US wind cost drop slows to 2%; Offtake prices rise further
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US onshore wind power costs fall 2% while solar drops 9%
The levelised cost of new US onshore wind farms fell by 2% over the last year, compared with 4% in the previous year, highlighting the slowdown in cost reductions following years of declines, Lazard consultancy said in its latest annual levelised cost of energy (LCOE) report. On average, wind costs fell by 5% over the last five years.
Wind construction is soaring as developers race to meet end-of-year deadlines for federal production tax credits (PTCs). Wind power costs are now estimated at between $26/MWh and $54/MWh, depending on factors such as local wind resources and the availability of finance. Including PTCs, average wind power costs are $26/MWh, competitive with the marginal cost of existing coal, gas and nuclear power plants, Lazard said.
Solar power costs fell by 9% over the last year and are now between $31/MWh and $42/MWh, the consultancy said. Including subsidies, the average cost of new build solar is now around $31/MWh.
Levelised cost of energy by generation type
(Click image to enlarge)
Source: Lazard's Levelized Cost of Energy Analysis (LCOE 14.0), October 2020
Lithium ion battery storage costs continue to fall, mainly driven by falling battery costs rather than savings in balance of system or operations and maintenance (O&M), Lazard said.
“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,” George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group, said.
US wind PPA prices hike on dwindling tax credits, strong demand
The average price of wind power purchase agreements (PPAs) in North America hiked 9% in the third quarter to $30.6/MWh, as demand outstripped supply, market platform operator LevelTen Energy said in its latest quarterly report. Solar PPA prices also rose, to $29.30/MWh.
Indexed wind PPA prices have been rising for the last two years. The step down in US wind production tax credits (PTCs) is requiring developers to seek higher revenues from PPAs, LevelTen said.
In some areas where contract demand is high, grid connection delays and permitting challenges have held back supply, it said, citing a survey of market participants.
In areas where demand is outpacing supply, 73% of respondents forecast PPA prices will rise.
“Renewable energy buyers should be aware that it may be a buyer’s market in many places now, but as more companies, utilities and governments commit to renewable energy, we’re already starting to see the pendulum swing to a seller’s market," Rob Collier, Vice President of Developer Relations at LevelTen, said.
California to accelerate new capacity build, re-evaluate load
California's energy agencies have pledged to accelerate new capacity installations and adapt resource planning targets to worsening climate change effects, to avoid a repetition of the blackouts enforced during a heatwave in August.
California ISO (CAISO) urged consumers to conserve electricity during afternoon and evening periods as solar resources waned and demand rose. Additional issues included unplanned stoppages of gas-fired plants, swinging wind resources and a lack of imports from neighbouring states suffering similar temperatures.
On October 6, the California Public Utilities Commission (CPUC) and California Energy Commission (CEC) sent their Preliminary Root Cause Analysis for the power cuts to Governor Gavin Newsom.
The outages were caused by demand levels during the extreme heatwave that exceeded assumptions in resource planning targets, as well as a lack of installed power generation capacity to meet early evening demand, the agencies said.
Load forecast and reserve margins should be updated to better account for heat storms like those seen in August and September, CPUC and CEC said.
"The current planning targets were developed in 2004 and have not been updated since," they noted.
California's vast solar fleet is unable to meet power demand after sundown, requiring significant gas-fired generation. California has around 28 GW of installed solar capacity, including 13.4 GW of utility-scale, and 7.0 GW of wind capacity. Peak power load surpassed 46 GW during the heatwave.
California summer 2020 max on-peak power generation by type
Source: CAISO's Summer Loads and Resources Assessment, May 2020
The CPUC and CEC will work with government to accelerate regulatory and procurement processes and build additional resources by 2021.
"This will most likely focus on resources such as demand response and flexibility," they said.
Around 2.1 GW of energy storage and 300 MW of solar and wind resources are already due online by summer 2021. The CPUC is working with electricity suppliers to track these projects and reduce the risk of delays, it said.
The agencies will also look to coordinate additional capacity procurements outside of their jurisdiction, they said.
For the period from 2022 onwards, the agencies will use their re-evaluation of load forecasts and margin requirements to assess whether additional generation capacity is required on top of current plans.
Wind developers see the coupling of storage as a way to build new projects in California, data on interconnection queues show. Around 11 GW of US wind plus storage projects were queueing for capacity at the start of 2020, of which around half were in California, the Lawrence Berkeley National Laboratory (Berkeley Lab) said in a recent report.
Siemens in talks with buyout groups to sell gearbox maker
German industrial group Siemens is in talks with Triton and other buyout groups to sell its transmissions system supplier Flender, Reuters reported October 14.
Siemens owns 67% of turbine supplier Siemens Gamesa and has been looking to streamline its group operations.
Valued at around 1.5 to 2 billion euros ($1.8-$2.4 billion), Flender supplies wind turbine gearboxes, generators and services through its Winergy brand. Flender also supplies couplings for cranes, ships, oil and gas production, as well as components for the chemicals, pharma, cement and food industries.
Siemens has asked Triton, Carlyle, CVC and Brookfield to submit final offers this week for the business, sources close to the matter told Reuters.
Flender's long-term supply contracts with Siemens Gamesa are seen as a crucial element of determining the valuation of Flender, one of the people said.
Triton bought rival transmissions maker Renk earlier this year and is looking to consolidate its transmission operations.