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 …
DirkH writes “That’s a straw man. Energy demand is flexible.”
Only to a point and thats easy to say whilst there is enough energy around to meet demand. Every single (man made) thing you can see around you has considerable energy input in its manufacture its not just the number of kWh you use in your home every day. More importantly there simply is no viable alternative for oil at all yet.
Yeah people all go on about possibilities like coal fracking and whatnot but the fact is that it takes significant time to get that kind of infrastructure up and running and I would suggest that politically it will be difficult to get moving at all let alone “in time”.
That is an eye opening piece. Well done. It would support The theory that solar will find its niche in micro applications until there is some revolutionary technical change that sidesteps the economics you highlight.
On wind, the big failing in most analysis is the focus on capacity utilisation. Like solar cell production cots, that isn’t the constraining factor. What matters is the uncertainty. The fact the we really have no idea how much electricity even the most diversified wind grid will actually produce at any instant – starting from zero.
In that way the debate about wind fran yield factors is irrelevant. It makes no difference whether the yield is 25% or 30% or even whether it can be increased to 50%. it matters that whatever the average yield over periods of time, the probability distribution of output at any instant will be little changed, be too concentrated around zero and too unknown. Like the solar option, a game changing, but as yet unknown, technological advance is needed before it makes any economic sense to invest in wind and only subsidy and regulation will encourage it until that happens.
I correct myself…When I referred to Fracking coal, I actually meant the Fischer–Tropsch process which essentially turns coal into oil. In theory It could extend our oil supply but will take a monumental effort and significant time to get production to the levels required globally. And an even larger effort politically to make happen.
Even though I dont believe CO2 is the evil that the AGW people believe it is, I do believe we are going down the right path chosing renewables over continued reliance on fossil fuels. Especially distributed small scale solar which IMO is one of the best options forward.
On the opening graph, nuclear (at 11c) is placed below biomass (12c) and advanced coal (12c). Something is wrong.
When I look at the costings we used to review very frequently in the early 1980s, the dominant factor was realley the physics of energy density. This has not changed greatly. Solar panels might have got a few percent more efficient, but that’s a drop in the ocean as you note.
The main deficiency I see in these figures is the huge burden that has been added to nuclear. It’s a synthetic blend that emerged step by step to placate green opposition. There are large social compliance costs, like the cost of site investigation, like pre-paid insurances with huge premiums, like mandatory charges to study waste disposal that have been collected but never utilised into a practical outcome, etc etc.
I’d also note the Moore’s law comment about solar prices dropping and apply it to nuclear technology. The new generation plants should produce more cheaply than the older. They are simpler. Then you need to factor in the longer practical operating lives of nuclear plants, which are not estimates now, but reality.
Taking all this into account, I’d tend to put modern nuclear TRUE costs about where hydro is. Historically, this is where it has been, if artificial social costs are removed, since the 1970s.
Scientists have to find ways to solar power viable for everyday use. With the prices of petrol and gasoline at an all time high, not to mention the side effects of these on the environment, alternate fuels sources are the need of the hour.
Rob Goodwin says:
December 3, 2011 at 4:38 am
Goodwin has cognitive dissonance. He is a solar power advisor. His outlook is short term (inal).
From UK elswhere:
On October 31st 2011 the government announced that they will be reducing the feed in tariff by over 50%.
All existing enquiries had to be installed by December 11th to qualify for the feed in tariff at the current rate.
This means that we are no longer able to take anymore enquiries for free solar.
However a paid solar system is still a great investment even with the feed in tariff at the reduced rate. CRETINS
If free solar does return you can still register your details and we will contact you if there are any changes. FAT CHANCE LOSERS!
Please accept our apologies if you are here from any publications that have already been distributed.
http://www.energygrantsdirect.co.uk/solar-pv.html
EIA is skewing coal numbers. Also, it is laughable to believe that CCS can be done for a penny. Every coal plant is going to deepwell CO2, or are we going to build pipelines crisscrossing the US to injection stations? I’m not aware of any real CCS other than heavily subsidized demonstration projects. Anyone who thinks it can be done for just a penny more (per kW) ought to be drug-tested.
Deepwell CO2? I suspect that bs may be reconsidered.
The other point to keep in mind is that the value of wind and solar energy is different.
The value of wind energy is avoided fuel consumption at the balancing plants. Essentially the cost of gas.
