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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In the emerging Ontario market a 10kW residential grid tied solar system can be fully installed for around $50k. That includes everything. Taking into consideration panel degradation, a system of that size will generate roughly 400,000kWh over the next 40 years. Inverters have 20 and 25 year warranties now too. That puts the capital energy costs around $0.125/kWh instead of the $0.20/kWh shown on the EIA graph. Move that same system to Los Angeles and the system can make up to 50% more energy in the same time. Capital cost/kWh is now down to $0.083/kWh.
Now we are knocking on coal’s door. Rooftop solar provides the most energy during the heat of the day when air conditioners are pushing the grid to its limits and there are no transmission lines to pay for. It would stand to reason that larger systems on stores and factories can bring these numbers even lower with volumes of scale. And let’s not forget, these systems are not designed as a primary source of electricity that requires back-up. They are designed to reduce the use of finite resources such as coal and eliminate the need for peaking capacity.
And yes, I agree we may be in a bit of a glut with respect to solar panel supply. That doesn’t mean we can’t make hay when the sun shines.
MrC
Espen says:
December 3, 2011 at 6:35 am
Matthew W: it’s not my idea to call it subsidies: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2ygdsSj.KQI
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Quoting someone that is wrong, won’t make it any more right.
you says:
December 3, 2011 at 6:25 am
Will-
You pure speculation about wind power, and small easy to maintain generators is a tactlessly bs argument. Just admit wind works.
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No one argues that wind doesn’t work.
Wind does blow, that’s what it does.
Trying to convert it into economically feasible energy isn’t what it does well.
Willis,
I agree with your comment on wind power. Even leftists/environmentalists (e.g. George Monbiot) in Europe are beginning to despise this “technology”. While in Hawaii (Big Island) last summer on vacation and heading toward the “Green Beach” we noticed that they had installed a new windmill farm on the Southern tip of the island. Next to it was the “old windmill farm” rusting away. To paraphrase Delingpole – the whole place looked like an abandoned War of the Worlds movie set.
DOE is one of the most politically motivated departments in Washington. I’ll bet their figures for life cycle costs are way low. They probably are not accounting for decommissioning – but since it’s an “environmentally friendly’ idea it’s OK if it ruins some of the most beautiful scenery on earth and rots away in the sun.
I’ll send picture of this mess if you want.
Tom Kennedy
@Willis
“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.”
Solar thermal only has to store process heat, not electricity. Also, I am suspicious that the Bechtel installation in S Calif is being used as the ‘cost’ (which is deliberately in the billions). Perhaps we should examine technologies that do not involve Big Green or Big Energy in the same manner that we consider Thorium in the face of opposition from Deliberately Big Uranium.
Solar thermal includes space heating, correct? I am suspicious there is some way to better analyse the need for domestic energy, for example. A lot of domestic energy is thermal and does not need to be electricity between the sun and the applied heat. Jus’ thinkin’…
Here is wind data for the month of December, 1999 measured at a now developed wind farm in New England. This was measured with calibrated sensors placed at 30 meters and 25 meters AGL. ( I will have to resurrect my old 80286 to provide the 12 months of data I have and apologize that the output is in mph and not metric M/S).
Summary Wind Speed Statistics
Mean Wind Speed: 11.1 mph
SDEV of Wind Speeds: 6.4 mph
Mean Turbulence Intensity: 0.191
Mean Energy Speed: 19.2 mph
SDEV of Energy Distribution: 5.7 mph
Mean Power Density: 156 Watts/m2
Max. 1 hour Wind Speed: 32.9
Assumed Average Air Density: 1.186 kg/m3
Energy Pattern Factor: 2.14
Weibull Shape Factor, k 1.80
Weibull Scale Factor, c 12.5 mph
Speed Data Recovery 99.0
Turbulence Data Recovery 100.0
Direction Data Recovery 92.9
Note: This was one of the better months, the wind speed was recorded below 10 mph for a total of 290 hours. Summer average was about 8 mph.
“Good post, Willis. Just one thing: when you complain about solar subsidies, don’t forget that fossil fuels are subsidized as well!”
