Analysts at investment bank Citi say solar PV and wind energy are becoming competitive with natural gas peaking and baseload plants in the US, despite the continuing fracking boom in that country.
Citi’s new anlysis says gas prices, considered to be cheap in the US, are rising and becoming more volatile. This has made wind and solar and other renewable energy sources more attractive because they are not sensitive to fuel price volatility.
It notes the big decisions in the US are now being made on the basis of securing low cost power, fuel diversity and stable cash flows.
This, the analysts say, is drawing them increasingly to the “economics” of solar and wind, and how they compare with other technologies.
Citi says solar is already becoming more attractive than gas-fired peaking plants, both from a cost and fuel diversity perspective. And in baseload generation, wind, biomass, geothermal, and hydro are becoming more economically attractive than baseload gas.
“We predict that solar, wind, and biomass to continue to gain market share from coal and nuclear into the future,” the Citi analysts write.
Citi says nuclear and coal cannot compete on cost. Environmental regulations are making coal even pricier, and the ageing nuclear fleet in the US is facing plant shutdowns due to the challenging economics.
Citi says the key metric in comparing power sources will be the levellised cost of energy (LCOE). “As solar, wind, biomass, and other power sources gain market share from coal, nukes, and gas, the LCOE metric increasingly becomes important to the new build power generation decision making,” it says.