The value of solar energy is somewhat higher because the output is more predictable. You don’t have to have as much back-up power for solar plants, so the value is avoided fuel consumption plus some avoided capital costs for other plants.
Also, it should be pointed out that the utility scale solar industry is still finding it’s feet. The biggest plant in the US is 48MW – tiny. So, they still build them basically as a collection of commercial sized plants, with 600VDC collector strings and 500kW inverters. Very little balance of plant optimization has been done.
Shorter version: “free” energy is too expensive if the O&M and capital depreciation is too high. “Too cheap to meter” will never happen because most of the cost of a delivered KWH is in the delivery system. The only theoretical possibility of that ever happening is very localized generation, and there’s nothing fitting that description on the horizon.
Now WHY were the Fukushima plants destroyed? The ONLY reason was because they were an obsolete design that required outside power to dump decay heat after shutdown. Of particular irony was that the explosion at Unit 1 probably resulted in the cascading failure of Unit 2 and Unit 3. Had unit 1 not exploded, chances are good that the other two wouldn’t have either because the explosion of Unit 1 cut the power cables that had just been laid to Units 2 and 3.
Units 5 and 6, being of newer design and being placed higher up, suffered no catastrophic damage. In fact, their power generators were still operating (though not needed in those designs to dump decay heat but those units were not operating).
The ultimate irony is that Unit 1 was slated for final shutdown for dismantling within three weeks of the quake. Had the quake waited two more months to occur, we wouldn’t be having this discussion at all. Unit 1 would have been in cold shutdown already and would not have exploded.
Now the larger point is that if we installed MODERN plants that do NOT require external power and pumps to shed decay heat, we would be immune to the sort of problem that knocked out Fukushima Dai-ichi. It was not the quake but the tsunami that took out that installation by taking out the generators required to run pumps and operate valves. Modern plants do not require generators to run pumps or operate valves for emergency cooling.
Fukushima Dai-Ni, on the other side of town, experienced the same quake but those units were of newer design that also did not require external power to run pumps. Those units had steam turbine pumps that could use its own decay heat to power the pumps. Modern plants don’t even have pumps! They operate on convection, gravity, condensation and evaporation and can remove decay heat passively.
We need to replace the old plants with new ones and build more of them.
For emergency cooling that is, the emergency cooling is completely passive.
And one other detail – if solar is cheap enough, a small penetration might be feasible in certain markets because the output coincides with the daily peak, and it’s output is valued at peak prices, which are much higher than average. Not only do you get a premium price for the power, you don’t need storage. Once you get past a certain point though (probably 5-10%), the economics go downhill rapidly.
Manoj says:
December 4, 2011 at 4:02 am
. . . alternate fuels sources are the need of the hour.”
Maybe the next hour, or the next, or the one after that. This morning it is a bit chilly where I live. I have an all electric house powered by falling water on the nearby Columbia River. That is true of my neighbors, who also burn wood as an alternate fuel. The only thing likely to change in the next ten years is who cuts and carries the wood.
Seriously, study the possibilities for massive alternative energy. What technology can be applied? How fast can it be built? Think materials, workers, land, transmission, among other factors. Would anyone object and file a lawsuit for a project? Even, say, a green wind project?
http://yesvy.blogspot.com/2011/11/wind-in-vermont-way-it-is-today.html
There is historical precedent for a transition from one form of power to another. See:
“The Centrality of the Horse to the Nineteenth-Century American City,”* an article by Joel Tarr and Clay McShane explaining the serious environmental hazards horses presented when used in large numbers and how that related to the emergence of the automobile.
http://www.enviroliteracy.org/article.php/578.html
Still, these things take time.
Put in a different light: “environmentalists” are making it much MORE likely we will experience a disaster like that in Japan by inhibiting the replacement of old plants of 1960’s/1970’s design with new plants of more modern design. A modern plant could weather an earthquake such as we experience in California (a “strike/slip” quake of up to about M8). By delaying the construction of modern plants, they are causing older plants subject to the same sort of failure as the Fukushima plants to operate longer. All nuclear plants are not the same. Modern plants such as the GE ESBWR and the Westinghouse AP1000 are not only safer, the are simpler to build and maintain. Most of the cost in building and operating nuclear plants is due to external costs imposed by regulations that are not directly related to how much it costs to actually generate power. One example is spent fuel. We are not allowed to reprocess it into new fuel (typically a fuel rod is “spent” when only 5% of the energy potential of the fuel is expended leaving 95% that could be reprocessed and used). Not only are we not allowed to reprocess them, we aren’t allowed to dispose of them either so we end up with massive amounts of spent fuel that must be guarded. It is stupid!
