U.S. solar LCOE on the rise, says Lazard

A new report from the financial firm Lazard shows the cost of building large, utility-scale solar power plants has gone up slightly this year, after nearly two decades of steep declines. The increase is blamed on higher construction costs, interest rates, tariffs, and supply chain problems. Even so, solar remains one of the cheapest ways to generate electricity, cheaper than new natural gas, coal, or nuclear plants in most cases.

This report focuses on big power plants that utilities build, not rooftop solar or home upgrades, so it does not change what a homeowner would pay for panels on their own roof. But it does matter for anyone watching electricity prices: battery storage costs, which utilities use to store solar and wind power for when the sun isn't shining, rose about 27% compared to five years ago. Lazard points to tariffs on lithium-ion batteries and restrictions on Chinese-made battery cells as part of the reason. Those cost pressures on the broader grid can eventually show up in electricity rates.

The report's authors say the underlying trend is still good news for renewable energy: solar costs have fallen roughly 81% over the past 20 years, and solar and wind remain cheaper than building new gas, coal, or nuclear plants, even after accounting for the extra backup power grids need when the sun isn't out or wind isn't blowing. Wind, in particular, remains competitive with solar in many parts of the country.