Lazard Reports Significant Drop in Battery Storage Costs Due to IRA, Uncertainty Over Domestic Content Provisions Remains

Lazard has reported that the IRA has brought the LCOS of a utility-scale 100MW, 4-hour duration battery energy storage system (BESS) down as low as US$124/MWh for projects that include ‘energy community’ adders to the investment tax credit (ITC) rate. The highest LCOS calculated for subsidised projects of that scale was US$226/Mwh. Lazard also noted that there is uncertainty over domestic content provisions and how they will be applied. The report also highlighted more variability in LCOS between its low-end and high-end modelling than in previous years, attributed to cell and raw material cost declines at the low end and rises in EPC costs due to workforce shortages, tighter delivery timelines, and prevailing wage requirements to meet ITC eligibility requirements at the high-ends. The impact on policy developments such as the raising of Section 301 tariffs on imported cells from China is yet to be seen.