A key difference between combined cycle plants and wind or solar plants is the CAPEX / OPEX distribution. According on recent data of the American Department of Energy, for a combined cycle plant the CAPEX will be only around 25%, being the overwhelming majority of the investment in operational costs (that is, fuel) and maintenance.
The picture is different for wind farms and photovoltaic plants, were the fuel is free (still no taxes on wind and sun) and the majority of investment is needed upfront, with over 80% of CAPEX.
An interesting trend I am observing is the shift in the weight of Balance of Plant (BoP, more usually called Balance of Systems in the PV industry).
It is well known that the costs of photovoltaic modules and turbines are following a downwards trend. I do not see the same trend for BoP, with costs per MW decreasing at a slower pace.
In the figure above, you can see how the BoP share can be more than half of the CAPEX for rooftop solar. The numbers are coming from the Fraunhofer Institute, which include in BoP also land acquisition costs, permitting and legal cost, taxes, etc. Even if I disagree with this “broad” definition of BoP, the result is unchanged – the relative weigh of BoP in renewable is increasing.
What are the consequences?
In my opinion, the most relevant is that now BoP can really make of kill a deal. When it was approximately the 20% of the CAPEX even a big movement in the BoP budget was not really moving the numbers that much. However now the relative weight increased to over 40% in some project, and an expensive BoP can make a project economically inviable.
Is there something that we can do about it?
For several items probably not. For instance, wind farms on top of mountains will need expensive access roads, complicate earthworks with rock blasting, etc. While there is probably still some room to decrease the price of wind turbines (e.g. with a better supply chain) I do not see why civil works should be cheaper in the future.
The same apply to some electrical works items such as medium voltage cables, which are basically a commodity linked to the price of aluminium, steel, etc.
In conclusion, I think that in the next years we will see an increasing effort in engineering and optimization to lower the cost of BoP and insure the economic sustainability of projects.