Solar costs in UK better than LCOEs suggest

Last week BEIS published an update of the levelised cost (LCOE) power generation in the UK. This is a helpful update for the industry and from my experience is a good reflection of current costs. However, the widely publicised headline that LCOEs are 30-50% lower than BEIS originally thought is misleading. The reduction is simply an update for 2025 and beyond compared to the previous analysis done in 2018. Various factors have changed in capex, opex and most importantly financing costs.

Moreover, what the LCOE figure miss is the cost of power delivered which takes into account transmission and balancing. Given that most UK onshore wind capacity is in Scotland and solar can be built in the south, delivered costs are more favourable for solar than simple LCOEs suggest. Based on these LCOEs and current TNUOS costs, power from a grid connected solar site in the south (eg Wales) should be 20% cheaper than an onshore wind in Scotland.

The comparisons above show LCOEs in 2025 as per the BEIS analysis, with TNUOS costs added for projects in representative regions. Most wind is still being developed in Scotland and the combination of solar radiance and lower transmission costs favours solar projects in the south. Solar also benefits from easier planning, even in more densely populated parts of the country. Offshore wind and CCGTs are assumed to be transmission connected in the midlands.

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