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Renewables Remain Cheapest New Power Source, Lazard Says

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Renewable energy remains the lowest-cost option for new power generation despite rising costs across all technologies, financial advisory firm Lazard (LAZ) said in a statement on Monday.

In its latest annual Levelized Cost of Energy+ report it said inflation, supply chain constraints, tariffs and higher financing costs have increased the cost of building new generation, while surging electricity demand is accelerating investment in new capacity.

Lazard said renewable energy continues to be the most cost-competitive form of unsubsidized new-build generation and is expected to account for most near-term US capacity additions.

At the same time, utilities and developers have announced more natural gas projects to meet growing demand, even as the levelized cost of gas-fired generation has reached its highest level in 15 years and faces long development timelines.

The report said rising electricity demand and reliability concerns underscore the need for a diverse mix of generation resources and faster permitting and approval processes.

Delays in permitting, combined with pipeline constraints and inflationary pressures, are increasing project costs and threatening grid reliability.

Lazard also found that the economics of existing power plants have improved as higher construction costs and project execution challenges make replacement generation more expensive.

Existing assets are being dispatched more frequently to meet rising demand, although operating costs for conventional plants remain sensitive to fluctuations in natural gas and coal prices.

Battery energy storage costs increased this year, reversing recent declines, as tariffs on lithium-ion battery imports reduced access to lower-cost Chinese battery cells, the report said.

While federal tax incentives for storage remain in place through 2033, new restrictions on supply chains linked to foreign entities of concern are accelerating diversification toward Southeast Asian and domestic manufacturing.

"We've entered a speed-to-power era-demand is outpacing supply, costs are climbing across every technology, and value is shifting to whoever can deliver capacity the fastest," Samuel Scroggins, Lazard's managing director and head of renewables and sustainable infrastructure, said.

Scroggins added that renewables remain the "lowest-cost and quickest to deploy resource, but meeting this moment will require a diverse generation fleet."

Price: $40.80, Change: $-0.61, Percent Change: -1.49%

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