Switched On

Clean Power Costs Split After Years of Alignment

41 min

The podcast discusses Bloomberg NEF's latest Levelised Cost of Electricity (LCOE) report, revealing a mixed year for clean power costs in 2025. While battery storage costs fell sharply by 27%, solar and onshore wind became more expensive due to supply chain issues, equipment costs, and changing market dynamics. The report also highlights the rising LCOE for gas turbines and the increasing competitiveness of solar-plus-storage solutions for meeting a significant portion of demand.

Summarized by Podsumo

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✨ Key Takeaways

1

Mixed Clean Power Costs

In 2025, battery storage costs dramatically decreased by *27%*, but solar and onshore wind LCOEs increased by *6%* and *2%* respectively, driven by supply chain constraints and market saturation in key regions like China.
2

Rising Gas Turbine Costs

The LCOE for combined cycle gas turbines (CCGT) surged by *16%* to an all-time high of *$20/MWh*, primarily due to increased CAPEX as manufacturing struggles to meet demand, especially from data centers.
3

Renewables Dominate New Generation

Wind or solar are now the cheapest sources of new bulk electricity generation in markets accounting for *four-fifths of global power supply*, with wind notably replacing gas as the cheapest in the US (unsubsidized).
4

Solar-Plus-Storage Competitiveness

A new model shows solar-plus-storage can meet *84%* of demand in California at a lower cost than gas, and *42%* of data center demand in PJM, demonstrating its growing economic viability for firm power.
5

Middle East Conflict Impact

The conflict's potential impact includes higher capital costs (disproportionately affecting CapEx-intensive renewables) and short-term fuel price volatility, but the long-term gas price outlook remains stable.

💬 Notable Quotes

"Effectively the LCOE in technical terms is the long term offtake price that a project developer needs to recoup all of their costs, pay taxes and hit their internal rate of return."

— Amar Vazdev
"Wind and solar are now proud parents, and they're going gray a little bit, but they're watching their child's storage. Go through the same rights of passages they were of just getting cheaper and cheaper and getting built more and more."

— Tom Rollins' Reese
"So what it really comes down to is the immediate impact and that becomes very much a power market question. And it comes down to the likelihood of fuel switching between gas plants and coal plants based on their short and marginal cost."

— Amar Vazdev