Cost increases harm renewables' competitiveness in Asia Pacific

The competitiveness of renewable power in Asia Pacific deteriorated in 2022 as increases in equipment, construction costs and interest rates in the region pushed up solar and onshore wind prices, Wood Mackenzie said on Tuesday.

The levelised costs of electricity (LCOE) for utility solar and onshore wind rose by 16% and 12%, respectively, since 2020, going up to USD 91 and USD 104 per MWh in 2022.

The trend was not even, however, with South Korea seeing the highest cost inflation in the period and China observing no cost increases.

“China has been insulated from cost inflation trends, gaining competitiveness against other markets due to massive scale, depth of local supply chain, and increasing technology dominance,” said Alex Whitworth, research director at Wood Mackenzie.

In addition, a decline in offshore wind costs in China means the technology is now competitive with gas and coal power in coastal regions and could undercut coal power nationally by 2025.

In Asia Pacific, costs associated with renewables are currently competitive with new coal power projects only in China, India, and Australia.

Asia Pacific’s average solar LCOE was at a 7% premium to coal power in 2022 even as higher fuel costs pushed up the LCOE for new coal projects by 16% and gas by 11% in the last two years. According to the research firm, coal will remain the lowest-cost new-build power generation option in the Asia Pacific until 2024.

The cost of a “firmed” mix of renewables, gas turbine back-up, and storage is projected to decline from USD 130 per MWh in 2022 to USD 90 per MWh in 2030, achieving competitiveness against gas and nuclear.

(USD 1 = EUR 0.936)

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