There's no question wind and solar energy are now competitive with fossil fuels around the world on a per-kilowatt-hour basis, but they still face the challenge that they're intermittent sources of energy. The sun won't provide energy to make electricity at night and wind turbines only generate electricity about half the time, at best. For now, natural gas or another fossil fuel is needed to fill in any gaps in electricity supply. 

What may change that narrative is energy storage. If energy storage can cost-effectively fill the gaps in wind and solar's energy production, renewable energy could be a 24/7 energy source and compete directly with fossil fuels in wholesale markets. An analysis by investment bank Lazard says we're already there

Large solar system at dusk.

Image source: Getty Images.

How expensive are wind and solar plus storage?

Each year, Lazard does a detailed analysis of the cost of renewable energy versus fossil fuels on an unsubsidized basis. This year, utility-scale wind and solar are both cheaper than coal and even natural gas, in some cases. The table below shows the cost of each utility-scale wind and solar compared to coal. 

Energy source Low-End Estimate High-End Estimate
Crystalline Utility-Scale Solar PV 4.6 cents per kWh 5.3 cents per kWh
Thin-Film Utility-Scale Solar PV 4.3 cents per kWh 4.8 cents per kWh
Wind 3 cents per kWh 6 cents per kWh
Coal 6 cents per kWh 14.3 cents per kWh
Natural gas combined cycle 4.2 cents per kWh 7.8 cents per kWh

Data source: Lazard's Levelized Cost Of Energy Analysis--Version 11.0.

Where this gets really interesting is that if you add an energy storage system, the cost of solar plus storage is competitive as well. In this example, Lazard assumed that a 200 MW solar power plant is accompanied by a 400 MWh energy storage system that could provide 110 MW of power at a time. This increases the cost to 8.2 cents per kWh for all solar projects, which is still competitive with coal and natural gas turbines. 

In comparison, it would cost at least 11.2 cents per kWh to build a new nuclear power plant, 9.6 cents per kWh for an integrated gasification combined cycle (IGCC, or clean coal) plant, at least 15.6 cents per kWh for a gas peaking plant, and 19.7 cents per kWh for a diesel reciprocating power plant. Solar plus storage is already competitive with fossil fuels.

Changing the game

Now that solar plus storage is lower cost than coal and diesel, why would a utility ever build one of those power plants again? There's abundant solar energy in the world to electrify any device we want, and if energy storage is cheap enough to be economically viable, it should drive adoption of more low-cost renewable energy

Energy storage doesn't just make wind and solar energy more viable for utilities -- it makes more expensive fossil fuel sources nearly irrelevant to the grid. Operators are already starting to see the value of energy storage and are building it into their resource plans while at the same time shutting down coal and nuclear developments that are no longer cost-effective. This is how a revolution happens in energy, and it's happening before our eyes. 

The Motley Fool has a disclosure policy.