© Fraunhofer ISE

Study on electricity production costs: Renewable energies clearly superior to conventional power plants

Researchers at the Fraunhofer Institute for Solar Energy Systems ISE have presented the fifth edition of their study on the cost price of electricity from renewable energies. In it, they analyse current costs and forecast further developments on the basis of technology-specific learning rates and market scenarios up to the year 2040.

“Wind power plants and solar power plants in Germany now have significantly lower electricity production costs than conventional power plants. Due to the rising costs for CO2 certificates, even the operation of existing conventional plants powered by coal and gas will become less and less competitive in the coming years,” says project manager Dr. Christoph Kost.

Due to the intensified efforts to protect the climate, the costs of operating conventional power plants are rising on the one hand, while on the other hand the electricity generation costs of photovoltaic power plants in particular have continued to fall compared to the last study in 2018. PV systems currently achieve electricity production costs of between 3.12 and 11.01 €Cent/kWh, depending on the type of system and solar radiation. The specific system costs range from 530 to 1600 €/kWp, depending on the system type.

Since PV battery systems represent a growing market in the German electricity system, they were included in the comparison for the first time in this study. The electricity production costs for PV battery systems today range between 5.24 and 19.72 €Cent /kWh. The wide range results from high cost differences between the different battery systems. The use of battery storage also adds value by contributing to system security in the electricity system and stabilizing the feed-in curves and battery discharge in hours of high demand.

In the case of wind power, falling plant costs lead to prime costs of 3.94 to 8.29 €Cent /kWh for onshore wind turbines, making them the second cheapest generation technology. Despite higher average full load hours of up to 4500 hours/year, offshore wind turbines are significantly more expensive at just under 7.23 to 12.13 €cents/kWh, due to higher installation, operating and financing costs (3000 to 4000 €/kW). Potential new conventional power plants in Germany do not come below an LCOE of 7.5 €Cent /kWh, taking into account higher CO2 costs.

Forecast of electricity production costs until 2040

Through further technological advances, PV systems (including rooftop systems) and wind turbines in windy locations will significantly undercut the average electricity production costs of all fossil-fuel power plants by 2040.
In 2040, the LCOE is projected to range between 3.58 and 6.77 €Cent /kWh for small rooftop PV systems and between 1.92 and 3.51 €Cent /kWh for ground-mounted systems. From 2024 onwards, the LCOE of all PV systems (without battery storage) will be below 10 €Cent /kWh.
PV system prices are expected to fall to below €350/kW by 2040 for ground-mounted systems and up to between €615 and €985/kW for small-scale systems.
In 2030, electricity generation from a PV battery system could then be cheaper than from a combined-cycle gas turbine (CCGT) power plant. By 2040, even small PV battery systems will be able to achieve electricity production costs of between 5 and 12 €Cent /kWh.

Newly installed PV and wind plants cheaper than existing conventional power plants from 2030 onwards

The research team at Fraunhofer ISE additionally compares the electricity production costs of new RE power plants with the operating costs of existing conventional power plants. It can be seen that in 2021 the electricity production costs of renewable energies will be on a par with the operating costs of conventional power plants, if not lower. By 2030, however, all existing fossil-fuel power plants will still have sharply rising operating costs. This is due to forecasts that indicate a CO2 price of over 100 €/t in 2030. “This means high market dynamics in terms of investment in new renewable power plants, as companies will prefer to invest in new RE plants rather than bear these high operating costs. However, it must also be ensured that sufficient areas and power plant capacities are available for wind and PV,” says Christoph Kost.

Download the study