For the solar and wind industries in the United States, it has been a long-held dream: to produce energy at a cost equal to conventional sources like coal and natural gas.
That day appears to be dawning.
The cost of providing electricity from wind and solar power plants has plummeted over the last five years, so much so that in some markets renewable generation is now cheaper than coal or natural gas.
Utility executives say the trend has accelerated this year, with several companies signing contracts, known as power purchase agreements, for solar or wind at prices below that of natural gas, especially in the Great Plains and Southwest, where wind and sunlight are abundant.
–
Here, Michigan Public Service Commission’s Julie Baldwin on the drop in Wind Energy prices:
Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources.
In Texas, Austin Energy signed a deal this spring for 20 years of output from a solar farm at less than 5 cents a kilowatt-hour. In September, the Grand River Dam Authority in Oklahoma announced its approval of a new agreement to buy power from a new wind farm expected to be completed next year. Grand River estimated the deal would save its customers roughly $50 million from the project.
And, also in Oklahoma, American Electric Power ended up tripling the amount of wind power it had originally sought after seeing how low the bids came in last year.
“Wind was on sale — it was a Blue Light Special,” said Jay Godfrey, managing director of renewable energy for the company. He noted that Oklahoma, unlike many states, did not require utilities to buy power from renewable sources.
“We were doing it because it made sense for our ratepayers,” he said.
Recently retired from Austin Energy, the municipal utility of the Texas capital, on how an integrated system works.
According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kilowatt-hour on the low end and coal at 6.6 cents. Without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kilowatt-hour at the low end, with wind at 3.7 cents.
Unsubsidized Levelized Cost of Energy from Lazard. Click for larger.
“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard, which has been comparing the economics of power generation technologies since 2008.
Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand. Alternately, conventional power sources produce pollution, like carbon emissions, which face increasing restrictions and costs.
But in a straight comparison of the costs of generating power, Mr. Mir said that the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”
Below, Energy Expert Doug Jester of 5 Lakes Energy, on why new energy is like the cell phone revolution.
In part utilities are waking up to renewables in response to customers, large and small, who are now starting to become energy producers themselves.
Pat Kennell’s motivation for installing sun power in his home is typical of the solar industry’s new customer: He did it to save money.
The retired police officer from Stony Point, New York, said his cost of energy per kilowatt hour will go from 20 cents with the local utility company to 13 cents with his new solar technology. And it didn’t cost him anything to install. The firm Kennell worked with, SolarCity, offered him a lease program, where customers with long-term contracts can have the equipment installed and maintained for free. Rivals of SolarCity offer similar programs.
“I needed to save money. I’m retired, my wife is 70, we needed to save some cash, and solar is good for the environment. I expect to save about 25 percent off my energy bill,” Kennell said.
Kennell isn’t alone. The residential solar market is on fire, with homeowners installing solar systems all across the country—sometimes trying to help the environment, other times just looking to save money. And while the trend has sent solar stocks on a tear, it could disrupt some traditional energy companies.
We should be thankful for any bit of good news, but all this is just cracks in the dam, not a flood. It’s going to be a long road as the economics plays out, and this kind of thing should give us pause.
“Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources”.
“can OFTEN compete”? That’s not going to cause me to take out a second mortgage and invest it all in alternative energy.
What I’m waiting to see is Shell, BP, Exxon-Mobil, and all the coal and NG companies start running for cover by doing what the tobacco companies did—-invest in food, hotels, insurance, and financial companies like Nabisco, Kraft, and Miller Brewing. The greedy rich will get rich no matter what their companies sell—-it doesn’t have to be fossil fuels.
“Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources.”
Wonder if there were ever any subsidies for fossil fuel?
You’re being sarcastic, of course. There have been huge subsidies for fossil fuels for decades, and globally at present they are in the neighborhood of 6 times the subsidies given to renewables, with ~9/10 of the total going to developing countries.
The problem in this country is that the FF folks have been sucking at the subsidy teat and getting fat for so long that it’s going to be hard to wean them. And since they have now bought themselves the Senate, we can expect the picture to deteriorate even more.
