Dive Brief:

• The levelized cost of onshore wind generation has declined 2% over the past year to an average of $26/MWh, while the cost of utility-scale solar dropped 9% to an average of $31/MWh, when accounting for government subsidies, according to an annual analysis released last week by Lazard, a financial advisory and asset management firm.
• Despite ongoing cost reductions, the rate of decline has slowed for both onshore wind and utility-scale solar, according to Lazard. But price declines for solar, at about 11% a year over the past five years, continue to outpace wind, at about 5% a year over the past five years.
• Lazard integrated hydrogen in its annual cost analyses for the first time, saying that it recognizes the energy sector's growing appreciation of the resource's "potentially disruptive and strategic role in managing the intermittency of renewable power generation.”

Dive Insight:

Wind and solar generation continues to cost less each year, according to Lazard, making them increasingly attractive compared to more traditional resources, particularly as newer options like hydrogen are emerging to potentially address some of the challenges posed by renewables.

"When U.S. government subsidies are included, the cost of onshore wind and utility-scale solar is competitive with the marginal cost of coal, nuclear and combined cycle gas generation," Lazard said in a press release accompanying the report. 

"The former values average $31/MWh for utility-scale solar and $26/MWh for utility-scale wind, while the latter values average $41/MWh for coal, $29/MWh for nuclear, and $28/MWh for combined cycle gas generation," the release continued.

But while renewables are increasingly attractive from a cost perspective, they also face obstacles. More and more solar and some wind projects are being paired with storage to address the perennial issue of intermittency and the need to curtail renewables when availability exceeds demand. Hydrogen is also emerging as a potential solution.

"For the first time, we have integrated green and blue hydrogen into our analyses, which recognizes the energy sector’s increasing appreciation of hydrogen’s potentially disruptive and strategic role in managing the intermittency of renewable power generation," said George Bilicic, vice chairman and global head of Lazard’s Power, Energy & Infrastructure Group, in the company's release.

At this early stage, hydrogen is not yet cost competitive, though IHS Markit forecasts that will happen by 2030.

A hypothetical fuel mix of 20% "green" hydrogen — produced using electrolyzers powered by wind and solar energy — mixed with 80% natural gas, and burned in a combined cycle plant, would have a levelized cost of energy of $127 per MWh under Lazard's analysis.

In comparison, the report puts unsubdized levelized wind costs within a range of $26-$54 per MWh, utility-scale solar at $29-$42 per MWh, natural gas at $44-$73 per MWh and coal from $65-$159.

The use of hydrogen derived from natural gas byproducts would drop the cost of the 20/80 fuel mix to $88 per MWh, according to Lazard.

Lazard declined to comment for this story.