Wind & Solar 30 – 50% cheaper than UK Gov thought

Electricity generated from wind and solar is 30-50% cheaper than previously thought, according to newly published UK government figures.

The new estimates of the “levelised cost” of electricity, published this week by the Department for Business, Energy and Industrial Strategy (BEIS), show that renewables are much cheaper than expected in the previous iteration of the report, published in 2016.

The previously published version had, in turn, already trimmed the cost of wind and solar by up to 30%. As a result, electricity from onshore wind or solar could be supplied in 2025 at half the cost of gas-fired power, the new estimates suggest.

The new report is the government’s first public admission of the dramatic reductions in renewable costs in recent years. It had previously carried out internal updates to its cost estimates, in both 2018 and 2019, but these were never published despite repeated questions in parliament.

The BEIS report also presents new estimates of the “enhanced levelised cost” of different technologies, which reflects any wider system benefits and their “system integration costs”.

These alternative figures, which have been under development for several years, put gas with carbon capture and storage (CCS) in a particularly favourable light, with costs comparable to wind or solar. CCS is expected to feature in the upcoming energy white paper, due this autumn.

Levelised cost

The new BEIS report on electricity generation costs is the first to be published in nearly four years. It sets out estimates of the “levelised cost of electricity” (LCOE) for various technologies, ranging from unabated gas-fired power stations through to wind, solar and gas CCS.

LCOE estimates are presented as the average cost of electricity, per megawatt hour (MWh) generated, across the lifetime of a new power plant. The new report gives these figures in £(2018). (Where comparisons are made, Carbon Brief has adjusted earlier estimates in line with inflation.)

The LCOE is designed to offer uniform cost comparisons between technologies, based on a consistent framework and a series of assumptions. These include how much power plants cost to build and their average electricity output each year, as well as project lifetimes and financing costs.

The LCOE does not include wider costs and benefits at a system level. This could include reductions in wholesale prices due to abundant zero-carbon generation, or higher grid costs due to the variable output from wind and solar.

The latest BEIS report gives LCOE estimates for projects that start operating in 2025, 2030, 2035 or 2040. Changes over time result from “technological learning”, as well as future prices for fossil fuels and CO2 emissions. For the first time, the report also presents “enhanced levelised cost” estimates. These attempt to capture wider costs and benefits, and are discussed below.

The BEIS estimates are updated at regular intervals, with previous iterations having been published in 2016, 2013, 2012, 2011 and 2010. The department made internal updates in 2018 and 2019, with these revisions the subject of peer review papers also published this week.

However, the 2018 and 2019 updates remain unpublished, despite numerous questions in parliament in which MPs asked repeatedly after the latest BEIS cost estimates.

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