Lazard’s numbers have always been suspect, especially when it comes to solar.
Example: this year, Warren Buffet invested in the Topaz solar farm in California, a 550 MW utility-scale PV plant. Buffet raised $2.515 billion in two tranches from Wall Street investors, according to Bloomberg. That amounts to $4573/kW. Yet Lazard tells us that the capital cost for utility-scale solar PV is $1250-$1750/kW, about three times lower than that.
Here in Australia, renewables receive little or no subsidies but coal miners receive massive subsidies as do the energy companies converting it into electricity. The latter wouldn’t be able to operate if they didn’t and the former would take a hit if they collapsed. We are stuck in a ridiculous situation where the generators can use the threat of massive power blackouts to continue receiving handouts and they then subsequently stubbornly refuse to adapt to the ever greener market. At some point something will snap. When the wholesale price from coal fired power goes negative as highlighted in the below link, that snapping point gets ever closer.
Problem for the oil industry is that they are already mature and efficient, with little room for improvement and cost reduction.
Renewables on the other hand have tons of room for growth and efficiency improvements across the whole development lifecycle and market infrastructure, and with no supply limits on the source of its fuel.
If they are already competitive now, then the the future is bright and the fossil fuel industry will decline as demand for their products dwindle.
No wonder the shills and deniers are so vocal and hysterical – they’re going down.
If the latest about India is even close to accurate, they’re about to leave the West in the dust and to take full advantage of their terrific insolation.
RenewEconomy reports that they’re now planning to install ONE HUNDRED GW of solar by 2022!! I wouldn’t have thought this is achievable and wonder if they’ll have the transmission lines in place for all this.
The thread is turning towards the issue of integrating renewables into the context of our societies, a newly emergent economic and cultural system. This entails social, not just technical change. The changes have already begun in the form of decentralized, collaborative commons.
Alternative energy companies better keep looking back, because for every kilowatt they generate, one more kilowatt must be added to the potential grid from oil and natural gas source, to make sure that when thethe sun doesn’t shine or the wind doesn’t blow, there we energy there for the grid.
Alternative energy companies better keep looking back, because for every kilowatt they generate, one more kilowatt must be added to the potential grid from fossil fuel sources, to make sure that when the sun doesn’t shine or the wind doesn’t blow, there we energy there for the grid, at least until there’s some backup battery developed for households.
The grid has a sizable operating reserve built into it.
Until renewables become a much larger percentage of the total grid, there’s no need for a 1-to-1 additional reserve.
yI think if you talk to real engineers, you’ll find the grid was built in an era when America was a structured work environment, usually 6a.m. to 9 PM or so, and expected a fairly stable baseload, with minimal peaks and valleys, until the evening when baseload could be dropped way down. Listen to an investor who knows wind energy very well, J. Dwight, talking with Kim Greenhouse Of Rainmaking Time fame, http://bit.ly/1VsZMxb . Mr. Dwight obviously has great knowledge of economics, as well. You’ll see why wind energy is horrible for everyone, mostly users of it.
We should be thankful for any bit of good news, but all this is just cracks in the dam, not a flood. It’s going to be a long road as the economics plays out, and this kind of thing should give us pause.
“Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources”.
“can OFTEN compete”? That’s not going to cause me to take out a second mortgage and invest it all in alternative energy.
What I’m waiting to see is Shell, BP, Exxon-Mobil, and all the coal and NG companies start running for cover by doing what the tobacco companies did—-invest in food, hotels, insurance, and financial companies like Nabisco, Kraft, and Miller Brewing. The greedy rich will get rich no matter what their companies sell—-it doesn’t have to be fossil fuels.
“Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources.”
Wonder if there were ever any subsidies for fossil fuel?
You’re being sarcastic, of course. There have been huge subsidies for fossil fuels for decades, and globally at present they are in the neighborhood of 6 times the subsidies given to renewables, with ~9/10 of the total going to developing countries.
The problem in this country is that the FF folks have been sucking at the subsidy teat and getting fat for so long that it’s going to be hard to wean them. And since they have now bought themselves the Senate, we can expect the picture to deteriorate even more.
