A recent report from BloombergNEF projects that the levelized cost of electricity (LCOE) for grid-scale solar and battery energy storage will experience a global decline in 2025. LCOE serves as a valuable metric that allows for the comparison of different energy technologies based on their costs. It is calculated by dividing the total lifetime costs of building and operating a power plant by the energy produced over its lifespan.
According to the report, the LCOE for fixed-axis utility-scale solar projects is expected to decrease by 2% year-over-year, dropping from $36 per MWh to $35 per MWh. Looking further ahead, it is anticipated that by 2035, this cost will continue to fall to $25 per MWh, representing a significant reduction of about 31%.
In addition to solar energy, battery energy storage is also projected to see a decrease in LCOE, with an expected drop of 11% from $104 per MWh in 2024 to $93 per MWh in 2025. By 2035, BloombergNEF predicts that the cost of battery energy storage could reach as low as $53 per MWh, nearly half of its current price.
The report highlights that the global cost of a typical fixed-axis solar farm fell by 21% in 2024, with modules being sold at or below production costs. Furthermore, it notes that there are no signs of relief from the overcapacity in the solar supply chain expected in 2025. “New solar plants, even without subsidies, are within striking distance of new U.S. gas plants,” the report states. This situation enhances the likelihood that solar energy will become increasingly appealing in the coming years, particularly if the U.S. begins exporting liquefied natural gas, which could introduce global price competition into its protected gas market.
While BloombergNEF acknowledges the potential for trade barriers and protectionist measures to temporarily hinder the decline in clean energy costs, it nonetheless anticipates a reduction in LCOE of between 22% and 49% by 2035. Matthias Kimmel, head of energy economics at BloombergNEF, commented, “China is exporting green energy technology at such low prices that the rest of the world is considering erecting barriers to protect their own industries. However, the overall trend in cost reductions is so robust that it is unlikely to be halted by any single individual, even a prominent political figure.”
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