Government Halves Wind and Solar Cost Forecasts

Electricity sourced from wind and solar in 2025 will cost between 30% and 50% cheaper than previously predicted, according to revised government figures.

The new estimates were published by the Department of Business, Energy and Industrial Strategy (BEIS) in its Electricity Generation Cost report and show the ‘levelised cost’ of energy (LCOE) across different electricity generation technologies.

What is the levelised cost of energy?The LCOE is a measure of the average cost per megawatt-hour (MWh) generated over the full lifetime of a plant. It takes into account building and operating costs and is used to assess and compare methods of energy production.

Wind and solar cheaper

The assumed cost of renewables shows a larger reduction than expected in the previous report, published in 2016. The most recent edition suggests that electricity from onshore wind or solar power even could work out at half the cost of gas-fired equivalents by 2025.

Back in 2013 the government estimated that an offshore wind farm would be able to generate electricity for £140 per megawatt-hour (MWh) by 2025. In 2016 this was revised to £107 per MWh, while the latest report expects it to cost just over half that, at £57 per MWh.

Reasons for the dramatic fall in costs include advances in the technology, as well as larger, more efficient manufacturing plants for solar and larger wind turbines for wind farms.

Although there has also been a drop in the expected levelised cost of electricity from gas, the LCOE of Combined Cycle Gas Turbine (CCGT) plants still works out significantly higher than renewables, at £85 per MWh.

Renewable electricity cost estimates

The government report estimates the following costs for projects commissioning in 2025. All figures cover building, operating and decommissioning a generic plant for each technology.

• Large-scale solar PV: £44 per MWh (down from £68 in 2016)
• Onshore wind: £46 per MWh (down from £65 in 2016)
• Offshore wind: £57 per MWh (down from £106 in 2016)

Source: BEIS Electricity Generation Costs (2020)