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Renewable Energy Is More Competitive Than Ever With Improved LCOE

Levelized Cost of Electricity improvements have helped make renewable energy more competitive than ever, according to MAKE Consulting.

The global renewable energy industry, in particular its wind and solar segments, have seen tremendous growth over the last several years, allowing for continued technological and efficiency improvements, leading to significantly improved Levelized Costs of Electricity (LCOE) — a measurement of a particular technologies’ lifetime of costs, including development, manufacturing, development, operation, and closure.

According to a new report from MAKE Consulting, “Wind and solar energy have experienced significant improvements in the cost of electricity in all major markets, bringing renewable energy to be cost competitive with conventional fossil fuels, despite historically low fuel pricing.” This has been helped by recent additional costs of environmental controls added to fossil fuels, which have reduced their cost effectiveness.

According to MAKE’s analysis, the United States’ wind energy sector is the most competitive in the world, in terms of LCOE, thanks to “the tremendous economies of scale that have been established in Texas and the Midwest region” which have seen the wind energy in that region sky-rocket in terms of installed capacity. Alongside the US economies of scale is the improvement being made in technology, specifically for more efficient turbines. As a result, the US wind industry is now in direct competition with the cost position of new gas plants.

The US isn’t the only American country seizing these opportunities, however, with other countries throughout North and South America not far behind the US in terms of wind LCOE. Mexico, Brazil, and Canada have “slightly higher cost positions, due to some of the regional supply chain dynamics present in these markets.” Currency risk in Brazil is currently threatening to increase LCOE over the long-term.

Germany’s onshore wind sector leads the way for European LCOE performance, with a new generation of 3 MW+ wind turbines placing the country in good standing for a new method of wind development, and solar creeping up on wind’s heels.

China and India, representing the Asia Pacific region, have had the LCOE of onshore wind hampered by significant curtailment that reduces production. However, MAKE expects things to improve as grid infrastructure improvements are made.

MAKE also expects the global offshore wind market to “experience a significant improvement in LCOE, as infrastructure investments in the North Sea and the latest generation of 7 MW+ turbines will significantly reduce wind LCOE over the next five years.”

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