Lazard has released its 2024 Levelized Cost of Energy (LCOE) report, shedding light on the evolving economics of renewable and conventional energy sources.

Amid rising inflation and interest rates, the report provides critical insights into the shifting dynamics of energy markets.

One major takeaway is the increase in low-end costs for renewable technologies like wind and solar, driven by high interest rates and persistent inflation. This marks the first time in the report’s history that low-end LCOE values have risen. However, renewables remain competitive, particularly for large companies able to scale projects efficiently.

The report also highlights the growing cost competitiveness of existing gas-fired power plants, which provide crucial support to intermittent renewables.

In an era of increasing demand, a diverse mix of generation, including gas and energy storage, will be essential for grid reliability.

Innovation is identified as a critical driver for the energy transition.

Emerging technologies such as carbon capture, long-duration storage, and advanced nuclear are seen as pivotal in complementing renewables, particularly for hard-to-decarbonize industries like steel and cement.

Energy storage systems are becoming more valuable, with cost variability driven by labour shortages and high construction prices.

Despite this, tax incentives like the Investment Tax Credit (ITC) from the Inflation Reduction Act (IRA) have helped stabilize storage economics.

Hydrogen is recognized as a promising solution for industrial decarbonization, though price disparities remain, particularly between Western and Chinese-supplied electrolyzers.

The report also underscores uncertainty regarding the IRA’s hydrogen production tax credits, which could influence the market’s growth.

After years of cost declines, renewable energy technologies like solar and wind have levelled off in costs. However, with federal tax subsidies, they continue to be cost-effective solutions in the energy transition.

Lazard’s 2024 LCOE report underscores the need for a balanced energy mix and innovation to navigate increasing demand and grid challenges.

While renewables remain central, advancements in complementary technologies and policy reforms will be crucial for achieving a decarbonized future.