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“Really??
Can you name those “subsidies”??
Don’t confuse the tax code with “subsidies””
Willis, well said, excellent article. Typically when investigated, the so called subsidies are exactly as you say part of the tax code not the direct subsidies given to solar, wind, and biofuels.
One favorites of Pelosi is the reduction in royalities that was set up during the Clinton Administration to give companies an incentive to drill in deep water offshore in the Gulf when oil prices were low. Royalities are still paid but circa 20 % less. It was a god business deal for both sides at the time and improved for the drillers as oil prices rose. So now many of the tax and spend crowd want to change the contract and threaten those who refuse to comply with blackballing them from biding on new leases. How else can they make renewable energy sources look competitive?
Another item frequently referenced is the accelerated write off of capital expenses to encourage investment and boost the economy that is offered to every other business.
A third item is the foreign tax credits offered to all companies that bring foreign earnings back to the US.
The tax code is by design complex to suit the political machines, and I have limited knowledge in this arena
Keep in mind that with all these “breaks” the fossil fuel business pays huge taxes to the US treasury unlike the renewable fuels. Finally one needs to be aware that after income tax, lease sales and royalities from fossil fuels are the largest source of income to the US Treasury. What is the plan to replace that income source, tax the rich?
Power production from wind turbines is very dependent on wind speed. Maps of winds in CA at 100m indicate very few places with adequate winds. Wind farms are constructed with one large turbine per 80 acres. That provides 1/3 to 1/2 mile spacing which reduces the risk of fratricide when a turbine fails and throws pieces weighing tons about 1/2 of a mile. 10% of CA electricity needs supplied by wind would require about 2500 square miles of area, considering the capacity factor. This much area with the required sustained winds doesn’t exist on land. Consequently, 10,000 or more turbines would have to be built at sea. Marine wind power costs much more than land-based wind power. That ignores the fact that levelized costs are all lies, skewed for political purposes.
PV solar also requires significant water use to remove dust. Dust reduces power production to a degree (est. 10 to 30%) that washing must be done. The water cost is significant in infrastructure, maintenance, and consumable.
Solar as an individual solution in theory makes sense, but only for people living on their own property. How does an apartment dweller make use of solar in NYC? Opportunity costs of solar and wind are high. Once you build those systems, the land is not very useful for many other purposes. Certainly, humans can’t live there anymore. In the future, people are going to need to live in the third dimension to avoid paving over farmland, forests, and wild places. We will need compact energy sources. Natural gas makes the most sense in the medium term, but nuclear is our solution for the long term. We won’t have any choice if we want to maintain our population.
Who is volunteering to get off the planet? That’s the OWS-socialist fantasy, that someone else will have to die.
As that article, and many others documenting the rapid obsolescence, decay, and abandonment of windfarms by “gone with the wind” ‘rupted operators, show, the real maintenance/replacement costs of renewables installations are likely to be disastrously higher than the official estimates. Like maybe an order of magnitude.
One comment I’ve seen a few times from technicians is that it’s actually a rare bird(!) who can work at the heights of the wind-rotors — and the danger is vastly increased in windy conditions. Which–doh!–are the pre-selected norm where windfarms are located.
Solar and windfarms are going to end up as hugely expensive salvage and clean-up operations. The gifts that keep on giving.
Espen @ur momisugly 6:35: The article you reference makes the same mistake many others do. It equates subsidies with tax credit. A subsidy is paid to someone to produce more. ie: ethanol, wind energy. A tax credit allows someone to deduct the cost of doing business. ie: mining, drilling, manufacturing.
Wind companies can deduct the cost of the windmill but they then are paid a subsidy for producing the (intermittent) electricity. Big difference.
Since we are stuck on the cost factor of wind generators right now, I recall reading recently, and had confirmed by my neighbor that works for a major electric utility; that the latest 2Mw wind generators require constant power to spin the motor in shipping and once installed still require power to spin the motor when there is no wind so that the bearings do not prematurely fail in it. So, if true, what does this really mean for the viability of large capacity wind generators.
