A new a levelised cost of electricity (LCOE) analysis by Bloomberg New Energy Finance (BNEF) shows that onshore wind has become competitive with gas and coal in some parts of the world and that the gap between fossil-fuel production and solar photovoltaic (PV) facilities has also narrowed.

In its ‘Levelised Cost of Electricity Update for the second half of 2015’, BNEF shows that the costs associated with onshore wind and solar PV plants have reduced when compared with the first half of the year, while the costs of gas-fired and coal-fired generation have increased.

“Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs. Meanwhile, coal and gas have got more expensive on the back of lower utilisation rates and, in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform,” head of Europe, Middle East and Africa Seb Henbest states.

The report has been published at the same time as South Africa’s renewable-energy progress has come under the spotlight, with the Department of Energy releasing a ‘State of Renewable Energy in SA’ report that shows that the country will have 6 236 MW of renewable-energy generation by 2019.

The study also shows that the prices of renewable energy have been falling over the past four years, with the average kilowatt-hour tariff dropping 68% since 2011. “Prices are now level with the lowest tariffs in global market leader Germany,” the DoE states.

The BNEF study, meanwhile, shows that the global average LCOE for onshore wind fell from $85/MWh in the first half of the year, to $83 in the second half, BNEF calculates, while reporting that solar PV costs fell from $129/MWh to $122/MWh.

In the same period, the LCOE for coal-fired generation increased from $66/MWh to $75/MWh in the Americas, from $68/MWh to $73/MWh in Asia-Pacific, and from $82/MWh to $105/MWh in Europe.

The LCOE for combined-cycle gas turbine generation also rose from $76/MWh to $82/MWh in the Americas, from $85/MWh to $93/MWh in Asia-Pacific and from $103/MWh to $118/MWh in Europe, Middle East and Africa.

Nuclear, the BNEF notes, has varying LCOE levels from region to region. But in both the Americas and the Europe, Middle East and Africa regions levelised costs rose to $261/MWh and $158/MWh respectively.

Levelised costs take account of the cost of generating a marginal MWh of electricity, as well as the upfront capital and development expense, the cost of equity and debt finance, as well as operating and maintenance fees.

“Generating costs continue to vary greatly from region to region, reflecting influences such as the shale gas boom in the US, changing utilisation rates in areas of high renewables penetration, the shortage of local gas production in East Asia, carbon prices in Europe, differing regulations on nuclear power across the world, and contrasting resources for solar generation,” energy economics analyst Luke Mills outlines.

In the UK and Germany, onshore wind is now cost-competitive with both gas-fired and coal-fired generation, once carbon costs are taken into account, the report shows.

In the UK, the onshore wind LCOE is $85/MWh, compared with $115/MWh for combined-cycle gas and $115/MWh for coal-fired power. In Germany, onshore wind costs of $80/MWh, compared favourable with $118/MWh for gas and $106/MWh for coal.

In China, onshore wind is cheaper than gas-fired power, at $77/ MWh versus $113/MWh, but it is much more expensive still than coal-generated electricity, at $44/MWh, while solar PV power is at $109/MWh. In the US, coal and gas are still cheaper, at $65/MWh, against onshore wind at $80/MWh and solar PV at $107/MWh.