UK government solar LCOE forecasts tumble

Image: Lightsource BP.

The levelised cost of electricity (LCOE) of solar in the UK could fall to just £28/MWh by 2040, according to new projections published by the country’s government.

Yesterday (24 August 2020) the UK’s Department for Business, Energy and Industrial Strategy (BEIS) published its annual update of electricity generation cost estimates, detailing how it expects the costs of renewables to fall in the coming years.

Those statistics now show a staggering downward revision of solar LCOEs in the country. Having forecast in 2016 for solar to generate at a cost of around £68/MWh in 2025, BEIS’ updated stats put the 2025 LCOE at just £44/MWh.

This would be made up of around £30/MWh in construction and equipment costs, fixed O&M costs of £10/MWh and a further £4/MWh of pre-development costs, such as planning and permitting.

Costs within BEIS’ central forecasts are expected to fall to £39/MWh in 2030, £36/MWh by 2035 and around £33/MWh.

BEIS’ lowest cost forecast, however, places solar’s 2040 LCOE at just £28/MWh.

The government’s forecasts place solar as the cheapest source of renewables from the onset, being able to produce power cheaper than other forms of renewables – notably onshore and offshore wind – over the next 20 years.

BEIS’ new estimates will be put to the test next year when solar is welcomed back into the country’s next Contracts for Difference (CfD) allocation round – the UK’s key auction mechanism for utility-scale renewables projects – takes place. Having been locked out of the previous two rounds, solar is widely expected to be richly competitive and could yet beat BEIS’ LCOE estimates four years early.

Chris Hewett, chief executive of the country’s Solar Trade Association, said now was the right time for the government to ramp up its ambitions for solar PV.

“Now it is time for the government to set an ambitious target for the deployment of solar PV in the UK, as it has done with offshore wind. Our favoured goal, 40GW by 2030, aligns with recommendations made by the Committee on Climate Change and the National Infrastructure Commission, and is achievable with moderate policy support,” he said.

Additional reporting by Alice Grundy.

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