, especially for shorter duration applications.
"Although diversified energy resources are still required for a modern
grid, we have reached an inflection point where, in some cases, it is
more cost effective to build and operate new alternative energy projects
than to maintain existing conventional generation plants" said George
Bilicic, Vice Chairman and Global Head of Lazard's Power, Energy &
Infrastructure Group. "As alternative energy costs continue to decline,
storage remains the key to solving the problem of intermittency and we
are beginning to see a clearer path forward for economic viability in
storage technologies."
The two studies offer a variety of insights, including the following
selected highlights:
LCOE 12.0
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While alternative energy is increasingly cost-competitive and storage
technology holds great promise, alternative energy systems alone will
not be capable of meeting the baseload generation needs of a developed
economy for the foreseeable future. Therefore, the optimal solution
for many regions of the world is to use complementary conventional and
alternative energy resources in a diversified generation fleet.
-
The cost of generating energy from utility-scale solar photovoltaic
(PV) and onshore wind technologies continue to decline. The mean
levelized cost of energy of utility-scale PV technologies is down
approximately 13% from last year and the mean levelized cost of energy
of onshore wind has declined almost 7%.
-
The levelized cost of energy of gas technologies sa a modest decline
year-over-year. The mean levelized cost of energy of gas peaking fell
2% and the mean levelized cost of energy of combined cycle gas has
declined 4%.
-
The low end levelized cost of onshore wind-generated energy is
$29/MWh, compared to an average illustrative marginal cost of $36/MWh
for coal. The levelized cost of utility-scale solar is nearly
identical to the illustrative marginal cost of coal, at $36/MWh. This
comparison is accentuated when subsidizing onshore wind and solar,
which results in levelized costs of energy of $14/MWh and $32/MWh,
respectively.
LCOS 4.0
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Lithium-ion remains the least expensive of the storage technologies
and continues to decrease in cost due to improved efficiencies and a
maturing supply chain. However, some of those gains may be mitigated
by rising cost pressures from higher commodity pricing (e.g., cobalt
and lithium carbonate) and tightening supply.
-
Project economics for a variety of illustrative energy storage
applications have modestly improved year-over-year, reflecting
improved costs rather than rising revenues, which remain dependent on
local market dynamics or utility tariffs. Ancillary service products
(e.g., frequency regulation), demand response and demand charge
mitigation represent potentially attractive revenue opportunities.
-
Combining energy storage with solar PV can create value by sharing
infrastructure (e.g., inverters, interconnection), reducing curtailed
production, capturing "clipped" solar production and/or through
charging cost savings. Currently, the economics for solar PV + storage
systems are most attractive for commercial use cases, but remain
modest for residential and utility-scale projects.
-
Industry participants expect costs to continue to decline over the
next five years, driven by economies-of-scale, improved
standardization, technological improvements and increased renewables
penetration. Technology-specific cost decline projections vary widely,
but are expected to be as much as 28% for lithium-ion technologies
over the next five years.
LCOE 12.0 and LCOS 4.0 reflect Lazard's approach to long-term thought
leadership, commitment to the sectors in which we participate and focus
on intellectual differentiation. The two studies are posted at www.lazard.com/perspective.
Lazard's Global Power, Energy & Infrastructure Group serves private and
public sector clients with advisory services regarding M&A, financing
and other strategic matters. The group is active in all areas of the
traditional and alternative energy industries, including regulated
utilities, independent power producers, alternative energy and
infrastructure.
About Lazard
Lazard, one of the world's preeminent financial advisory and asset
management firms, operates from 42 cities across 27 countries in North
America, Europe, Asia, Australia, Central and South America. With
origins dating to 1848, the firm provides advice on mergers and
acquisitions, strategic matters, restructuring and capital structure,
capital raising and corporate finance, as well as asset management
services to corporations, partnerships, institutions, governments and
individuals. For more information on Lazard, please visit www.lazard.com.
LAZ-FAPE
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