Since the first six months of 2018, the benchmark levelized cost of electricity (LCOE) for lithium-ion batteries has plunged 35% to $187/MWh, BNEF says. For projects that have gone into construction in the opening months of this year, the LCOE for solar PV stands at $57/MWh, down 18% from a year earlier. However, recent declines in the LCOE for solar largely occurred in the third quarter of 2018, rather than earlier in the year, as mid-year changes to PV policy in China left the global market awash with surplus modules, BNEF says.

Recent analysis also shows that the benchmark LCOE for offshore wind has tumbled by 24% over the past year, while the onshore wind LCOE has dropped 10%. These “spectacular” declines in cost, BNEF says, suggest that lithium-ion batteries and offshore wind in particular “are now at the center” of the global energy transition.

“There have been staggering improvements in the cost-competitiveness of these low-carbon options, thanks to technology innovation, economies of scale, stiff price competition and manufacturing experience,” says Elena Giannakopoulou, head of energy economics at BNEF. “The LCOE per megawatt-hour for onshore wind, solar PV and offshore wind have fallen by 49%, 84% and 56% respectively since 2010. That for lithium-ion battery storage has dropped by 76% since 2012, based on recent project costs and historical battery pack prices.”

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BNEF says the declining cost of lithium-ion batteries is particularly exciting because it creates a wealth of “new opportunities for them to balance a renewables-heavy generation mix.” Technologies such as open-cycle gas turbines, long relied upon by grid operators to handle fluctuations in electricity demand, increasingly must compete with batteries that can offer up to four hours of energy storage, it says.

“Solar PV and onshore wind have won the race to be the cheapest sources of new ‘bulk generation’ in most countries, but the encroachment of clean technologies is now going well beyond that, threatening the balancing role that gas-fired plant operators, in particular, have been hoping to play,” says Tifenn Brandily, energy economics analyst at BNEF.