In general, the levelized cost of electricity (LCOE) is used to compare the costs of different energy source technologies and determine the most economical option. The decisive factors here are the investment and operating costs (including interest), the costs for fuels and CO₂ emissions if the electricity generation is based on the combustion of fossil fuels, as well as the service life, capacity utilization and disposal of a plant. How have the electricity generation costs for commercial PV systems changed in recent years compared to various other energy sources?
PV electricity generation costs have fallen by 85% over the past twelve years
According to the report “Renewable Power Generation Costs in 2020” of the International Energy Agency (IEA), the global cost of generating electricity from solar power has decreased by % an average of 85 percent in 2020 compared to the costs in 2010. In some countries, such as China, India and the United States, the cost has decreased by more than 90 percent. PV LCOE are now lower than the costs of coal or gas-based electricity generation. For Germany, the Fraunhofer Institute comes to the following conclusion in a Study The results show similar values: according to this, the LCOE for large-scale PV systems in 2021 will be between 3.12 and 11.01 cents per kWh, whereby the range is explained by the fact that a distinction was made between different types of PV system in the calculation. The larger the system, the lower the costs per kWp and the decisive factor for the LCOE overall is whether it is realized with or without electricity storage. If the averaged LCOE for photovoltaic systems in Germany from 2011 and 2021 are compared, the costs are also 85 % lower.
Low electricity generation costs for renewable energies
With an average value of just under 6 cents per kWh, large-scale photovoltaic power plants are now on a par with onshore wind power plants, which have always been quite cheap. The latter have been able to reduce their electricity generation costs from 9 to 6 cents per kWh on average in recent years. Both studies come to the conclusion that electricity production from large Solar parks is the most cost-effective option today. Apart from small private PV rooftop systems with storage or offshore wind turbines, electricity from biogas is now the most expensive electricity from renewable energies. Experts attribute the cost reductions in PV electricity generation costs mainly to technological advances and mass production. In addition, the efficiency of PV modules has increased, while the costs of production and installation have fallen. The development of innovative PV systems, such as the combination of PV systems with energy storage systems, is also helping to reduce costs. This trend is expected to continue in the coming years.
Rising electricity generation costs for fossil fuels
In general, the electricity generation costs of fossil fuels have risen in recent decades. This is partly due to the fact that some fossil fuel reserves have become more difficult to access, resulting in higher costs for extraction and exploration. In the case of gas in particular, the production costs were at times almost 30 cents per kWh due to the Russian invasion of Ukraine. Despite the current price stabilization, they still reached an annual average of over 20 cents per kWh in 2022. In addition to higher procurement costs, stricter environmental regulations are also making fossil fuels more expensive in Europe. The prices for CO₂ emissions continue to be successively increased by the countries and the European Union.