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On the economics of wind and solar power — by Lion Hirth
“Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?”
November’s COP22 climate summit of Marrakech gave climate policy fresh tailwind, after the blow of Donald Trump’s election. Even without a strong global treaty, national climate policies are multiplying — at least a certain type of policies. While the policy that economists often recommend — putting a price on greenhouse gas emissions — remains patchy, as a recent World Bank report shows, subsidies for renewable energy are booming: no fewer than 145 countries support renewables today. Germany’s Energiewende is a prominent, but not the only example: Obama’s Clean Power Plan features renewables as a centerpiece of climate policy, India’s National Solar Mission includes a 100 GW solar power target. In addition China is said to be considering a 200 GW target, and Morocco has announced the building of the largest solar power facility on the planet. Nearly half of all newly added electricity generation capacity was based on renewables. In ten countries, wind and sun deliver more than 10% of electricity consumed. These includes Denmark (43%), Portugal (24%) and Spain (23%).
Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?
On the cost side, the economics of renewables look impressive. The costs of wind power have dropped significantly. On average, wind now generates electricity at $70–80 per Megawatt-hour (MWh) globally, as reported by the two international think tanks IRENA and IEA. Ten years ago, a roof-top solar array for a single family home cost more than $50,000 — today it sells for less than $14,000. (America’s LBNL and Germany’s Fraunhofer ISE provide more data.) Germany, which receives less solar radiation than southern Canada, now generates solar power at $90 per MWh. The United Arab Emirates have tendered a solar power station for $58 per MWh and recent auctions in Chile, Peru and South Africa have resulted in even lower prices.
In some countries, wind and solar power are now cost-competitive with coal- and natural gas-fired power plants, even when carbon emissions are not priced. However, cost structures are very country-specific, and cost-competitiveness is not universal. Renewables tend to be cheaper where it is windy or sunny, where investors have access to low-cost finance, where fossil fuels are pricey, and where emissions are priced. In many places, however, coal-fired power plants remain the cheapest option for producing electricity, driving the renaissance of coal. Still, for renewables to have caught up with fossil plants in cost terms represents a huge success for wind and solar power.
Costs are, however, only one side of the competitiveness equation. The other is value. Merely comparing electricity generation costs between different plant types is misleading, as it ignores the fact that the economic value of electricity from different power stations is not the same. This is because on wholesale markets the price of electricity fluctuates from hour to hour (or even minute to minute). Some power plants produce electricity disproportionately at times of high prices (so called “peaking” plants), while others produce constantly at low prices (“base load” plants). This little detail has striking consequences for the economics of wind and solar power. Paul Joskow and Michael Grubb observed this a while ago.
On the value side, the outlook for renewables is…
Bipartisan Governors Urge Trump to Support Renewable Energy
Bipartisan support grows in the U.S. due to falling renewable energy costs combined with massive job growth in solar and wind power manufacturing and installations across the country.
As recently as Sunday, February 12, 2017 wind power provided over 50 percent of the 14-state Southwest Power Pool (SPP) grid — and that percentage doesn’t include renewable energy production from hydro-power, geothermal, nuclear power, geothermal energy, biomass nor other clean energy types.
“Ten years ago, we thought hitting even a 25 percent wind-penetration level would be extremely challenging, and any more than that would pose serious threats to reliability. Now we have the ability to reliably manage greater than 50 percent wind penetration. It’s not even our ceiling.” — SPP Vice President of Operations Bruce Rew, in a statement.
Rural landowners make $222 million per year renting their land for wind turbines. The solar energy industry added more than 30,000 jobs last year, employing more than 200,000 people. A group of Republican and Democratic governors focused on these and other economic points in a letter to President Donald Trump on Monday, urging the Republican climate… (more…)
Offshore wind energy in Europe is a mature industry – but the U.S. has yet to dip its toe in the water. Until now
Connecting Block Island RI to the mainland grid for the first time – will provide reliable, renewable energy that will reduce island electric rates by an estimated 40% and diversify Rhode Island’s power supply.
No longer will this beautiful island community need to rely on diesel energy. The Block Island Wind Farm will reduce harmful emissions and provide clean energy for one of America’s Last Great Places. — From the DeepwaterWind website