Guest Post by Willis Eschenbach
The “Annual Energy Outlook” for 2011 is just out from the US Energy Information Administration. The section called “Levelized Cost of New Generation Resources” looks at what are called the “levelized” costs of electric power from a variety of sources. Their study includes “renewable” sources like solar, although I’ve never found out exactly how they plan to renew the sun once it runs out. The EIA data in Figure 1 shows why solar will not be economically viable any time soon.
Figure 1. Levelized costs of the different ways of generating power, from the EIA. Blue bars show the capital costs for the system, while red bars are fuel, operations, and maintenance costs. Estimates are for power plants which would come on line in five years. Operation costs include fuel costs as appropriate. Background: HR diagram of stars in the star cluster M55
“Levelized cost” is a way to compare different electrical generation technologies. It is calculated by converting all of the capita costs and ongoing expenses for the project into current dollars, and dividing that by the amount of energy produced over the lifetime of the plant. For the mathematically inclined there’s a discussion of the various inputs and calculations here. Levelized cost is the all-up cost per kilowatt-hour of generated power. The levelized costs in Fig. 1 include transmission costs but not the costs of backup for intermittent sources.
So why is this chart such bad news for solar electricity? It’s bad news because it shows that solar won’t become cheap enough to be competitive in the open market any time in the near future. Here’s why.
Now, please don’t get me wrong about solar. I lived off the grid for three years on a houseboat with solar power in Fiji, collecting sunshine and drinking rainwater. I am a solar enthusiast and advocate, there are lots of places where it is the best option.
But not on the grid. It’s too expensive.
Yes, it’s true that the sunshine fuel is free. And the operations and maintenance is cheap, 2 cents a kilowatt-hour. And as backers are always claiming, it’s the only technology where the capital cost is falling rather than rising, as the price of solar cells drops.
But here’s the problem. Solar cell prices have already fallen so far that only about thirty percent or so of the cost of an industrial-sized solar power plant is solar cells. The rest is inverters, and wiring, and racks to hold the cells, and the control room and controls, and power conditioners, and clearing huge areas of land, and giant circuit breakers, and roads to access the cells, and the site office, and half a cent for the transmission lines from the remote locations, and labor to transport and install and wire up and connect and test all of the above, and …
That means that out of the twenty cents of capital costs for solar, only about six cents is panel costs. Let us suppose that at some future date solar panels become, as they say, “cheap as chips”. Suppose instead of six cents per kWh of produced power, they drop all the way down to the ridiculous price of one US penny, one cent per kilowatt-hour. Very unlikely in the next few decades, but let’s take best case. That would save five cents per kWh.
The problem is that instead of 22¢ per kWh, the whole solar electric system at that point would have a levelized cost of 17¢ per kWh … and that is still two and a half times the price of the least expensive option, an advanced combination cycle gas turbine.
Finally, this doesn’t include the fact that when you add an intermittent source like solar to an electrical grid, you have to add conventional power for backup as well. This is so you will be sure to still have power during the time when the sun doesn’t shine. Even if you never use it, the backup power will increase the cost of the solar installation by at least the capital cost of the gas plant, which is about two cents per kWh. That brings the levelized cost of solar, IF panels dropped to a levelized cost of only one penny per kWh, and IF the backup generation were never used, to 19¢ per kWh … and that’s way more than anything but offshore wind and solar thermal.
However, it gets worse from there. The cost of fuel for the gas advanced cycle power plant is only about 4 cents per kWh. So even if gas prices triple (which is extremely unlikely given the advent of fracking), the gas plant cost will still only be about 14¢ per kWh, which is still well below even the most wildly optimistic solar costs.
And that means that the dream of economically powering the grid with solar in the near future is just that—an unattainable dream. The idea that we are just helping solar get on its feet is not true. The claim that in the future solar electricity will be economical without subsidies is a chimera.
w.
PS—On a totally separate issue, I suspect that the maintenance costs for wind power are underestimated in the report, that in fact they are higher than the EIA folks assume. For example, both wind and water are free, and the EIA claims that wind and hydro have the same operation and maintenance cost of about one cent per kWh.
But with hydro (or almost any other conventional technology) you only need to maintain one really big generator on the ground.
With wind, on the other hand, to get the same amount of power you need to maintain dozens and dozens of still plenty big separate generators, which are stuck way up at the top of really tall separate towers … and also have huge, hundred-foot (30 m) propeller blades whipping around in the sky. You can imagine the trek you’ll have when you forget to bring the size #2 Torx head screwdriver …
Do you really think those two systems, both feeding the same amount of power into the grid, would cost the same to maintain? Check out the windfarms and count how many of the fans are not turning at any given time …
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Willis writes “Running costs for solar are currently about 2¢ per kWh. You said they would reduce. ”
Come on Willis, get a grip. From your original diagram, do you seriously think that running costs of Coal at 3c vs running costs of Solar PV at 2c is correct?
