9
Renewable costs have continued to decline but are increasingly impacted by trade issues
Context Setting
Selected historical average LCOE index, 2009-2024
0
20
40
60
80
100
120
140
160
Key
Solar PV Nuclear Coal Gas combined cycle Wind onshore
LCOE,
$/MWh
$182
$118
$76
$50
$61
2.8%
0.4%
(0.6%)
(6.8%)
(11.9%)
CAGR
Technology Policy &Regulatory Geopolitics Climate Market
LCOE for renewable generation technologies has been declining since 2009…
… but there has been an uptick recently
Technological
advancements
Economies of
scale
Manufacturing
improvements
Trade issues and tariffs
⦁ Tariff hikes on Chinese solar panels and clean-tech components have increased the cost
of renewable energy projects
Supply chain disruptions
⦁ Pandemic related challenges in 2021 led to shortage of critical materials, and significant
delays driving commodity price volatility
IRA local requirements
⦁ The IRA is intertwined with trade and labour policy. Projects only qualify for tax credits if
they adhere to local content and labour rules, increasing renewable project costs
Other
⦁ High interest rates and cost of capital – surge in financing costs due to interest rate hike
⦁ Grid constraints – grid congestion and interconnection queues have increased costs
Decline drivers
Increase drivers
Offshoring
Source(s): Lazard LCOE
Renewable costs have continued to decline but are increasingly impacted by trade issues
Context Setting
Selected historical average LCOE index, 2009-2024
0
20
40
60
80
100
120
140
160
Key
Solar PV Nuclear Coal Gas combined cycle Wind onshore
LCOE,
$/MWh
$182
$118
$76
$50
$61
2.8%
0.4%
(0.6%)
(6.8%)
(11.9%)
CAGR
Technology Policy &Regulatory Geopolitics Climate Market
LCOE for renewable generation technologies has been declining since 2009…
… but there has been an uptick recently
Technological
advancements
Economies of
scale
Manufacturing
improvements
Trade issues and tariffs
⦁ Tariff hikes on Chinese solar panels and clean-tech components have increased the cost
of renewable energy projects
Supply chain disruptions
⦁ Pandemic related challenges in 2021 led to shortage of critical materials, and significant
delays driving commodity price volatility
IRA local requirements
⦁ The IRA is intertwined with trade and labour policy. Projects only qualify for tax credits if
they adhere to local content and labour rules, increasing renewable project costs
Other
⦁ High interest rates and cost of capital – surge in financing costs due to interest rate hike
⦁ Grid constraints – grid congestion and interconnection queues have increased costs
Decline drivers
Increase drivers
Offshoring
Source(s): Lazard LCOE
