While other regions feel upward pressure China's booming offshore wind industry has driven the sector's power price down to match coal, a new report by analyst BloombergNEF found.

The trend in wind at sea came against a background of solar and wind energy costs largely unchanged in the first half of 2023 year-on-year as rising interest rates negate any declines

Capital costs for solar are the highest they’ve been since 2014, while wind hasn’t seen the current level since 2017, putting a floor under levelised cost of energy (LCOE) for the sectors, BNEF said in its 1H 2023 LCOE update.

Slowing onshore wind and solar cost declines “are also consistent with the maturing of these technologies”, and BNEF noted that the doubling of module capacity, which drives a 28.5% cost decline, is taking longer to achieve.

Still, “onshore wind and solar remain the cheapest new-build technologies for producing electricity, a position they have held since 2018,” BNEF asserted.

Global average LCOE ranged from $42 to $48 per MWh for onshore wind and solar, compared to $92/MWh for natural gas-fired power, according to the firm.

The China effect

Global costs of offshore wind and coal-fired power have converged as Chinese demand, 57% of the global market, and vast manufacturing capacity have driven weighted averages downwards. China's offshore wind LCOE plunged to $65.7/MWh – $21 less than the rest of the world.

LCOE for coal-fired power meanwhile has risen on “stranded asset risk caused by stronger climate ambition worldwide,” BNEF noted, with both standing at $74/MWh.

Offshore wind’s global LCOE is distorted by China’s dominance, and costs in Europe and North America actually rose.

Renewable energy advocacy group American Clean Power Association (ACP) estimates US offshore wind LCOE at $98/MWh.

The world's second largest economy saw similar cost declines in onshore wind, which dropped to $34/MWh – 21% below other markets.

Increased pricing pressure from developers, a switch to larger 4-5MW platforms, and “fierce competition among manufacturers” drove turbine prices in China 61% below the $930,000/MW global benchmark.

BNEF noted that despite recent bumps, solar and wind costs will maintain their downward trajectories, plunging 50% by 2050 “thanks to continuing technology improvements, greater economies of scale and reduced financing costs.”

The research firm forecasts wind and solar both averaging $20/MWh across major markets by 2050, while offshore wind will plunge to an average of $37/MWh.