The present study analyzes the levelized cost of electricity (LCOE) of renewable energy technologies in the first quarter of 2018 and predicts their future cost development until 2035 based on technology-specific learning rates (LR) and market scenarios.
The main focus of the study is on the LCOE of photovoltaic (PV), wind turbines and biogas plants in Germany. As a reference, the development of the LCOE for newly constructed conventional power plants (brown coal, hard coal, combined cycle gas turbines (CCGT), gas turbines) is also analyzed. Figure 1 shows the LCOE for both renewable and fossil power plants built in 2018.
Depending on the type of systems and solar irradiance (950 to 1300 kWh/m²a of global horizontal irradiance (GHI) in Germany), PV systems have a LCOE between 3.71 and 11.54 €Cents/kWh, excluding value-added tax (VAT). As of today, the specific system costs lie within the range of 600 to 1400 EUR/kWp and are primarily dependent on the type of plants. This study distinguishes between small PV rooftop systems, large PV rooftop systems and PV ground-mounted utility-scale systems. The LCOE for all types of PV systems continues to show a decreasing trend, thus increasing the margin between them and the average end-customers electricity price of 29.23€Cents/kWh, including VAT (BDEW 2017).
The LCOE of onshore wind turbines in 2018, with specific plant costs of 1500 to 2000 EUR/kW, ranges between 3.99 and 8.23 €Cents/kWh. As a result, PV systems and onshore wind turbines are, on average, the least expensive technologies in Germany, both among renewable energy technologies as well as fossil power plants. Onshore wind farms at very good locations already produce electricity at lower costs than newly erected coal or CCGT power plants. Despite higher average full load hours of up to 4,500 hours per year, the LCOE of offshore wind turbines from 7.49 to 13.79 €Cents/kWh is significantly higher than onshore wind turbines. This is owed to higher investment and installation costs as well as higher operating and financing costs for offshore installations (specific system costs of 3100 to 4700 EUR/kW).
The LCOE of biogas power plants (specific plant costs between 2000 and 4000 EUR/kW) ranges between 10.14 €Cents/kWh (7000 full load hours) and 14.74 €Cents/kWh (5000 full load hours). A heat utilization is not considered in the calculations.
In terms of the conventional power plants, the LCOE of brown coal lies between 4.59 and 7.98 €Cents/kWh, of hard coal 6.27 to 9.86 €Cents/kWh and of combined cycle power plants 7.78 to 9.96 €Cents/kWh, depending on the assumed full load hours and CO2 certificate prices. The range of costs is mainly attributed to the large variation in full load hours. Since the full load hours result from the variable marginal costs of the individual power plant, they are dependent on the forecast of fuel prices, CO2 certificate prices, development of renewable electricity feed-in and composition of the power plant complex.
The study also calculates the LCOE of PV home storage systems. It lies between 16.34 and 47.34 €Cents/kWh in 2018. Both the costs of electricity generation by PV systems and the storage costs are taken into account in the calculation. The large variation in the LCOE is a result of the wide range in the investment costs of PV battery storage as well as the consideration of different storage sizes and their potential to increase the selfconsumption rate.
Prognosis of LCOE in Germany through 2035
Figure 2 shows the results for the future development of the LCOEs in Germany until 2035. The illustrated range reflects the possible cost variations in the input parameters (e.g. power plant prices, irradiance, wind conditions, fuel costs, number of full load hours, costs of CO2 emission certificates, etc.), which are listed in Tables 1 to 6. This methodology is exemplarily explained for the cost range of PV: The upper limit of the LCOE results from the combination of a PV power plant with a high procurement price at a location with low solar irradiance (e.g. northern Germany). Conversely, the lower limit is defined by the most inexpensive solar system at locations with high solar irradiance in southern Germany. This same process is carried out for wind and biomass power plants as well as conventional power plants. The usual financing costs on the market and the surcharges for risks are included in detail and are specific to each technology. This provides a realistic comparison of the power plant locations, technology risks and cost developments. The level of financing costs has considerable influence on the LCOE and the competitiveness of a technology. Furthermore, all of the costs and discount rates in this study are calculated with real values (reference year 2018). The specific investments in 2018 are calculated based on market research and cost studies.
For PV systems, a LR of 15% is assumed. By 2030, the LCOE of PV systems will sink below the value of 4.70 (rooftop systems) and 2.41 €Cents/kWh (ground-mounted utility-scale power plant). From 2025 onwards, even small PV rooftop systems in southern Germany will generate electricity at a lower cost than newly installed hard coal or CCGT power plants in 2025. The specific PV system costs in 2035 will be between 350 and 815 EUR/kWp. By 2035, utility-scale PV power plants in southern Germany will generate electricity at a considerably low cost, way below the average LCOE for all fossil fuel power plants.
The current LCOE of onshore wind power is already at the level of brown coal power plants and in some cases below the LCOE of hard coal and CCGT power plants. For the future trend, a LR of 5% is anticipated. Improvements are mainly expected through higher full load hours and also new installations with special lowspeed turbines. The expected increase in costs for fossil fuel power plants will nevertheless further improve the competitiveness of onshore wind power plants, i.e. the cost of electricity generation at high wind speed onshore locations in 2035 will be well below the levels for all fossil power plants, at LCOEs between 3.49 to 7.09 €Cents/kWh. Offshore wind turbines still have a strong cost reduction potential compared to onshore wind turbines. Depending on location and wind supply, electricity generation costs will fall to between 5.67 and 10.07 €Cents/kWh by 2035. The increase in LCOE of conventional power plants is owed to the expected reduction of full load hours as well as the higher price of CO2 emission certificates in the future.
Since only slight decreases in cost are expected for biogas power plants, no LRs for biogas are assumed. This leads to constant electricity production costs until 2035 (10.14 to 14.74 €Cents/kWh excluding heat generation).