WTF Wills? “I was responding to Tim, who seemed to think that there were only advantages to distributed generation, and no disadvantages or hidden costs in distributed generation. ”
You’re the one who brought up the disadvantages of many generators connected to the grid without mentioning the fact the added redundancy was also a good thing.
Chris Harries says:
December 6, 2011 at 2:05 pm
Thanks, Chris. That’s why the chart refers to “Generation Resources”, because it is discussing electrical generation. In fact, that’s the subject of this thread. Which is why hot water is not on the chart.
It is true that in places where energy is routinely wasted, there is often “low-hanging fruit”, places where conservation is a cheap, hugely efficient no-brainer.
In the rest of the world, however, this is not true. People at the lower end of the economic spectrum (AKA most people on the planet) have very little slack in any of their budgets, energy or otherwise. They picked the low-hanging fruit generations ago.
Finally, while your point is well taken that conservation is generally cheaper than generation, here in California our power prices are going through the roof because of green fantasies. You’ll excuse me if I find that to be a separate and independent topic that is as deserving of discussion as is conservation.
So what I do on WUWT is pick and discuss one thing at a time (as much as is possible in this interconnected world). This does not mean the other things are not important. It also does not make the discussion have “limited horizons”. Our horizons are the same … we’re just discussing things one at a time. This thread is about electrical generation.
Thanks,
w.
TimTheToolMan says:
December 6, 2011 at 4:21 pm
What on earth does coal have to do with your claim that solar costs will reduce? Let’s get that out of the way before you run off to discuss coal.
As to the coal costs, coal is very cheap per kWh. Why do you think it is used all over the planet as an energy source? Why do you think the Chinese are building one coal fired plant a week? I suspect that the EIA figures are not too far wrong. It’s a mature technology, there’s got to be tons of data on the costs of coal. So yes, I do think they are definitely in the ballpark for coal.
Now, could we return to your claim that solar running costs will reduce?
w.
Spector says:
December 6, 2011 at 2:46 pm
Take a look at the amount of natural gas that has recently been discovered. Take a look at the entry of the Canadian tar sands, larger than Saudi Arabia, into the equation. You’re not keeping up with the times, my friend. For the first time since the 1970’s, the US is about to become a net exporter of refined petroleum products. Your claim is simply wrong.
Since we also have energy available from nuclear fission (and perhaps fusion as well), I don’t see why you are limiting your analysis to the sun.
In any case, 100 watts per sq. yard (or square metre) as a total recoverable solar yield seems high. Let me think about that.
Louisville, Kentucky is in the mid-latitudes, around 40 N. Total insolation is about 4 kWh / m2 / day. This gives 4000 watts divided by the number of hours in a day, which gives an instantaneous average energy produced of about 170 watts / square metre over the 24 hours.
A typical solar system might have an efficiency of 10% or so, which means that currently we could harvest about 17 w/m2 in Louisville.
Will we get to where we are six times that efficient, to get to your 100 w/m2 figure? Perhaps … but that’s a ways away.
If you wish to return to a “lifestyle” where kids routinely died because there were no antibiotics, that’s easily done. Just move to rural Africa. But don’t expect me to clap and join in the move, thanks.
w.
TimTheToolMan says:
December 6, 2011 at 4:33 pm
I brought it up??? I didn’t mention that there were advantages to redundancy??? Do your homework before you start up with false accusations.
Here is my first mention of the question, in response to a claim of yours:
That was our introduction to the discussion of distributed generation.
Note that you, not I, brought up only one side, the benefits. I was responding to that lack of balance.
Note that in my response it was I, not you, who stated that there were both advantages and disavantages.
In other words, you are reduced to simply making things up … and not only that, you accuse me of what you did.
Check before posting, my friend, it will keep you from such transparent and easily avoided errors.
w.
Evening Willis,
The 9300 kwh per year I noted is my actual 6.12 kw STS rated (5.22 CEC rated AC) output for my system- measured using the separate kwh meter I had installed after my problems with the non accurate numbers from my original inverter. I reside up in the foothills (out of the fog and most of the time out of the snow) south of Highway 50 at a 2400 elevation. My panels are roof mounted facing south (the building were built with the roofs this way- I didn’t have anything to do with it) with 12 of them at a 30+/- % slope and the other 24 at a slope of 16%. Back when I was trying to find a way to pay PG&E less then I did in 2005 (we had a yearly electrical bill of $3600 and we used 2200 kwh from PG&E in 2005) I looked into self generation as an option. The local airport had loads of wind speed data- the data said the average and SD of the wind speed in my area were not appropriate for any self generation wind option. I thought of just telling my 80 year old parents (who were living with us at the time) that they couldn’t turn on the air conditioner or heaters….. but that didn’t seem like a good plan.
