Dept. of Energy’s Analysis Says Wind and Solar Not Competitive

The Dept. of Energy’s Energy Information Agency (EIA) publishes their take on the relative cost of electrical generation systems every year.  This year’s “Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011” forecast the dollars per megawatthour prices from different sources of electricity in the year 2016.  The EIA use 2016 because the long lead-time for some technologies are such that they could not be brought on before 2016 unless they were already under construction.

Lets cover some terms here to make sure we understand, before we look at the Levilized cost table, what criteria the EIA used to assemble it.

Levelized cost is often cited as a convenient summary measure of the overall competiveness of different generating technologies.  Levelized cost reflects overnight capital cost, fuel cost, fixed and variable O&M cost, financing costs, and an assumed utilization rate for each plant type. For technologies such as solar and wind generation that have no fuel costs and relatively small O&M costs, levelized cost changes in rough proportion to the estimated overnight capital cost of generation capacity. For technologies with significant fuel cost, both fuel cost and overnight cost estimates significantly affect levelized cost. “

(Overnight capital cost is the total cost, even if it took several years to build, as if it could be built in one day.)

“The availability of various incentives including state or federal tax credits can also impact the calculation of levelized cost. The values shown in the tables below do not incorporate any such incentives.  .”

A 3% penalty is added to fossil fuel plants that have high CO2 emissions, and that adds to the “ …. cost terms      its impact is similar to that of a $15 per metric ton of carbon dioxide (CO2) emissions fee when investing in a new coal plant without CCS,..   The adjustment should not be seen as an increase in the actual cost of financing, but rather as representing the implicit hurdle being added to GHG-intensive projects to account for the possibility they may eventually have to purchase allowances or invest in other GHG emission-reducing projects that offset their emissions.”

This chart gives renewables no credit for available subsidies and fossil fuel plants(coal and natural gas) are penalized for CO2 emissions.

The “total system levelized cost”–  the last column in the chart– is the forecast cost of electricity in 2009 $/megawatthour for each of the examined “plant types”.

The first three natural gas cases would be considered standard power generating facilities and their prices range from $66 to $89 per megawatthour.   The next two are “backup/peak” cases. These unit are natural gas driven turbines designed to be put rapidly into or taken out of service in order to  meet a rapid change in customer electrical demand OR  an unexpected change in supply of electricity.  These turbines are not something you want on-line like a major coal, nuclear or natural gas power generating plant because of their high cost,  but the major plants are not flexible enough to meet rapid demand changes.  In the past, the need for these turbines was, although not exclusively,  to manage rapid demand increases.   But now that wind and solar power are now mandated to be in the mix,  irregular swings in supply must  also be met.  The wind can quit blowing or the sun quit shining resulting in rapid changes in supply that cannot be predicted.   At this time, if the electrical system is required  to take on an electrical supply from either or both wind or solar, the system operators typically have to install matching turbine capacity to meet the swings introduced in the supply by these renewables.

The column labeled “capacity factor” represent the percentage of the rated capacity that is actually delivered by the various types of facilities.  The totally reliable system would operate at capacity 100% all of the time. The major fossil fuel power plant’s inability to produce at rated capacity occurs about 15% of the time.  Often the majority of this loss is due to planned shutdowns for annual maintenance.

Further examination of the chart shows that only the plant type onshore “Wind”   ($97/megawatt hour) is in the ballpark versus the cost for fossil fuel based power-generating facilities.  And none of the wind or solar cases exceeds a capacity factor of  34%,  with solar thermal at 18%.   Many critics say that 34% is misleading high because wind can not be banked upon to meet peak system demand.

What can we conclude from the Department of Energy’s EIA calculations?   Neither wind nor solar are cost competitive versus fossil fuel plants.   And this is likely to remain unchanged for a long time to come.  Through lavish use of subsidies, these facilities can be made to look competitive. However, no matter how the renewable cost looks after subsidies, you are still paying the non-competitive difference as the Federal and State governments are using your tax money to pay for the subsidies.

A final thought on the EIA analysis.  In the real world, duplicate fossil fuel capacity has to be added to match renewable electric supply because it is undependable.  So the backup unit capital cost should be charged against the wind and solar cases to make this comparison reflect reality.  That, of course, would make these renewable energy cases look even less competitive.

To read the EIA levelized cost report click here.


One response to “Dept. of Energy’s Analysis Says Wind and Solar Not Competitive

  1. Actually, what the AEO2011 shows is that wind and solar are not (currently) competitive with natural gas. However, they are more than competitive with the other half of fossil fuel generation: new coal generation plants. In the right locations (most of the Great Plains), the AEO2011 notes that wind has a LCOE of $0.819/ kWh. A new advanced coal plant (which meets current EPA standards but does not address carbon capture… I’ll leave carbon capture costs out of the equation for the climate change deniers) will range from $0.101/kWh to $0.122/kWh.

    And solar PV has a LCOE of $0.158/kWh in the solar resource rich Southwest. Not too bad, especially when you consider the fact that PV panel costs are dropping rapidly. It will be interesting to see what the PV LCOE is in the next AEO (due in april 2012).

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