In a recently published report, Wood Mackenzie projects solar-plus-storage LCOE for both utility-scale and distributed commercial & industrial (C&I) segments to decline considerably over the next five years. As grid resiliency and renewables intermittency continue to be a challenge in Asia Pacific’s power markets, solar-plus-storage could address these issues particularly as solar and battery costs continue to decline.
According to Wood Mackenzie, unsubsidised utility-scale LCOE for a 4-hour lithium-ion solar-plus-storage will command a cost premium between 48% and 123% over solar LCOE in 2019. This will reduce to between 39% and 121% in 2023. By then, solar-plus-storage costs would already be competitive against gas peakers in all the National Electricity Market (NEM) states of Australia. The country’s utility-scale solar-plus-storage LCOE will hover at about 23% above average wholesale electricity price.
Only Thailand is expected to have a utility-scale solar-plus-storage LCOE below the average wholesale electricity price by 2023. While the country does not have a wholesale electricity market, industrial power price taken as a proxy is higher compared to other wholesale markets and hence shows competitive solar-plus-storage economics.
CAPEX subsidies and additional remuneration through different forms of renewables certificate will be crucial for projects to go-ahead.
In general, Wood Mackenzie expects the average solar-plus-storage LCOE in Asia Pacific to decrease 23% from US$133/MWh this year to US$101/MWh in 2023.
On the distributed C&I solar-plus-storage front, the storage premium over solar LCOE is between 56% and 204% this year. In 2023, the cost premium will narrow to between 47% and 167%. The reason for such wide LCOE range is because there are some mature markets where solar cost is extremely competitive while others are not and some in-between. This is due to a mix of labour/ land/ environment/ civil costs, weighted average cost of capital, and procurement methods (tenders vs feed-in tariffs (FIT)). Also, some markets have very well established supply chains with the availability of storage manufacturing.
Unsubsidised C&I solar-plus-storage is expected to be competitive in Australia, India and the Philippines by 2023.
The residential market also poses a great opportunity for solar-plus-storage. In 2018 with the help of government subsidies, Australia’s New South Wales saw a 76% savings on annual electric bills through solar-plus-storage installations. Another attractive residential solar-plus-storage market is Japan. FIT for 600 MW of solar projects is poised to expire this year. As power prices are set to increase, storage retrofits provide an opportunity for home consumers to avoid high residential prices.
Source: Wood Mackenzie