Solar and Wind Economics Boost Renewable Energy Value in the U.S.

The study assessed the so-called the “net market value” of solar and wind power over time, defined as the difference between the costs of replacing solar and wind generation by purchasing electricity in wholesale markets and the levelized cost of solar and wind energy (LCOE).

Due to continued declines in the LCOE of solar and wind power and significant volatility in wholesale markets, particularly in 2021 and 2022, the study found that the net market value of these two renewable power generation sources has improved. For example, in 2022, solar power generated a net worth of $2.1 billion in the US and wind power generated $100 million.

This means savings for buyers and the potential for lower energy bills for consumers. However, as the report notes, whether end users benefit from lower bills depends on the contractual structure and sophistication of the buyer or customer.

For example, in the case of a long-term, fixed-price power purchase agreement (PPA), the value of securing solar and wind energy in the form of lower bills is likely to be passed on to customers.

On the other hand, with fixed-price released renewable energy certificates (RECs), consumers typically pay a premium, meaning the value of securing solar and wind power is less felt.

The LBNL report found that improving solar and wind economics are causing buyers in some cases to rethink their contracting practices to ensure that retail customers, particularly residential customers, get a greater share of the collateral value they can provide.

It recommended that more electricity purchasers consider contracting structures that enable improved solar and wind economics to be passed on to end consumers, such as physical and virtual PPAs and index-based RECs that allow for benefits to be locked in when wholesale prices rise.

“Grid Value and Cost of Utility-Scale Wind and Solar: Potential Billing Implications” is available in full here . The LBNL report follows the publication of a study by Lazard that found the range of LCOE for different types of electricity generation in the U.S. has narrowed.