The global energy landscape is undergoing a profound transformation, with wind and solar leading the way in this revolution. According to the latest analyses from Wood Mackenzie, these renewable technologies are witnessing a notable decline in their levelized cost of electricity (LCOE). In North America, renewable technologies are expected to reduce their LCOE by 4.6% by 2024, thanks to a decrease of 4.2% in capital costs. This trend looks even more promising by 2060, with a projected reduction of 60% for utility-scale solar. While technological advancements and increased production capacities are lowering costs, offshore wind projects are also revealing their growing potential, despite short-term cost pressures. The rapid evolution of these energy solutions highlights their essential role for a more sustainable future.
Wood Mackenzie recently reported a global decline in the levelized cost of electricity (LCOE) for renewable energy technologies, with wind and solar at the forefront. In North America, a decrease of 4.6% is anticipated by 2024, driven by lower capital costs. In the long term, technological improvements are propelling this trend by reducing component costs and extending project lifespans.
The study projects a drop of 42% in LCOE for onshore wind and 67% for offshore wind by 2060. However, offshore wind remains costly in the short term. Meanwhile, the LCOE of solar energy could decrease by 60% due to advancements in cell technology and production capacity.
the drivers of declining renewable energy costs
According to Wood Mackenzie, the cost of electricity, particularly due to renewable technologies like solar and wind, continues to decrease on a global scale. These energies, based on the strength of the wind and the rays of the sun, are becoming increasingly competitive against fossil fuels. In North America, the levelized cost of electricity (LCOE) for renewable technologies is down by 4.6% for 2024, primarily supported by a 4.2% reduction in capital costs. These figures clearly reflect the industry’s progress toward a clean energy transition.
the factors influencing cost reduction
The significant drop expected by 2060, especially for utility-scale solar, can be attributed to ongoing improvements in cell technology and increased production capacity for components like polysilicon. Wind energies are not lagging behind, with a projected reduction of 42% for onshore wind and up to 67% for offshore wind. Although the latter is facing short-term cost pressures, it is playing an increasing role in the energy mix of tomorrow. Technological advancements also help to reduce component costs while increasing capacity and project lifespans.
market challenges and opportunities
In the North American context, analysis of Power Purchase Agreements (PPAs) shows a rise in prices despite a fall in project costs. Solar PPA prices jumped by 5.4% in the third quarter of 2024 and 10.4% year-on-year. While these increases may seem paradoxical in an environment of declining costs, they reflect the scarcity of projects due to interconnection issues. This situation gives developers more leeway to negotiate higher prices, emphasizing the complexity of the current market. The path to complete integration of renewable energies remains fraught with challenges but offers unique opportunities for those ready to seize them.
