In my Clean Energy Standards article in our 2012 Renewable Energy Handbook I discussed how turbine OEMs and their supply chains are working to get the cost of wind generated power lower than that from natural gas.
This is something I’ve heard commonly discussed at tradeshows. However, one reader sharply noted that renewable energy may already cost less than fossil fuels, depending on how you look at it. I’d like to share his comments with you.
Perhaps the fossil fuel cost of electricity is now higher than that from solar or wind if we do an apples to apples comparison. That is if one source has a 20 or 25 year PPA or guarantee on power production, the other electricity source needs to have the same PPA or guarantee time. The natural gas and coal prices can be guaranteed for a few years by means of commodity futures exchange markets, but I am not aware of anyone giving a fixed price for fossil fuel for 20 to 25 years. If you know of this being done I would be very interested. A possible criticism of this argument is that fossil fuel power is not subject to down time due to darkness or calm winds, however if we combine pumped hydro with solar or wind we can still have a nearly continuous power flow. Along this line, I think closed loop pumped hydro has a great future and perhaps someone you know could help promote it:
“The only way to store a significant amount of energy is by having a large body of water located on a hill relatively near, but as high as possible above, a second body of water. In some places this occurs naturally, in others one or both bodies of water have been man-made. Projects in which both reservoirs are artificial and in which no natural waterways are involved are commonly referred to as ‘closed loop’.” –Wikipedia
I think this gentleman makes a valid point. What are your thoughts WPE&D readers?
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Barry Bielat says
In the past five years, mainly due to incentives, renewable projects have become much more cost effective. Kathleen is spot on as the only long term energy hedge is wind, solar, hydro, etc. Common sense mandates that we build renewable energy projects, that do not harm the environment,create a domestic source of power, and create employment opportunity. The sun and wind will be the preferred feedstock as fossil fuel feedstocks escalate.
Barry Bielat of BSC CLEAN ENERGY, LLC places financing for energy power plants from $4 million to $ 500 million.
Mark Ringenberg says
Wind Powered generation does not require a water source, as does coal, nuclear, etc. So the impact on this resource is negated.
Steve Oaks says
Kathleen, I have heard of pumped hydro, but don’t know of where it has been in operation for long enough periods to prove its value proposition. However, it seems that such a project was attempted in the Palm Springs area where many turbines have been in operation for a few decades. When one climbs up on the hills above I-10 to the Northwest, they can look down to see several troughs of water in the desert, where I imagine pumped hydro was attempted years ago. I asked someone if those water troughs were actively filling each other from the surrounding wind turbines and was told they were never activated.
So, with all the money our govt. spends on testing, wouldn’t there be active pumped hydro projects that can tell you the financial benefits?
Doug Selsam says
Seems like the topic shifts from wind to pumped hydro.
Cheap energy storage is needed to make wind more viable, on the one hand.
But then again, if you have cheap energy storage, you can store off-peak power that is probably cheaper than wind energy anyway.
A flaw in this cost of energy analysis that has been done to make wind look closer to the cost of fossil fuels is that it does not factor in the limited revenue potential of wind versus alternative sources in the real-time markets (long-term PPAs being a hedge/financial product against uncertainties in values in this real-time market). This would consider not only the revenue potential of the energy itself, but the capacity value and other ancillary products that are priced in markets like PJM and MISO (e.g., voltage support). Wind provides limited value in terms of capacity and ancillary products (but for the renewable energy credit value), and is less attractive than almost all other sources in terms of the energy value on a $/MWh basis.
Relative to a baseline of buying a fixed contract for around the clock capacity and energy, nuclear would be close to this value as it is nearly always generating electricity (except for outages during the shoulder months, which causes average revenue to be slightly above the baseline). Due to economic dispatch considerations, coal would have a revenue profile above that (generally baseload, but ability to ramp up and down depending on the market cost of energy), combined cycle above that, then solar and peaking natural gas units (btw, the worst analysis I saw was comparing a peaking unit with an assumed cost of over $200/MWh against wind, but the over $200 coincides with a similar type of revenue profile). On the opposite side, you have wind, which in all but certain limited exceptions (e.g., Santa Ana winds) generates more electricity when the revenue value of that electricity is low (overnight, non-summer months).
If you also want to compare the cost of wind as you have pumped storage as a capacity alternative, make sure you bring in the cost of that resource. Also, good luck getting that type of facility permitted. Not many places in the windy Midwest are there mountain valleys just waiting to be dammed up.
This is not to dismiss that the cost of wind has indeed come down since 2007-2009, but one must consider the socialized costs of transmission and the revenue impacts as well, which still makes wind an expensive social product.
Mike Barnard says
How about $0.055 / kwh for new wind generation? That’s what Brazil saw recently when 80% of contracts in an energy auction for new built generation capacity went to wind capacity over fossil fuel and hydro projects.
How about $0.03 / kwh for wind? That’s what a recent study shows wind in the US is trending toward with the level-the-playing-field tax breaks that are in place.
Compare this to the fossil fuel prices and you see that wind is not only cheaper, but can be much cheaper.
Shane Mulligan says
Gene, nuclear is one of the most contentious, because it seems nobody is willing to price in the risk (however slight) of a Fukushima. The Clean Air Alliance Ontario has done some calculations and claims *new* nuclear power will likely cost between 19 and 37 cents. See the report on Darlington Rebuild at http://www.cleanairalliance.org/. This price does not include disaster insurance, which is effectively underwritten by the taxpayer/nature. I wish you luck.
Kathleen Zipp says
Another great point from LI:
This may or may not be true. However, the key issue with wind power, after grid problems and nimby concerns are solved, is energy density. We need GW sources and fossil fuel stations are far more compact. The land area needed for PVs or turbines is huge in comparison, and pump storage (noted in your article) adds to this cost and land use. Renewables still have a great contribution to make, but we have be clever about how we integrate them into our structures, land use, and society.
Posted by Leighton Cochran
Kathleen Zipp says
One gentleman shared some good points on Linkedin:
Wally Lafferty • Interesting point, Kathie. I agree with the premise that wind (and maybe solar) are cheaper than fossil fuels if you make a level comparison, normalized on all variables. The way the cost of energy is calculated for fossil fuels does not take into consideration all of their lifecycle and environmental costs, as is the case with wind energy.
Currently, coal is considered to be the cheapest energy resource in the US, but according to Harvard professor Dr. Paul Epstein in an article published in the Annals of the New York Academy of Sciences, an accountability of the full lifecycle cost of coal would add another 17.8 cents per kWh of electricity produced. This would make coal the most expensive resource of all.
I grew up in the mountains of Virginia, not far from the West Virginia coal mines. In just my lifetime, nearly 500 mountains have disappeared from the Appalachain chain due to coal mining. Those 500 mountains simply no longer exist. Yet, the loss of these mountains doesn’t appear in any variable in the cost of energy calculation. Neither do the costs associated with ground water pollution, which is a cost to the local mining communities’ water treatment facilities. And so on.
Hi. Yeah it is ofcourse the fossil fuel will help us for couple of decades not more than tat but cv the same time the renewable energies like wind or solar or tidal there production will not be sufficient to meet the requirement.
China along with 7 other countries is trying to make the nuclear fusion reactor and if they will succeed in making tat the power crisis will be over.
Gene Stone says
Kathleen do you have a effective chart that shows the cost of renewable energy opposed to nuclear and fossil fuel? If so I would like to have one to post on my website. We are actively engaged in in the effort to close down the two nuclear power plants on fault lines and in tsunami zones here in California. We have been looking for a really good and effective chart, if you have one I would appreciate your help with this matter. Thank you for your article.