The levelized cost of electricity for renewable energy technologies is dropping globally, led by wind and solar energy, according to new reports from Wood Mackenzie.
In North America, “renewable technologies LCOE declined by 4.6% in 2024, underpinned by a 4.2% drop in capital costs,” WoodMac said in a release.
The data analytics firm found that the LCOE for utility-scale solar in North America is expected to decline by an average of 60% by 2060 as the cost is driven down by advancements in cell technology and increased production capacity for components like polysilicon.
“Each technology has specific factors that contribute to the decline in LCOE for renewables,” said Chris DaCosta, a research manager at Wood Mackenzie. “In the short term, lower LCOE is the result of easing of supply chain pressure and decreased financing costs. Generally speaking, long term technology improvements help to both reduce the cost of components while also increasing the capacity factor and lifespan of the projects.”
WoodMac projects onshore wind’s LCOE to drop 42% by 2060, and offshore wind to see a “significant” reduction of up to 67%.
While offshore wind faces short-term cost pressures, its projected drop highlights its “growing role in the future energy mix,” the release said.
The report also tracked the 2024 LCOE for resources like pumped hydropower, geothermal, coal, and nuclear pressurized water reactors. “Across regions, the cost competitiveness of these technologies shows significant variation, but overall, renewables are on a steady path towards outcompeting traditional fossil fuel sources,” Amhed Jameel Abdullah, senior research analyst at Wood Mackenzie said in the release.
Currently, fixed-axis solar systems “average an LCOE of US$66/MWh globally, with a wide range from US$28/MWh to US$117/MWh,” WoodMac said, “[influenced by] geography, technology advancements, and regional market conditions.”
Single-tracking systems, on the other hand, “[average] $60/MWh, with a range from $31/MWh to $103/MWh, reinforcing their growing role in utility-scale projects,” according to the release.
Onshore wind technology globally averages an LCOE of $75/MWh with a range of $23/MWh to $139/MWh, WoodMac said, but offshore wind – and floating wind in particular – remain “expensive, with fixed installations averaging US$230/MWh and floating systems at US$320/MWh.”
“These costs are expected to fall over time but remain higher than onshore options,” the release said.
In contrast to the LCOE drop, prices for renewable power purchase agreements in North America rose this year. Solar PPA prices jumped 5.4% during the third quarter of 2024 and 10.4% year-over-year, according to recent data from LevelTen Energy, and while wind PPA prices remained flat in the third quarter, they increased 14.1% year-over-year.
”While project costs can inform PPA prices, there are other variables involved,” DaCosta said. “Currently the scarcity of projects because of clogged interconnection queues has led to increased negotiating power for developers, contributing to the higher PPA prices in the face of dropping project costs.”
