Renewables count the cost of rate hikes

Levelised cost of electricity rises on higher cost of capital but renewables remain highly competitive against fossil fuels

Inflation and the resulting interest rate hikes are increasing the levelised cost of electricity (LCOE) of renewables for the first time in years, although not by nearly enough to threaten their competitiveness against fossil fuels. At the end of the first half of this year, research firm BloombergNEF (BNEF) reported an annual increase of 7pc in LCOEs for onshore wind and 14pc in fixed-axis solar, taking costs “temporarily” back to 2019 levels as inflation starts to bite. Central banks across the world are hiking interest rates, which is “certainly contributing to higher LCOEs across the board”, according to Amar Vasdev, energy economics analyst at BNEF. But renewables remain competitive. “T