Back in late 2005 and early 2006 the PV installation industry wasn’t to developed- It was near to impossible to get anyone to come to my homestead- we live on 11 acres- to quote on putting some PV on a couple of my buildings. My make/buy decision was made a bit more difficult by the three firms that finally came out to the homestead to give me a quote. Yes, the sales representatives reminded me of a less then enjoyable used car dealer experiences. To make a long story shorter I ended up converting all the hardware (and installation) quotes into AC output per year as that way I could compare apples to apples. I got quotes all over the place price and output wise. And yes their quotes came out close the price noted in the LA Times article. I ended up being the general contractor for the project- I selected the hardware and location for the panels- and selected a reputable installer to put the hardware up (I would of lost 20% of my rebate if I had done the install on my own by the way) to save some money on the system. My wholesale hardware sourced system, before rebates and tax credits, ended up being $7189 Kw (DC) in 2006.
I did a quick check at the wholesale PV supplier who I got my hardware from and to find out what wholesale PV system pricing would be for a system that matches the output of mine- using the same manufacture for the panels. Per their web site it would cost $20808 to get the same 6.12 kw (STS rated) output without tax with free shipping. So it looks like one could put a similar system in place in the Bay Area today for:
hardware= $20808 +1768.68 (tax)= 22576.68 +7956 (install costs at $1.3 per kw)= $30532/5.22 kw CEC rated= $5900.00/ kw ac which is a bit less then your example. (BIG NOTE TO THE Moderators- your may or may not want to include the reference to the wholesaler I used back in 2006- http://www.gridtiesolarkits.com/mitsubishi-5232-watt-solar-power-systeme2.htm ).
My younger brother is rather handy (which comes in handy as he actually knows what he is doing when it comes to down to Mechanical and Electrical engineering items- his degrees). If I was going to be a general contractor for a PV system in the future I could likely convince John to visit for a week and cut the install costs down by half.
These days the federal tax credit for going with a PV system (green?- well that is another question as my power actually comes from a small hydro facility that feeds my distribution line) is 30% (it was limited to $2k back in 2006) so the final out of pocket cost for a PV system, installed by a contractor (vs. my brother) would be $5900.00- (.3*5900)= $4130 per AC kw. in 2011. I think the PG&E rebate amount for PV is down to something like 30 cents a kw which you can get from PG&E if your don’t install the system yourself and I didn’t include this in the cost side of the equation as I don’t know what the permitting costs are these days (likely a lot more then the $250.00 I paid back in 2006).
On the benefit side of things in CA one can leverage PV (an enabling technology) to risk going with a time of use meter (E-7 in my case) which reduces the cost of a kwh to $.075 for baseline power from PG&E during off peak times. Additionally if you can really manage your load it allows you to get a .30 credit for kwh’s sent to the grid at peak times in the summer.
I concur that for base load and reliable (i.e. no intermittency and scalable) peaking electrical generation natural gas fired plants are the way to go.
RE: Willis Eschenbach says: (December 6, 2011 at 5:22 pm)
Take a look at the amount of natural gas that has recently been discovered. Take a look at the entry of the Canadian tar sands, larger than Saudi Arabia, into the equation. You’re not keeping up with the times, my friend. For the first time since the 1970′s, the US is about to become a net exporter of refined petroleum products. Your claim is simply wrong.
I base this on Figure 3 published in David Archibald’s article, “Peak Oil – now for the downslope” and his reputation as a petroleum expert. Jeff Rubin, *former* CIBC chief economist, has been writing in the Globe and Mail that the US debt situation makes it likely that China and India will be the primary customers for Canadian oil.
”Since we also have energy available from nuclear fission (and perhaps fusion as well), I don’t see why you are limiting your analysis to the sun.”
I am posing this as a response to those who insist that we all must depend on traditional ‘renewable’ energy resources for the good of the planet.
”In any case, 100 watts per sq. yard (or square metre) as a total recoverable solar yield seems high. Let me think about that.
That was an absolute upper limit guess as to what might be obtained as an annual average including the effects of cloud and hours of daylight. It may well be much lower as you suggest. That greatly increases the footprint of the solar farm that would be required to replace carbon-power.
[We do know that back in 1880 we had a lifestyle model and total global population that did not depend on carbon-power to the extent we do today.]
If you wish to return to a “lifestyle” where kids routinely died because there were no antibiotics, that’s easily done. Just move to rural Africa. But don’t expect me to clap and join in the move, thanks.
I think something like that is just what might happen if we are all eventually constrained to the use of traditional ‘renewable’ energy resources.
