Costs of deploying renewable electricity generators continue to fall as new government statistics show dramatic cost reductions for solar and wind out to 2040.
The Electricity Generation Costs document details forecasts for the levelised cost of energy (LCOE) across a number of electricity generation technologies.
The most recent iteration – published yesterday (24 August 2020) – shows that the government expects large-scale solar PV to be developed at a LCOE of £44/MWh in 2025 in its central cost scenario, a significant drop when compared to its 2016 forecast, which placed solar at £68/MWh.
Likewise, onshore wind has seen reductions from the 2016 forecast - £65/MWh – and now comes in at £46/MWh in 2025. Offshore wind, meanwhile, has seen the biggest drop, going from £106/MWh in the 2016 forecast to £57/MWh.
CCGT, on the other hand, is expected to cost £85/MWh, significantly higher than the renewable technologies.
BEIS also commissioned Europe Economcis to updated its hurdle rate - the minimum financial return that a project developer requires over a project’s lifetime on a pre-tax real basis - assumptions for projects starting development from 2018, with solar updated to 5%, onshore wind 5.2% and offshore wind 6.3% compared to 7.5% for CCGT.
Tom Edwards, senior modeller at Cornwall Insight, explained how the figures also show that hurdle rates for solar and wind have come down since the 2016 report, “while hurdle rates for traditional thermal technologies remain fairly static”.
“This gives us a good indication that investors are getting more comfortable with these assets classes and are more willing to put their money behind them.”