Costs for Solar, Wind, and Natural Gas Construction Projects Declines
According to a new report from the U.S. Energy Information Administration (EIA), the average construction costs for solar photovoltaic systems, onshore wind turbines, and natural gas-fired electricity generators all decreased in the United States in 2021 compared with 2020.
These three technologies (solar, wind, and natural gas) made up more than 91 percent of the capacity added to the U.S. electric grid in 2021.
Average construction costs for solar photovoltaic systems fell by six percent, for wind turbines by five percent, and for natural gas-fired generators by 18 percent over the period.
Construction costs include civil and structural costs (such as site preparation, steel, utilities), mechanical equipment and supply, electrical instrumentation, indirect costs (such as engineering, labor and materials, construction management, etc.), financing costs, as well as owner costs such as environmental reviews and permitting, interconnection costs, and property taxes during construction.
Average U.S. solar construction costs across all solar panel types fell six percent to $1,561 per kilowatt (kW) in 2021. The decrease was primarily driven by a 10 percent drop in the construction cost for crystalline silicon tracking panels, which fell to $1,423/kW, their lowest average cost since 2014.
The general reduction in solar construction costs since 2013 is part of a larger downward trend in installed solar costs that has prevailed since at least 2010. According to data compiled by Lawrence Berkeley National Laboratory’s “Utility-Scale Solar Report,” the median installed costs of utility-scale photovoltaic solar has fallen by 78 percent since 2010 expressed in real 2022 dollars. This reduction in installed costs equates to a 71 percent reduction since 2010.
The average construction cost for U.S. onshore wind turbines fell five percent in 2021 to $1,428/kW. The average construction costs for all three wind turbine size groups decreased slightly in 2021. The cost for the largest wind farms (those with more than 200 megawatts [MW] of capacity) remained relatively flat, decreasing by one percent to $1,382/kW. Wind farms ranging from 100 MW to 200 MW also decreased in average construction costs by just over four percent to $1,464/kW in 2021. Average construction costs for wind farms with 1 MW to 100 MW of capacity decreased by 22 percent to $1,949/kW in 2021.
A major driver pushing down installed wind construction costs since 2014 has been reductions in wind turbine unit costs. Since 2008, global wind turbine prices per kilowatt have fallen by 51 percent in real dollars, which translates to a 38 percent reduction in nominal dollars. Turbine unit costs rose in 2021, both real and nominal, but it is unclear how many of these turbines would have been included in 2021 construction costs.
The average construction cost for natural gas-fired generators fell 18 percent between 2020 and 2021. The decrease in average cost for natural gas-fired generators was driven primarily by decreases in the cost for combustion turbines. The average construction cost for combustion turbines used in simple-cycle mode fell by 19 percent in 2021 to $512/kW. The average combined-cycle generator construction cost increased by eight percent in 2021 to $1,252/kW.