Renewable energy now costs dramatically less than coal and gas

Image: Shayanne Gal/Business Insider

Renewable energy, especially grid-scale solar and wind, is now much cheaper to produce than fossil fuel energy. This trend is irreversible, worldwide, and will continue. Conventional energy will continue to be used as backup energy. Battery storage, a still developing technology, will be a crucial part of the energy mix.

Coal and gas will be around for a while. But there will be less and less of it as renewables become dominant.

The cost of producing one megawatt-hour of electricity — a standard way to measure electricity production — is now around $50 for solar power, according to Lazard’s math. The cost of producing one megawatt-hour of electricity from coal, by comparison, is $102 — more than double the cost of solar.

The rapidly declining cost of solar is a sign that the world may be on the verge of a dramatic change in how we power our buildings and vehicles. The price drop is likely to spur a shift toward renewable power sources like wind and solar and away from fossil fuels like oil and coal.

Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE 11.0) shows a continued decline in the cost of generating electricity from alternative energy technologies, especially utility-scale solar and wind.

Although alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the base-load generation needs of a developed economy for the foreseeable future. Therefore, the optimal solution for many regions of the world is to use complementary conventional and alternative energy resources in a diversified generation fleet.