Logistics crisis could increase renewable energy costs

Building infrastructure for renewable energy generation was cheaper this year, but bottlenecks in global supply chains threaten to drive up costs in 2022, reversing a decade-long trend, according to Lazard Ltd.

The unsubsidized cost of utility-scale solar power fell to just $ 28 per megawatt-hour for thin-film PV modules in 2021, falling $ 1 from a year earlier, while wind power marina fell $ 3 to $ 83, according to the New York firm’s leveled annual report. The energy cost analysis will be published on Thursday.

Lower production costs have been a major benefit as nations and companies embrace renewables in the race to meet climate goals.

Battery storage alongside solar PV is beginning to be cheaper to implement than building a natural gas-fired peak power plant to keep power grids stable and provide reserves, he said. George Bilicic, vice president of investment banking for Lazard and director of global energy, energy and infrastructure.

The pace of cost reductions in the categories of renewable energy it has slowed down as the industry matures. In particular, after utility-scale solar costs have plummeted 90% steadily since 2009 and wind fell 72%, reductions have slowed dramatically.

Now, major disruptions to global supply chains caused by the pandemic could end the downward trend.

“We show a continued decline in renewable energy costs, but we believe the next time we do this study we will show cost increases due to supply chain challenges and higher costs overall.“, said Bilicic.

Renewable energy production will come under pressure as bottlenecks mean higher labor and material costs, he said.

Supply chain problems could also lead to delays in manufacturing projects. renewable energy, especially in the United States, where there is uncertainty about tax incentives and public policies.

“This year is different because we have supply chain problems in addition to public policy uncertainty, and that is causing more uncertainty“, said Bilicic. “The energy transition must have the fundamental basis for investment, which in the US is affected by the public policy environment”.

On top of that, storage developers are also increasingly competing with the rapidly growing market for electric vehicles for lithium-ion batteries, he said. Lazard.