Sometimes I believe that we have become a nation of emotionally driven idiots.
Germany’s ahead for some more trouble w/ renewables. According to the Handelsblatt (in German) Poland is about to repel german renewable’s export in order to protect their power plants from ramping down – forcing us germans to eat our own dog food.
Of course they won’t do that. They want compensation. I can’t blame them.
First of all the nuclear cost figure is pure fantasy. It might be that low after you force the captive rate payers to eat the cost overruns! The solar pv cost figure is also fantasy because we still let analysts get away with inflated industry averages that are falling fast and includes the costs from wannabe startups with Federal loan garauntees and no future. In short, misguided statistics equates to more lost time on rational energy policy choice.
As usual some very interesting reading at WUWT. This article and the comments are good food for thought. Natural gas FTW as expected by anyone who’s followed the industry and knows the massive amounts now available to us. When even nuclear and coal are more expensive you know the game is up for the rest.
I was surprised by the entry for wind at 10 cents. That is close to competitive but first we need to solve a few problems like storage of massive amounts of DC electricity cheaply. Without that no intermittent source is practical on a large scale. If you can get rid of the requirement for base load energy as backup you can make a much better case for wind/solar etc. If you can’t? Well you are sunk.
It is very similar to your house. Solar and for that matter wind, micro hydro etc really only make sense when you go off grid completely. The reason for that is all the other charges on your bill. In my case a full 2/3rds of my gas, water & electric is not consumption based. To pay back solar would take forever unless I would disconnect and save that 66% of my bill. That costs a lot more up front because now you are looking at serious amounts of storage for electricity.
I’m also amazed at how much emphasis is placed on big projects. Yes there are advantages to scaling but like Willis has pointed out there are a lot of other costs. So when they build roof tiles with solar built in that will be a major advantage because you are going to get the roof tiles installed anyway.
Think about heating and cooling for a minute. Rather than something high tech and complex how about something simple? Bury 1000 feet of 6″ tubing ten feet underground and use that to heat and cool your house (and greenhouse). Insulate well and have a wood stove for the occasional cold spell.
http://citrusinthesnow.com/
I would love to see some serious investigation about that approach.
TimTheToolMan says:
December 4, 2011 at 1:22 am
Didn’t I just go through and show that “distributed small scale solar” is about three times the price of grid power? Didn’t I just show solar is very unlikely to ever be less than about 12¢ per kWh no matter how cheap the panels get? Didn’t we discuss the fact that these numbers don’t include the necessity for spinning backup, with associated capital, fuel, and operations costs that aren’t included in the 12¢ per kWh? And that as a result solar will likely never cost less than 15¢ per kWh or so?
How on earth can you twist that into thinking that solar is “one of the best options forward”??? Grid-connected solar is a lousy option forwards, hugely expensive and a bad choice.
w.
ChE says (emphasis mine)
December 4, 2011 at 9:05 am
Thanks, ChE. There’s two parts to transmission costs: connection to the grid, and moving (“wheeling”) the power around the grid. The “wheeling costs” (the costs to move a kWh around the grid) are a small part of the cost of a delivered kWh. They around a penny or so per kWe depending on the grid. (A “penny” is the US 1¢ coin.) Getting power to the grid is not all that expensive either. The most expensive connection to the grid is for offshore wind. The EIA puts that cost at 0.6¢ per kWh (six tenths of a cent).
So your statement in bold above isn’t true. Transmission costs are typically a small part of the cost of a delivered kWh.
w.
ChE says:
December 4, 2011 at 9:11 am
First, what part of “solar is not cheap enough, and won’t be cheap enough any time in the near future” is escaping you here?
Second, there is an illusion, likely fostered by the power companies, that peaking power is hugely expensive. In fact, it is only as expensive as the most expensive power in the mix. Typically, peaking power is provided by gas turbines. Looking at Figure 1, these come in at 11¢ per kWh.
The other problem with “replacing” peaking turbines with solar is … what happens when a cloud passes over your fifty megawatts of solar? You need to have extra spinning backup power for solar. So you need even more gas turbines to prop up your solar megawatts.
