The headline information making the rounds with this analysis is that building new wind and solar power, in some cases, is cheaper than running already built fossil and nuclear facilities. Well, we already knew that at pv magazine.
For instance, Indiana finalized their plans to shut down coal plants and exchange them renewable facilities because its “the most viable option for customers”. Colorado recently voted for retiring Xcel’s coal-fired Comanche Generating Station ten years early, which represents 660 MW of total capacity for two separate units at the site – again, for economic reasons. Carbontracker.org noted that all of the wind bids for the above Xcel RFP were cheaper than coal, and 74% of the solar bids were.
Yesterday, Lazard released its Levelized Cost of Energy (LCOE) analysis version 12.0 for Energy (.pdf), and Version 4.0 for Energy Storage (.pdf). The document shows that utility scale wind, solar offer the cheapest absolute electricity pricing – without subsidies. When federal tax subsidies are applied, essentially politically palatable forms of a carbon tax, we see all thin film solar cheaper than all gas, and the majority of crystalline silicon solar cheaper than gas.
Rooftop solar for residential and commercial, with its broad price ranges representing the broad classes of projects they cover, shows higher pricing. However, this analysis doesn’t consider the additional benefits including avoided costs achieved with behind-the-meter installations, and as such it isn’t a pure apples-to-apples comparison.
Nonetheless, even with this calculations handicap – unsubsidized rooftop commercial and industrial solar power is quite comparable to almost all new coal construction, cheaper than most nuclear, and even touches on the upper costs of combined gas. When considering federal, and state incentives where available, we start to see why rooftop corporate procurement was a growing solar sector in a mostly flat first half of 2018.
The document does make reference to emissions once – in the slide Cost of Carbon Abatement Comparison. The costs considered in the document were not pollution, health or social costs – but instead carbon avoidance costs. The document defined these values as ‘$26 – $34/Ton vs. Coal and $10 – $25/Ton vs. Gas Combined Cycle’. Lazard hypothesized, that if policy makers were to apply these market values to utility scale wind or solar, they would be great drivers toward renewable deployments.
The document notes a much lower price per kilowatt-hour (kWh), after applying carbon avoidance costs, of wind between 6.3-15.1¢/kWh lower vs gas and coal, respectively, and 2.5-11.7¢/kWh lower for solar vs gas and coal, respectively. These numbers are for unsubsidized wind and solar.
The analysis above assumes 60% debt at 8% interest rate and 40% equity at 12% cost. The document does describe its fundamental values that fed its calculations on the page, “Levelized Cost of Energy Comparison—Sensitivity to Cost of Capital“.
The Levelized Cost of Energy Storage 4.0 (.pdf) version gave significant information about how it came to its current form, and the assumptions that it used in determining the valuation. Additionally, significant time was spent differentiating across the various utility regions in the United States, as each of them have many nuances driving energy storage revenue.
The point that first jumped out from the above unsubsidized analysis was that, over the long term, flow and lithium ion pricing is much closer than headlines showing off projects being deployed are. This probably has much to do with lithium ion product availability due to intertwining nature with electric vehicles. This ought give us insight into a brewing competition that will benefit the industry, and might provide us with complementary technologies offering contrasting benefits – much like wind and solar.
All of these costs come from a history that Lazard also shows. One thing to note is that utility scale solar power is catching up with the ultra low pricing of wind power. Over the last decade the three cost leading energy sources – wind, solar and combined cycle gas – saw price decreases of 69%, 88% and 30%, respectively.
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I read PV every day! You and partners do great job keeping us updated, everyday! Like this Lazards’ article!
Grateful for your work!
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One of the things that has surprised me is the degree to which our captains of industry have been caught off guard by the the wind/solar revolution. Off course solar pv in particular’s rapid cost reductions and ability to complement base-load/peaking grid infrastructure, even without any dispatchable backup, was one aspect of their oversight. The concomitant reductions in the cost of dispatchable battery technology that can be deployed independently of intermittent energy sources that in the foreseeable future will make mass unsubsidized utility scale deployment economically feasible totally obviating solar and wind’s intermittent grid characteristics is another.
A third, which I have never seen discussed at a strategic policy level, is the inherent deficiency of levelized cost which doesn’t account for the risk, which we’re now seeing play out, that the production facilities of variable-cost thermal power production can become stranded assets magnifying economic losses if energy prices drop below a certain threshold, the fixed cost nature of solar and wind mean that even if pricing models were over-optimistic, some relatively large portion of the cost of those facilities can still be recovered since the power they generate is essentially free. That aspect is unfortunately it’s usually totally ignored when cost comparisons are made between fossil fuel and renewable sources.
Lazards figures don’t account for existing generation, which means they’re not counting the entire lifespan of production, otherwise their figures would be lower on most forms of production, not only this but they don’t account for externalized costs which would show you that wind and solar are, in fact, behind most of everything else except the most expensive of the fossil fuel generation methods. I don’t agree with the usage of fossil fuels by the way, I’m all for renewables and nuclear, but it serves no one to disseminate data that was calculated in one way that has little to do with the point we’re trying to make as evidence for it.
Renewables and nuclear cause little pollution, thus they kill much less people, about 100 times less in fact, so even if it was a little more expensive we only need to ask ourselves if we would rather pay for example 30% cheaper power or live a few years less because we died from coal/oil pollution that caused us cancer and respiratory diseases.
You can’t realistically show a cost for MWh without considering that intermittency means that renewables need either complementary CCGT or an inordinate amount of energy storage (about a third of their total energy annual production if you want it to account for seasonal variability). Add to that new , long, grid lines to account for the fact that renewable resources are usually far from cities, and you get a lot of externalities that are sadly almost never considered in analysis. Only Bloomberg 2017 did an analysis on the cost of renewable with storage included, and it was 4h storage to account for daily peaking and some daily variability. With 4h storage, solar went from 40 to 200 $ /MWh. And that is only to “fix” the inherent daily curve. If you get a low wind, cloudy day , which can be as much as one tenth of the irradiation, your 4h battery won’t do much and you’ll have to start your CCGT. Consider that those conditions (low wind-cloudy days) can and have lasted for as a long as a month. Then start adding seasonality, which is lower for wind but is a factor of 8 for solar in most of northern europe, and you start getting some very different numbers.
In short, those LCOE numbers are extremely questionable and i can’t help but wonder why a lot of the industry push those with unwavering faith. It’s hard to even calculate an effective cost of renewable + externalities because it seems like no one is bothering to account for externalities in the first place. That’s not good planning.
The numbers include storage as well.
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