It’s getting more expensive to firm up renewables

The cost of firming renewables is going up.

For the second year in a row, the financial services firm Lazard’s much-anticipated levelized cost of electricity report included the price tag of the additional capacity needed to support renewables around the country. This includes infrastructure like battery storage.

This year’s iteration of the report, out last week, found that increasing power demand — driven by things like the artificial intelligence boom, onshoring, and electrification — is also increasing the “timing imbalance” between peak demand and renewable energy production. And as the need for firming resources like energy storage has risen in the last year, so has the price of deployment.

Because of those higher costs, which are making existing gas-fired generation comparatively cheaper, Lazard recommended that LCOE should serve as a “starting point” for resource planning, rather than a determinant of investment decisions.

The cost of renewables

While renewables costs have plunged in the last decade, they have stabilized in recent years. 

Meanwhile, Lazard’s analysis showed that existing gas-fired generation is increasingly cost-competitive with new-build renewables. Accordingly, using combined-cycle gas turbines alongside new or existing renewables remains the most prevalent firming resource around the country, Lazard reported.

And while intermittent renewables remain cheaper than the likes of nuclear, gas peaking, or coal, the cost of firming up those resources often pushes costs up.

According to the report, firming costs in the last two years have been the highest in CAISO, where the regionally-adjusted firming cost of solar, for example, averages $146 per megawatt-hour. Last year, Lazard clocked solar’s firming costs in CAISO at $126 per MWh.

Importantly, grid operators use different assumptions for firming resources depending on the region. CAISO’s high prices reflect grid operators’ assumption of a four-hour lithium battery storage system. In MISO and PJM, meanwhile, assessments are made based on a (considerably less expensive) natural gas peaker plant.

But firming costs are up across the board — and, with very few expectations, are higher than the levelized cost of combined-cycle gas — regardless of technology assumptions. Both MISO and PJM saw jumps in the cost of firming wind and solar, and regions where the report tracked the cost of firming photovoltaics plus storage — PJM and CAISO — saw costs jump as well.