Solar and Storage Now Cheaper Than Fossil Fuels, Says Study

A recent report from Germany’s Fraunhofer Institute for Solar Energy Systems (ISE) reveals that solar photovoltaic (PV) systems, even when paired with battery energy storage systems (BESS), are now generating electricity at a lower cost compared to coal and gas power plants. The study evaluates the costs of electricity generation across various energy technologies, including hydropower and nuclear power plants, highlighting the potential of renewable energy sources.

Key Findings:

• PV systems, even with battery storage, have proven to be more cost-effective than traditional coal and gas power plants.
• By 2045, as the energy system transitions to being climate-neutral, backup power plants will still be necessary despite the high share of renewable energy and battery storage.

Study Insights

The study assessed the costs of generating electricity from different technologies, including solar, wind, and biomass. According to the analysis, the cost of generating electricity from PV systems with battery storage ranges between €6/kWh and €22.5/kWh. This wide range is attributed to:

1. Significant differences in battery costs, ranging from €400/kWh to €1,000/kWh.
2. Variations in PV system costs.
3. Different levels of solar radiation depending on the plant’s location.

The researchers identified ground-mounted PV systems and onshore wind turbines as the most cost-effective solutions, with generation costs between €4.1/kWh and €9.2/kWh, making them cheaper than both fossil fuel and other renewable energy technologies.

Dr. Christoph Kost, Head of Energy System Analysis at Fraunhofer ISE and lead author of the study, stated, “These calculations show that the large-scale projects currently underway in Germany, combining PV systems, wind farms, and battery storage, represent excellent investments. This combination allows for better utilization of grid capacities.”

Future Cost Projections

Looking toward 2045, the study predicts that electricity generated by small rooftop PV systems will cost between €4.9/kWh and €10.4/kWh, while large-scale ground-mounted PV systems will have costs ranging between €3.1/kWh and €5/kWh.

As battery storage costs decline to between €180/kWh and €700/kWh, even small PV systems with storage will achieve generation costs ranging from €7/kWh to €19/kWh, explained Dr. Verena Fluri, co-author of the study and a scientist at Fraunhofer ISE.

For onshore wind farms, new turbine installations could reduce electricity costs to between €3.7/kWh and €7.9/kWh, thanks to higher full-load hours and more advanced turbine designs.

The Role of Backup Power Plants

Despite advancements in renewable energy and battery storage technologies, the study emphasizes the ongoing need for flexible backup power plants in a future energy system. These could include biomass and biogas power plants, with electricity generation costs ranging from €20.2/kWh to €32.5/kWh for biomass and between €11.5/kWh and €23.5/kWh for biogas.

Hydrogen-powered gas and steam turbine plants could also play a role. For plants built by 2030, Fraunhofer ISE estimates electricity generation costs will remain relatively high, between €23.6/kWh and €43.3/kWh. However, these plants will likely be used only during peak demand, as noted by Paul Müller, a scientist at Fraunhofer ISE.

Conclusion

The study by Fraunhofer ISE highlights the economic advantages of PV systems, particularly when integrated with wind farms and battery storage. While backup power plants will remain crucial for grid stability, solar energy with storage has emerged as the most cost-effective solution, even surpassing traditional fossil fuel-based power generation.