In chapter 7, Laura Paige highlights for Gail Fong the progress solar is making in producing electricity versus the use of fossil fuels (such as coal or natural gas):
“Patience, Gail,” Laura jumped right back in, “Don’t you see what good news this is for renewable energy advocates? The photon-to-electron conversion efficiency of sunlight is one of the most important metrics in driving down the dollar-per-watt costs of installations. It will make the cost of electrical production from solar cheaper than that produced by fossil fuels.”
This is fast becoming reality in 2015. It was reported by Bloomberg New Energy Finance (BNEF), in October of that year, that the Levelized Cost of Electricity (LCOE) for solar photovoltaic (PV) and onshore wind power technologies is approaching parity with gas-fired and coal-fired generation of electricity. In certain markets, there is no difference, and in fact, in others, renewable energy generation is cheaper than fossil fuel generation of electricity.
In both the United Kingdom and Germany, onshore wind is cost-competitive with either gas- or coal-fired generation. Renewable averages range in the lower $80/MWhs compared with fossil fuel ranges of $106 to $118/MWh. This is the first time that threshold has been crossed by a G7 economy. It is significant, especially since there are no subsidies for renewable energy involved.
In the U.S., however, coal- and gas-generated power generation possess an average LCOE of $65/MWh, almost half of that found in Europe, where carbon taxes and other environmental factors drive up the cost of fossil fuel-produced electricity. Onshore wind in the U.S. is comparable with that of Europe at $80/MWh while solar PV comes in at $107/MWh. So, for now, the reality in the U.S. is that fossil fuel electricity production has been favored.
The widespread adoption of renewable energy sources is effectively lowering the capacity factor for fossil fuels – the percentage of time a source is producing energy. As Tom Randall writes, “That's because once a solar or wind project is built, the marginal cost of the electricity it produces is pretty much zero—free electricity—while coal and gas plants require more fuel for every new watt produced. If you're a power company with a choice, you choose the free stuff every time.”
This situation has become a vicious cycle for the established utility operators who have traditionally favored centralized energy production: “As more renewables are installed, coal and natural gas plants are used less. As coal and gas are used less, the cost of using them to generate electricity goes up. As the cost of coal and gas power
rises, more renewables will be installed.”
Power companies face a dilemma. The shift in the winds, pun intended, forces the economics unfavorably when contemplating new investments in coal or natural gas power plants. In the past, a high capacity factor, characteristically associated with fossil fuel-driven plants, has simply been a fixed input in the cost calculation. That’s no longer the case. A billion-dollar power plant with a projected lifespan of decades may ultimately be used much less (a lower capacity factor over time) as time goes by than when it was first fired up.
The good news for renewable energy advocates: “Wind power, including U.S. subsidies, became the cheapest form of electricity in the U.S. for the first time last year . . .”
And solar energy as the next challenger to the status quo is not far behind.
[1] In the November 2015 study released by Lazard, their analysis (billed as version 9.0) essentially communicates similar results. As the authors of the study for the U.S. market write, “Over the last six years, wind and solar PV have become increasingly cost-competitive with conventional generation technologies, on an unsubsidized basis, in light of material declines in the pricing of system components (e.g., panels, inverters, racking, turbines, etc.), and dramatic improvements in efficiency, among other factors.”
“Patience, Gail,” Laura jumped right back in, “Don’t you see what good news this is for renewable energy advocates? The photon-to-electron conversion efficiency of sunlight is one of the most important metrics in driving down the dollar-per-watt costs of installations. It will make the cost of electrical production from solar cheaper than that produced by fossil fuels.”
This is fast becoming reality in 2015. It was reported by Bloomberg New Energy Finance (BNEF), in October of that year, that the Levelized Cost of Electricity (LCOE) for solar photovoltaic (PV) and onshore wind power technologies is approaching parity with gas-fired and coal-fired generation of electricity. In certain markets, there is no difference, and in fact, in others, renewable energy generation is cheaper than fossil fuel generation of electricity.
In both the United Kingdom and Germany, onshore wind is cost-competitive with either gas- or coal-fired generation. Renewable averages range in the lower $80/MWhs compared with fossil fuel ranges of $106 to $118/MWh. This is the first time that threshold has been crossed by a G7 economy. It is significant, especially since there are no subsidies for renewable energy involved.
In the U.S., however, coal- and gas-generated power generation possess an average LCOE of $65/MWh, almost half of that found in Europe, where carbon taxes and other environmental factors drive up the cost of fossil fuel-produced electricity. Onshore wind in the U.S. is comparable with that of Europe at $80/MWh while solar PV comes in at $107/MWh. So, for now, the reality in the U.S. is that fossil fuel electricity production has been favored.
The widespread adoption of renewable energy sources is effectively lowering the capacity factor for fossil fuels – the percentage of time a source is producing energy. As Tom Randall writes, “That's because once a solar or wind project is built, the marginal cost of the electricity it produces is pretty much zero—free electricity—while coal and gas plants require more fuel for every new watt produced. If you're a power company with a choice, you choose the free stuff every time.”
This situation has become a vicious cycle for the established utility operators who have traditionally favored centralized energy production: “As more renewables are installed, coal and natural gas plants are used less. As coal and gas are used less, the cost of using them to generate electricity goes up. As the cost of coal and gas power
rises, more renewables will be installed.”
Power companies face a dilemma. The shift in the winds, pun intended, forces the economics unfavorably when contemplating new investments in coal or natural gas power plants. In the past, a high capacity factor, characteristically associated with fossil fuel-driven plants, has simply been a fixed input in the cost calculation. That’s no longer the case. A billion-dollar power plant with a projected lifespan of decades may ultimately be used much less (a lower capacity factor over time) as time goes by than when it was first fired up.
The good news for renewable energy advocates: “Wind power, including U.S. subsidies, became the cheapest form of electricity in the U.S. for the first time last year . . .”
And solar energy as the next challenger to the status quo is not far behind.
[1] In the November 2015 study released by Lazard, their analysis (billed as version 9.0) essentially communicates similar results. As the authors of the study for the U.S. market write, “Over the last six years, wind and solar PV have become increasingly cost-competitive with conventional generation technologies, on an unsubsidized basis, in light of material declines in the pricing of system components (e.g., panels, inverters, racking, turbines, etc.), and dramatic improvements in efficiency, among other factors.”