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Concentration of CO2 in the Atmosphere

Plummeting Cost of Renewable Energy Plus Storage

By George Harvey

Watching the progress of a no-hitter in baseball has an unusual aspect to it. The exciting thing is that nothing new happens. The moment the game changes, the excitement ends.

 That is how it has been with the prices of electricity from renewable power. The costs of solar and wind power have just kept going down. And since they have just kept doing that, we could see that sooner or later, a situation called “grid parity,” the point at which further investment in fossil fuels becomes increasingly uneconomical, would be achieved.

Now, the whole game for renewable energy is changing. But unlike the no-hitter, where a hit could spoil the excitement, it has become even more exciting. The prices bid for electricity from solar photovoltaics (PVs), wind power, and batteries have not hit record lows that could have been predicted. They have hit new lows at levels few people imagined only months ago.

Xcel Energy operates four utilities in eight states, mostly in the Midwest. Last year, it decided to close down some coal-fired generating plants, and put out bids for capacity to replace them.

The amount of power to be bid on was huge. They asked for proposals on 238 projects, with a total of over 58 gigawatts, to be completed within five years. Of the total in the bids, less than 6% was to be powered by fossil fuels. Stand-alone battery storage accounted for 3.3%. Nearly all of the rest consisted of various combinations of PVs, wind power, and batteries.

As shocking as the size of the solicitation was, it was the bids themselves that were most impressive. The bids for wind, solar, and batteries were astonishingly low.

We should review the numbers from Lazard Associates to put the new numbers into context. The most recent were published last November and can be found at http://bit.ly/LCOE-11. They report levelized costs of electricity, meaning that the costs of subsidies and tax breaks are included to make overall costs comparable, and the prices they cite are for the wholesale market.

I have translated them here to prices in cents per kilowatt-hour (¢/kWh), because that is what most people are used to. They put the cost of utility-scale solar power in 2017 in the range of 4.3¢/kWh to 5.3¢/kWh. With battery backup, solar is put at 8.2/¢/kWh. Wind power is at 3¢/kWh to 6¢/kWh. By contrast, the least expensive fossil fuel, combined cycle natural gas, is in a range from 4.2¢/kWh to 7.8¢/kWh.

The bids for the Xcel solicitation are far lower. For the median bids, meaning that half of the bids were at or above the figure, and half were at it or lower, the cost for wind power was 1.81¢/kWh. For wind power with battery backup, the median cost was 2.1¢/kWh.

This means that half the bids for wind power, with batteries, were below a price that was only half the lowest cost for the least expensive fossil fuel. A list of other prices is available in the article, “This is How Wind and Solar Energy will Crush Fossil Fuels,” at the investment site, Motley Fool. It can be found at http://bit.ly/crushing-fossil-fuels.

There are many caveats about these numbers. The Xcel bids were not levelized, and so are not directly comparable to those at Lazard, though we should note that the incentives and tax credits will run out well before 2022, so we can assume that they have no effects on the bids. The people making the bids are doing so based on estimates of how the prices will change. We do not know what effects will be from the tariffs President Trump ordered on solar panels, and there are other contingencies we cannot judge.

Nevertheless, it is clear that times are changing rapidly. We are entering a time fossil fuels are no longer competitive with renewables. They are not even in the same ballpark.

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