Lazard Releases Annual Levelized Cost of Energy and Levelized Cost of Storage Analyses
October 19 2020 - 8:45AM
Business Wire
Lazard Ltd (NYSE: LAZ) has released its annual
in-depth studies comparing the costs of energy from various
generation technologies and the costs of energy storage
technologies for different applications.
Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE
14.0) shows that as the cost of renewable energy continues to
decline, certain technologies (e.g., onshore wind and utility-scale
solar), which became cost-competitive with conventional generation
several years ago on a new-build basis, continue to maintain
competitiveness with the marginal cost of selected existing
conventional generation technologies.
Lazard’s latest annual Levelized Cost of Storage Analysis (LCOS
6.0) shows that storage costs have declined across most use cases
and technologies, particularly for shorter-duration applications,
in part driven by evolving preferences in the industry regarding
battery chemistry.
This year’s LCOE, for the first time, includes a study of
hydrogen as a supplemental fuel component for combined cycle gas
generation.
“As the costs of utility-scale wind and solar continue to
decline and compete with the marginal cost of conventional energy
generation, the focus remains on tackling the challenge of
intermittency,” said George Bilicic, Vice Chairman and Global Head
of Lazard’s Power, Energy & Infrastructure Group. “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.”
LCOE 14.0
- The cost of generating energy from onshore wind and
utility-scale solar projects fell by 2% and 9%, respectively, over
the past year.
- While the reductions in costs continue, their rate of decline
has slowed, especially for onshore wind. Costs for utility-scale
solar have been falling more rapidly (about 11% per year) compared
to onshore wind (about 5% per year) over the past five years.
- 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.
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.
- Regional differences in resource availability and fuel costs
can drive meaningful variance in the cost of certain technologies,
although some of this variance can be mitigated by adjustments to a
project’s capital structure, reflecting the availability, and cost,
of debt and equity.
LCOS 6.0
- Sustained cost declines were observed across the use cases
analyzed in our LCOS for lithium-ion technologies (on both a $/MWh
and $/kW-year basis). The cost declines were more pronounced for
storage modules than for balance of system components or ongoing
operations and maintenance expenses.
- Project returns analyzed in our “Value Snapshots” continue to
evolve as hardware costs decline, and the value of available
revenue streams fluctuate with market fundamentals.
- Project economics analyzed for standalone behind-the-meter
applications remain relatively expensive without subsidies, while
utility-scale solar PV + storage systems are becoming increasingly
attractive.
- Long-duration storage is gaining traction as a commercially
viable solution to challenges created by intermittent energy
resources such as solar or wind.
LCOE 14.0 and LCOS 6.0 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 more than 40 cities across 25
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. Follow Lazard
at @Lazard.
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Clare Pickett, +1 212 632 6963 clare.pickett@lazard.com
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