Tim (the Tool Man), here’s an article about the advantage that you claim for distributed systems, that it leads to “decreased transmission costs (a less loaded network)”. Here’s the reality:
Source
I did love this explanation. TimtheToolMan, think about this one (emphasis mine) …
This is the problem with all these fantasies. Nobody thinks them all the way through. They figure if one of something is good, then a hundred of them will be great … until the system starts overloading.
w.
RE: Willis Eschenbach says: (December 6, 2011 at 5:22 pm)
“A typical solar system might have an efficiency of 10% or so, which means that currently we could harvest about 17 w/m2 in Louisville.”
According to one reference, (T Boon Pickens) we are currently harvesting about 85 million barrels of petroleum a day. Each barrel has the energy equivalent of about 1.7 million watt-hours. Thus we are extracting 145 terawatt-hours a day or a sustained global energy flow of about six terawatts. A solar farm required to produce that much energy by your figure would be about 354 square gigameters or about 600 kilometers on a side. The installation cost, maintenance, and environmental consequences of such an array are indicative of the dark future of the exclusive use of solar power. It would be ironic if an array that large influenced the climate.
Keeping Warm
http://eureferendum.blogspot.com/2011/12/keeping-warm.html
The Aussies need a stern talking to by TimtheToolMan. They clearly haven’t realized that distributed systems are so much superior to centralized systems, or as Tim put it …
Here’s how Tim’s “less loaded network” is playing out in Australia (emphasis mine)
Now, what do you think will happen because of this?
Costs go up. There’s a surprise. And remember, dear friends, that these are the kinds of costs of renewable energy that are NOT included in Figure 1 above. The article continues:
The joys of distributed solar electricity …
w.
The problem is that instead of 22¢ per kWh, the whole solar electric system at that point would have a levelized cost of 17¢ per kWh … and that is still two and a half times the price of the least expensive option, an advanced combination cycle gas turbine.
————–
That’s correct but only if the other costs do in fact stay fixed.
The cookie cutter nature of PV means that the whole system is subject to economies of scale. It is plausible that you could have factories building entire systems on assembly lines like cars.
Given market barriers this might not happen in the USA. But in China they need to build a lot of power sources of all kinds, but especially ones that prevent them from choking to death on SO2 aerosols from coal burning.
So while I am not an enthusiast for PV those costings from Willis could become out of date very quickly.
LazyTeenager says:
December 9, 2011 at 9:29 pm
Hey, Lazy, good to hear from you. You are right about the “cookie-cutter nature” of large photovoltaic installations. I think, however, that you are drawing the wrong conclusions from that fact.
The problem is that PV is not new technology by any means. It has been built and pushed and subsidized for thirty years or more. As a result, the low-hanging fruit in terms of economies of scale have already been picked. You won’t see the cost of the racks, for example, dropping by much. Why not? Because there are a variety of manufacturers, and there is heavy cost pressure on them already. They are popping them out as cheaply and quickly as they can, and they’ve been doing it for a while.
Regarding China, they are building nuclear and coal. They do not have our inhibitions about breeder reactors, so they will have no shortage of nuclear fuel. As their economy improves, they will require the type of pollution controls on their coal plants that we have in the US. Those two will fix the pollution problems you mention above.
In the meantime, the Chinese will happily make solar cells for export sale to the West. And as someone pointed out above, they hope to be paid by the West to retire their coal plants in favor of nuclear when their coal generation systems start wearing out.
All the best,
w.
From an editorial in the Washington Times:
The oil figures seem high, but the rest sounds about right.
w.
I never had any trust that solar power could be sufficient on a industrial scale. However, despite this article I still think solar power can have a bright future when indidivual consumers start using it, when the energydensity of solarpanels goes up while the price goes down. I think this should not be subsidised, but i think it is so far to be taxfree, as you do not pollute anything.
“I never had any trust that solar power could be sufficient on a industrial scale. However, despite this article I still think solar power can have a bright future when indidivual consumers start using it, when the energydensity of solarpanels goes up while the price goes down. I think this should not be subsidised, but i think it is so far to be taxfree, as you do not pollute anything.”
If all nuclear power options were deemed to be unsustainable or impractical or just ‘politically incorrect’ then solar power or solar derived power is all that remains. I do not believe this energy source, alone, could sustain our current population, once the Earth’s sources of carbon power are exhausted. I believe we should be looking for a practical replacement energy source now, before we have to start dealing with the consequences of reduced energy availability.
As far as ‘taxfree’ goes, I expect you would have to pay property tax on the value of your solar power installations and there may well be a pollution impact in gathering the raw materials and the manufacture of your solar panels. You might also have to pay a monthly maintenance fee to keep them working efficiently.