Also, do you know what happens when one of these generators “accidently” spins backwards?
@Bernie
https://selvbetjening.preprod.energinet.dk/NR/rdonlyres/9184BC8C-9FF3-48E7-B1A8-42AC9D1F1DB6/0/11WP4SurveyofnewmeasuresbyPES.pdf#page=3
This is from energinet.dk, danish TSO – they must export ~80% of their wind power cheaply to their scandivavian neighbours and need to buy it back expensively when their winds production fails.
Here’s what it looked like in Germany:
http://i171.photobucket.com/albums/u304/wflamme/DE_2006-Stromexport_ueber_Windeinsp.png
There is a hidden subsidy for both solar and wind power, one that could easily be avoided, but never will be because it is not politically expedient. The subsidy is the amount of money it takes to remove solar and wind farms once the parent company abandons them. It usually winds up being public money that is used, since the parent companies usually go bankrupt and are dissolved. It could easily be avoided if the parent companies were forced to post a bond equal to the amount it would take to remove the equipment, and restore the area. And that is a subsidy which coal and oil do not enjoy, because they are forced to remediate their mining and drilling sites.
The one in Malaga is definitely not me 🙂
Taking into consideration panel degradation, a system of that size will generate roughly 400,000kWh over the next 40 years.
That is about $40,000 worth of power over 40 years at retail prices, for an investment of $50,000. You are losing $10,000 even before we consider what else you could have done with the $50,000.
Add to this the fact that the system is not likely to last 40 years. More likely 20 years as the panels degrade, which would be only $20,000 worth of power. Which means solar power is able to turn your $50,000 into $20,000 in only 20 years.
Now in Ontario, they have a FIT program that hides this true cost, by paying consumers 5 TIMES the retail market prices for electricity for solar power. So, while a $50,000 investment can return $100,000 over 20 years under FIT – unless a new government cancels the program – $80,000 of that amount comes from everyone else paying taxes.
So, if everyone in Ontario was to do this, then everyone’s taxes in Ontario would have to go up $80,000 over 20 years to pay themselves the $80,000 difference between FIT and market.
However, this won’t happen, because only the rich can afford the $50,000 investment, which means the poor in Ontario are paying the rich to install solar power.
@Bernie
Mrd is short for the german ‘Milliarde’=1e9 (Billion).
Thus 37,3Mrd kWh =37.3*1e9*1e3 Wh=37.3e12 Wh.
CF(2010) = 37.3e12 Wh / 8760 h / 27214.7e6 W = 0.156.. = ~16%
Espen says:
December 3, 2011 at 3:51 am
Good post, Willis. Just one thing: when you complain about solar subsidies, don’t forget that fossil fuels are subsidized as well!——————-
I keep hearing that from the current administration, but can’t for the life of me figure out what they are referring to.
The own an interest in various wells. I pay tax on every penny which they produce, sometimes tax to federal, state, and county governments. I was able to to deduct initial drilling costs from the income, and deduct an annual depletion allowance of 15%, much in the way one deducts depreciation on a rental property. The difference between depletion and depreciation is that one claims depreciation even if the property appreciates in value, why the reserves in my wells actually do decline every year.
Those deductions are the only “subsidies” I can think of. By comparison, last year one could put solar panels on a house and recover 80% of the cost through subsidies.
Hiya Willis and Happy Holidays!
Disagree, disagree… Solar (and wind, for that matter) are not intended to replace other fuel sources, only complement them. Best case scenario is 25%-30%.Within those design specifications for a smart grid, especially solar looks good.
Others have noted that it is not just the module subject to price decreases due to innovation. In addition to inverter and other BOS components, there is the chance to lower prices considerably by reducing the bureaucracy associated with permitting and interconnection.
Another factor to add in when comparing capital costs is (on the good side) we don’t know really how long modules will last, as they refuse to die so far and (on the bad side) inverters really need to improve their lifespans.
Free fuel is compelling, especially to owners of large homes with pools who like A/C in summers. For now, that’s enough of a market to chase. As the price/performance ratio improves, the number of homes for which solar is appropriate will increase.
