Renewable Costs Have Risen: Policymakers Can Help Reverse The Inflationary Blip

We are a nonpartisan climate policy think tank helping policymakers make informed energy policy choices and accelerate clean energy by supporting the policies that most effectively reduce greenhouse gas emissions.Inflation has hit the entire energy sector, and renewable energy is no exception. For decades developers fought to become competitive—then dominant––as the source of new power sector generation, and it’s worked for the most part.

LBNL also found coupling battery storage with solar projects only added modest additional costs – about 30-50% depending on project size. Batteries add reliability value while keeping projects competitive with other reliability resources like gas plants, and they can function on their own as power plants and grid infrastructure.battery pack prices slightly increased from $141 per kilowatt-hour to $151/kWh, the first year-over-year price increase since Bloomberg began reporting data.

High interest rates are another key cost driver. While rates are high today and disproportionately increase the cost of capital-intensive renewables projects relative to fuel-based resources like natural gas generators, interest rates are inherently volatile and unpredictable.interest rates will fall from an average of 5% in 2023 to 2% in 2026 – this would cut the cost of a typical utility-scale solar project 20%.

First, utility regulators must enhance real-time feedback between market conditions and utility power plant contracts. Utilities seeking to protect their investments in existing fossil fuels may not regularly test the assumption these plants remain economic, risking an overcorrection of outdated estimates lasting several years. Regulators must ensure utility cost estimates track coming cost declines accurately to protecting consumers and overcome bias towards preserving the status quo.

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