First things first: LCOE, or Levelized Cost Of Energy, measures the overall cost of generating electricity over the plant’s lifetime. This includes the costs connected to developing, building, operating, and decommissioning the power plant and its resulting production.

The LCOE for solar and wind has decreased significantly in recent years, in some instances falling below USD 50 per MWh.

The rapid decrease can be attributed to multiple variables, including the reduction of cost of key equipment, decreased installation costs, improved efficiency and capacity factors, increased competition with more service providers, and innovations.

As the overall cost of generating electricity has fallen, the relative importance of operating expenses (Opex) has risen. Currently, Opex typically accounts between 20% and 30% of the LCOE - a significant portion.

As a comparison, for utility solar, in certain countries, the Capex connected to the supply of modules impacts less than 25% of the LCOE (or 33% of the overall Capex).

This shift emphasises the crucial role of balancing increased production with optimised Opex to remain competitive. Opex now play an integral role in the LCOE. To meet our ambitions of deploying more solar, we need to continue pushing the LCOE downwards - let’s look at ways of further improving our Opex.

We have to remember that LCOE does not give the entire picture for renewables. With the increasing grid penetration of non-controllable renewable power plants like wind and solar, the LCOE does not consider indirect costs linked to adapting the grids (cross border interconnections, storage, new transmission lines). Thus, on the long term, LCOE might not be sufficient to capture the full picture.