It’s gonna be okay…
I was wrong … the visual scan over the data didn’t pick up periods where data were being collected,, but there was low insolation. Here’s a graph showing the number of maximum consecutive days over the previous 30 days, when insolation was less than one standard deviation below the mean. (The blue line on the graph is meaningless; it only joins the data points so that you don’t go cross-eyed.) I’ve not plotted data for periods during which there were no data.
Even for those without PV panels, solar hot water systems have been popular in Western Australia for well over 30 years because they work well for 8 to 10 months of the year. Solar hot water systems make more sense than PV because their energy is easy to store; and if you don’t have a house-load of teenagers, you may not need to add heat to the hot water that you use even after a spell of 3 to 5 dull days. The energy is stored in the water. Cheap.
Space heating in the Perth metro area is seldom done by solar; not even supplementary. The cost of plant is so much higher than for other heating; unless you’re in a building with central airconditioning and heating. The ROI for even a small supplementary heating system in a domestic residence is negative especially if one includes the cost of plant maintenance (tanks, pumps, blowers, filters and valves).
Matthew, barryjo: I’m not going to insist that it makes sense to call it a subsidy. But in any case it’s an advantage given to a specific industry, isn’t it?
@Bernie
Apologies for busting in… Mrd is short for Milliarden – a Milliard is equal to one thousand million. A term largely ignored by the English-speakers especially those leaning to the USA-version which adopted the term “billion” from the French for the same quantity, before the French went back to “milliard” because the “billion” was a bad idea in retrospect.
USA-ian use of “billion” persisted and its (ab)use has spread along with the financial markets and dealing of the USA. Leading to much confusion. So I habitually avoid the term, referrring to it as thousand-million if I mean that, or million-million if I mean the other. Sometimes, I get lazy and call a milliard a milliard.
Some people think that a milliard is 0.036 inches.:-)
I don’t know about the rest of the world but, here in NY wind and solar are heavily subsidized while so called “fossil” fuels and hydro are heavily taxed.
>> Espen says:
December 3, 2011 at 6:35 am
Matthew W: it’s not my idea to call it subsidies: <<
Then you need to look into the details rather than just read the headline of a news release.
1. A large part of the so-called subsidies to 'fossil fuels' is the ability to write off costs incurred in exploration/drilling and taxes and fees paid to foreign countries for the extracted oil. In any other industry these are considered normal tax write-offs as business expenses. Compare that to direct payments of tax dollars (e.g. Solyndra) and higher electrical costs required by the government for solar.
2. Another significant part of the subsidy is the government subsidizing heating fuel for the poor. This savings goes to the fuel companies but is passed on to the user. Compare that with subsidies for home solar installation, electric cars, and other green energy consumer subsidies which go mostly to the wealthy.
3. The real subsidy is measured in money per unit energy. Even if you claimed that business costs should be taxed and that the tax write-offs are therefore a subsidy the 'subsidy' per kilowatt hour are insignificant compared to those for solar and wind.
Far from subsidizing fossil fuels governments tax them – think gasoline taxes. Every quanity of fossil fuel replaced by subsidized renewable energy must take into account the lost in revenues from taxes and added to the subsidies . In Europe these taxes are enormous. That is why gasoline costs 10 dollars a gallon. In California the state collects almost 3 billion dollars in gas taxes. Can you imagine what a mess California would be in if all cars were electric and subsidized.
California is finding out that increased electricity costs is resulting in what the supporters of cap and trade described as ‘leakage’ – the lost of manufacturing jobs to other states or in the case of solar cell manufacturing – China.
john says:
December 3, 2011 at 7:16 am
Here is wind data for the month of December, 1999 measured at a now developed wind farm in New England. This was measured with calibrated sensors placed at 30 meters and 25 meters AGL.
Correction with apologies, I had the lower anemometer placed at 15 meters. Should be 30 and 15 meters.
My results are consistent with the expected resource at almost all of the major wind farms located in Maine except for a couple located at the higher elevations in Maine’s western mountains.