Ya think?
http://priceofoil.org/fossil-fuel-subsidies/
Great site. Another one to subscribe to.
Lazard’s numbers have always been suspect, especially when it comes to solar.
Example: this year, Warren Buffet invested in the Topaz solar farm in California, a 550 MW utility-scale PV plant. Buffet raised $2.515 billion in two tranches from Wall Street investors, according to Bloomberg. That amounts to $4573/kW. Yet Lazard tells us that the capital cost for utility-scale solar PV is $1250-$1750/kW, about three times lower than that.
Seriously, is this believable?
Lazard is in a long line. Yes. Lazard is believable, if you believe Citigroup and don’t hold to conspiracy theories.
“Investment bank Citi says solar and wind are competing on costs with fossil fuels in the U.S.”
http://www.greentechmedia.com/articles/read/citigroup-says-the-age-of-renewables-has-begun
Apparently Warren Buffet thinks there is nothing particularly conspiratorial about making money on renewables, either.
http://www.renewableenergyworld.com/rea/news/article/2013/04/what-does-warren-buffett-see-in-solar
The list is a lot longer than that.
Here in Australia, renewables receive little or no subsidies but coal miners receive massive subsidies as do the energy companies converting it into electricity. The latter wouldn’t be able to operate if they didn’t and the former would take a hit if they collapsed. We are stuck in a ridiculous situation where the generators can use the threat of massive power blackouts to continue receiving handouts and they then subsequently stubbornly refuse to adapt to the ever greener market. At some point something will snap. When the wholesale price from coal fired power goes negative as highlighted in the below link, that snapping point gets ever closer.
http://uknowispeaksense.wordpress.com/2014/07/07/solar-has-won-even-if-coal-were-free-to-burn-power-stations-couldnt-compete/
Problem for the oil industry is that they are already mature and efficient, with little room for improvement and cost reduction.
Renewables on the other hand have tons of room for growth and efficiency improvements across the whole development lifecycle and market infrastructure, and with no supply limits on the source of its fuel.
If they are already competitive now, then the the future is bright and the fossil fuel industry will decline as demand for their products dwindle.
No wonder the shills and deniers are so vocal and hysterical – they’re going down.
If the latest about India is even close to accurate, they’re about to leave the West in the dust and to take full advantage of their terrific insolation.
RenewEconomy reports that they’re now planning to install ONE HUNDRED GW of solar by 2022!! I wouldn’t have thought this is achievable and wonder if they’ll have the transmission lines in place for all this.
http://reneweconomy.com.au/2014/india-maps-giant-solar-parks-on-road-to-100gw-solar-target-92217
The thread is turning towards the issue of integrating renewables into the context of our societies, a newly emergent economic and cultural system. This entails social, not just technical change. The changes have already begun in the form of decentralized, collaborative commons.
Alternative energy companies better keep looking back, because for every kilowatt they generate, one more kilowatt must be added to the potential grid from oil and natural gas source, to make sure that when thethe sun doesn’t shine or the wind doesn’t blow, there we energy there for the grid.
Alternative energy companies better keep looking back, because for every kilowatt they generate, one more kilowatt must be added to the potential grid from fossil fuel sources, to make sure that when the sun doesn’t shine or the wind doesn’t blow, there we energy there for the grid, at least until there’s some backup battery developed for households.
The grid has a sizable operating reserve built into it.
Until renewables become a much larger percentage of the total grid, there’s no need for a 1-to-1 additional reserve.
yI think if you talk to real engineers, you’ll find the grid was built in an era when America was a structured work environment, usually 6a.m. to 9 PM or so, and expected a fairly stable baseload, with minimal peaks and valleys, until the evening when baseload could be dropped way down. Listen to an investor who knows wind energy very well, J. Dwight, talking with Kim Greenhouse Of Rainmaking Time fame, http://bit.ly/1VsZMxb . Mr. Dwight obviously has great knowledge of economics, as well. You’ll see why wind energy is horrible for everyone, mostly users of it.