A Tale of Two Trends: Falling Storage Costs and Growth of Solar Deployments

Time: August 23, 2022

Solar is the lowest-cost source of electricity and battery-based energy storage is the least expensive flexible peaking capacity resource across much of the world today. Embracing a 100% clean energy future is not only imperative, but also the most economic path forward.

The remarkable growth of Solar + Storage deployments is the result of two colliding trends: the falling cost of energy storage and the rapid deployment of solar.

Falling Storage Costs

Lithium battery-based large-scale energy storage costs have been falling faster than predicted over the last decade, with battery cell prices declining around 90% since 2010 to reach a benchmark price of approximate $100/kWh by 2023.

Growth of Solar Deployment

Meanwhile, renewable energy deployment continues apace with solar leading the way. Over the next five years, solar is expected to add 125 GW of capacity per year, propelling renewables to be the largest source of electricity generation by 2025.

Competing Against Conventional Assets

The impact of the rise of renewables and declining costs of storage? The expansion and economic viability of Solar + Storage. While some headlines may continue to read that Solar + Storage is not cost competitive enough to displace combined cycle gas turbines (CCGT) like-for-like, the more adept analysis evaluates the role of Solar + Storage as being capable of economically replacing conventional gas generators today.

When evaluated as an option to displace natural gas, there are two things that become abundantly clear about the prospect of Solar + Storage:

1.Solar Storage is highly cost-competitive: On a levelized cost of energy basis, Solar + Storage is cost competitive against gas generators with capacity factors up to 40-50%. Recent competitive Solar + Storage auctions in Israel and Chile have resulted in prices of $54.4/MWh and $32.4/MWh. No incentives needed.

2.Proper planning will result in more Solar + Storage and lower costs: While it is true Solar + Storage cannot directly replace a CCGT that operates 24 hours a day, such short-term, narrow thinking risks future stranded assets and high consumer costs. Broad, creative planning that considers the capabilities of Solar + Storage in combination with other firm clean energy resources and demand response can produce more economic outcomes. Additionally, increasing renewable penetration is impacting CCGT operations – fewer hours, greater ramping requirements, increased starting and stopping – harming CCGT economic output and efficiency.

Lawmakers, regulators, planners, and developers need to push the energy transition forward at full speed not only to mitigate the effects of climate change, but to lower the cost of reliable energy for all. Solar + Storage should be evaluated as a key resource to provide reliable, low-cost energy.

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