Finally, huge gas turbines don’t like being speeded up and slowed down, up and down every time a cloud passes over your green power plant. The thermal shock greatly shortens their lifetime, which again adds to the cost of solar.
Summary:
1. Solar is far too expensive to replace even peaking power.
2. Solar is unlikely to be cheap enough to replace peaking power any time in the near future.
3. Even if it were cheap enough, the up/down cycling and the need for spinning backup make it useless for peaking power.
In short,
Solar electricity = brilliant plan
Grid-connected solar electricity = very expensive bad plan
w.
I spent most of summer in Denmark and Germany and hardly saw the sun. The best place for solar panels in these regions is inside the barn so as they don’t get dirty and you can shine lights on the panels to generate electricity.
Australia is probably one of the best countries for solar panels but the unit cost for a kWH would need to more than triple to make solar panels and wind turbines viable. Our federal government here in Oz us tell us in one of their brochures that once sufficient solar panels and wind farms are up and running coal fired power stations can be decommissioned.The availability rating for electricity generated from coal fired power stations is currently around 99.95%. I dread to think what that rating would fall to if we disconnected all coal fired generators.
crosspatch says:
December 3, 2011 at 8:10 pm
Gail, wind does not work. Well, not on a large scale…..
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It has always been a scam.
I looked into it a while ago. Wind might work small scale if you live on a windy ridge (I do) and can use it to pump water between two ponds with a hydro-generator between them. Otherwise they only make sense for pumping water into livestock tanks in remote locations or grinding grain in third world countries.
The big problem with all of it is the town zoning laws. A large corporation can do what a home owner can not. Which is probably lucky or we would have small scale bird shredders littering the landscape.
TRM says:
December 4, 2011 at 11:46 am
….Think about heating and cooling for a minute. Rather than something high tech and complex how about something simple? Bury 1000 feet of 6″ tubing ten feet underground and use that to heat and cool your house (and greenhouse). Insulate well and have a wood stove for the occasional cold spell…..
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I also look into this one too. These people seem to have done the engineering: http://mb-soft.com/solar/saving.html
I talked to a guy yesterday who sells small heaters. He knows of two houses in my area with the buried pipe heating/cooling system.
Now if I could only convince my Community College to use my house as a demo project. Windmill with a two pond hydro power unit for self contained electric and the geo-thermal for the heating/cooling maybe I could get a grant…… (snicker)
Willis,
The folks in Marin are a bit unhappy with how PG&E is allocating it’s cost to provide service- “Marin Clean Energy officials, as well as representatives from the San Joaquin agency and San Francisco, have repeatedly asked the California Public Utilities Commission (CPUC) to rein in PG&E as the company has used a scatter-shot approach to stall public-power efforts.” as noted here- http://www.pacificsun.com/news/show_story.php?id=2486 : “PG&E charges ahead -Is utility manipulating rates to undercut Marin Clean Energy?”
They are likely upset about how much PG&E is allocating to transmission and distribution- “Charges for your electric service include both generation (electricity) and transmission & distribution (delivery of electricity) components. PG&E’s transmission & distribution rates are applicable to all customers. PG&E’s generation rate is not applicable to customers who do not receive their generation from PG&E, such as CCA customers or Direct Access customers. Generation rates for these customers are determined by their energy service provider, although PG&E may also include PCIA and FFS charges to reflect the full cost of your generation services. See definitions below and on Page 2 of your bill.” . This quote is from http://www.pge.com/includes/docs/pdfs/mybusiness/customerservice/energychoice/communitychoiceaggregation/faq/PGE%20Business%20Non-Gen%20Rates.pdf
The non-generation part of the A-1 (business) rate is 65% of the costs of a delivered kwh. This percentage is similar the allocated costs, per my yearly true up bill from PG&E, which was 36% for generation for 2009 and 2010- my allocation for generation droped to 25% last year. My allocation for public purpose programs jumped last year to 24% of my yearly bill (vs 16% the year before).
The unbundeled rates for residential (e-1 rate schedule) is delineated here- http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_E-1.pdf It’s been many a year since my cost accounting days, but the breakdown in the costs noted in the schedule don’t seen to have any relation to the actual cost to deliver electrons to end users. Your thoughts on the allocations would be more then welcome………..