Finally, a Positive Feedback That Really is Positive: Wind, Sun, Now in Driver’s Seat

Readers of this blog are familiar with the (not so) “positive feedback” effects that exacerbate climate change – for instance, as arctic ice melts, more open water, which absorbs more heat, which melts more ice, etc, or melting permafrost, which creates more GHGs, which melts more permafrost -etc.
Now, finally we’ve identified a positive feedback that really is positive – Solar and wind energy are now in a virtuous cycle with relation to fossil fuels.

Washington Post:

A new analysis suggests that we continue to move into a world in which it makes more economic sense to draw electricity from the sun or the winds, rather than from fossil fuels.

The report, from Bloomberg New Energy Finance, examined the “levelized cost of electricity” around the world in the second half of 2015 — a metric that seeks to take a comprehensive look at costs including capital expenditures, interest rates and operating costs. It’s an approach that is able to “put technologies on a level playing field and enable that comparison, which is valuable,” says Seb Henbest, head of Europe, Middle East, and Africa analysis for Bloomberg New Energy Finance.

The report was based on analysis of some 55,000 projects around the world, says Henbest. And it found that globally, onshore wind now on average costs $83 per megawatt-hour of electricity ($2 cheaper than in the first half of the year), and thin film solar photovoltaics costs $122 per megawatt-hour — a drop of $7 in just half a year.
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Nonetheless, the pattern is changing, and as Henbest explains, once there are more renewables online, there can actually be a process in which their utilization undermines fossil fuels. That’s because renewable installations don’t require any fuel to operate, and thus don’t have that recurring cost that fossil fuel-fired generation has.

So as renewables bid in low to supply power to the grid, they come to supply more of it — meaning that fossil fuel plants operate less.

Bloomberg Business:

Second, the shift illustrates a serious new risk for power companies planning to invest in coal or natural-gas plants. Historically, a high capacity factor has been a fixed input in the cost calculation. But now anyone contemplating a billion-dollar power plant with an anticipated lifespan of decades must consider the possibility that as time goes on, the plant will be used less than when its doors first open.

Most of the decline in capacity factors is due to expensive “base-load plants that are being turned on less because of renewables,” according to BNEF analyst Jacqueline Lilinshtein. Plants designed to come online only during the highest demand of the year, known as peaker plants, play a smaller role. In either case, the end result is that coal-fired and gas-fired electricity is becoming more expensive and the profits less predictable.

The opposite is true of wind and solar, as well as new battery systems that can be paired with renewables to replace some peaker plants. Wind power, including U.S. subsidies, became the cheapest electricity in the U.S. for the first time last year⁴, according to BNEF. Solar power is a bit further behind, but the costs are dropping rapidly, especially those associated with financing a new project.

The economic advantages of wind and solar over fossil fuels go beyond price.⁵ Still, it’s remarkable that in every major region of the world, the lifetime cost of new coal and gas projects⁶ are rising considerably in the second half of 2015, according to BNEF. And in every major region the cost of renewables continues to fall.