Guest Post by David Middleton
My apologies to the memories of the late Richard Llewellyn and late John Ford; but I just had to borrow their title for this post. This paragraph from a 2010 Telegraph article really says it all…
Its 500,000 photovoltaic panels will generate 30 megawatts of electricity, enough, in the popular measurement, to power 9,000 homes. It is costing about $250 million to build, significantly less than a gas, coal or nuclear power station, which can easily exceed $1 billion. And it represents a sea-change in America’s energy business.
America has been notoriously devoted to hydrocarbon fuels. Big Oil, Big Coal and big Texan hats in the White House were seen by the rest of the world to be keeping it so, whatever the global interest. Oil barons funnelled money to scientists ready to pour doubt on the science of climate change, and conservative Republicans led the charge to pour scorn on those such as the former Democrat vice-president Al Gore who were urging Americans to rethink where their energy was coming from.
The power plant described in the preceding passage is the Cimarron Solar Facility, built on Ted Turner’s 590,823 acre ranch in northern New Mexico. It is indeed true that most natural gas- and coal-fired power plants cost a lot more than $250 million to build. However, it’s also true that most natural gas- and coal-fired power plants have nameplate generating capacities a bit larger than 30 MW…
TVA to build natural gas power plant
By DUNCAN MANSFIELD, Associated Press
Posted June 4, 2009
KNOXVILLE — The Tennessee Valley Authority on Thursday decided to build an $820 million natural gas power plant in northeastern Tennessee to comply with a North Carolina lawsuit over air quality.
The 880-megawatt combined-cycle gas plant would be as large as the 1950s-era, coal-fired John Sevier plant in Rogersville that a federal judge has targeted for new pollution controls on North Carolina’s behalf.
[…]
- $820 million divided by 880 MW works out to $931,818 per MW.
- $250 million divided by 30 MW works out to $8,333,333 per MW.
Assuming that the gas-fired plant managed an 85% capacity factor and a 30-yr plant lifetime, the initial capital expenditure would work out to $0.004/kWh… A bit less than half-a-cent per kilowatt-hour. Assuming a 25% capacity factor and a 30-yr plant lifetime for the Cimarron Solar Facility, the initial capital expenditure works out to $0.127/kWh… Almost 13 cents per kilowatt-hour! The average residential electricity rate in the US is currently around 12 cents per kWh… That’s the retail price. As a consumer of electricity, I know which plan I would pick. I’m currently paying about 9 cents per kWh. I sure as heck wouldn’t seek out a provider who would have to raise my current rate by about 50% just to cover their plant construction costs.
Solar photovoltaic electricity is bankruptcy the green way writ large. Here in Texas, Austin Energy has agreed to a long-term purchase agreement to pay $10 million a year for 25 years, for the electricity generated by the Webberville Solar Farm. That works out to more than 15 cents per kWh.
In concert with his efforts to drive up the cost of coal- and natural gas-fired power plants, President Obama has aggressively pursued an agenda of financing expensive power plants with taxpayer dollars. Many of these taxpayer-guaranteed loans have gone to financially strapped companies, lacking the means to repay those loans. In most cases local utilities were coerced or enticed into signing long-term purchase agreements to buy electricity at nearly double the cost of coal- and natural gas-generated electricity. The sole justification for this “green” centralized industrial policy is the Lysenko-like junk science of catastrophic anthropogenic global warming.
The economics of this “green” centralized industrial policy are mind numbingly horrible.
The capex for solar power plants averages between $6- and $7-million per MW of installed capacity. Coal-fired plants generally run less than $2-million per MW and natural gas plants currently run less than $1-million per MW. The average retail residential electricity rate in the U.S. is currently less than 12¢ per kWh. The levelized generation cost for the plants being financed by the Obama administration is more than 20¢ per kWh. His “green” centralized industrial policy will drive the wholesale cost of electricity to nearly double the current retail rate.
One need not literally seize the assets of businesses and install gov’t bureaucrats into management position to effectively nationalize those businesses. All it takes is to make them dependent on gov’t and/or direct their activities through regulatory constraints.
Ian of Fremantle says:
May 4, 2012 at 9:54 pm
…the development of non polluting forms of energy production surely is a plus for the environment. Isn’t it? Everything isn’t always down to the dollars and cents. Is it?
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This will sound cold in our PC age, but everything involving econmoic transactions does come down to dollars and cents or else how will this solar plant sustain itself? We really cannot organize society based on the whims of the Ted Turners of the world and still maintain prosperity and economic opportunity for the masses.
David.. don’t use engineering units and financial units….that will only confuse the eco-weirdo’s newspeak.
Also…Energy and $ are entirely interchangeable…well, oil and $. Everything we use can be equate to so much oil. And the cost of a commodity is a reflection of the amount of oil used to produce it. But again, that requires math and units and stuff…. a pointless exercise with the green religion.
Ian of Fremantle says:
May 4, 2012 at 9:54 pm
“Whether or not you believe in CAGW and on this blog most are sceptical as indeed am I, the development of non polluting forms of energy production surely is a plus for the environment. Isn’t it? Everything isn’t always down to the dollars and cents. Is it?”
Actually, yes, the “environment” would be far better off if more attention were paid to market prices. If that solar plant costs ten times what a gas-fired plant would cost (per megawatt), then effectively it’s eating up approximately ten times the resources initially.
During operation, it then is supposed to gain back that disadvantage due to the gas plant’s requirement for fuel. However, you also have the required maintenance on the solar plant to consider. Virtually all of these considerations (plus all the others that might be missed or, when regulators with an attitude are involved, consciously ignored) will eventually be captured in a price somewhere.
If, in the end, you consume a product that costs ten times the cost of another product, you’ve probably consumed nearly ten times the resources, assuming the market is allowed to function properly. In short, the solar plant is wasting significant resources, not money, but real resources.
There are external costs, of course, but a good economist can devise ways to capture those in pricing, and that’s where the regulators should focus their efforts, instead of on favoring one method of production over another while completely ignoring pricing signals (as is the case with solar and wind today.)
And this isn’t even considering the quite likely possibility that millions of dollars of government loans are being bled off the project into the pockets of our President’s bundlers…
One of my (several) computers which crunch numbers 24/7 pulls a shade over .5KW/Hr.
It’s a powerful machine with real production measured in TFLOPS, but there is no getting around the cost of feeding and cooling it. On the bright side, it helps warm the office in winter.
If solar photovoltaic panels made economic sense, they would have already been installed on my roof.
A great deal of profit- motivated research for at least the past 35 years has yet to create photovoltaics which are a rational investment for me. Maybe in another 35 years…
These solar panels will create hundreds of jobs. Low-paid low-life cleaners’ jobs, mostly illegal aliens, cleaning the panels from desert dust, continuously for the 25 years of the PV’s expected lifetime. I just wonder from where qre they getting all that water and how much it will cost. If the panels are not cleaned continuously, their efficiency will drop dramatically, especellially in a desert environment where it doesn’t rain.
Steve Cota says:
May 5, 2012 at 7:55 am
“. . . but at least I didn’t see any deer along the highway. ”
Do deer object to the towers (sight, sound, buzz)? Our local elk herd seems to find them attractive and often are seen in the midst of the “wind farm.”
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dscott says:
May 5, 2012 at 7:45 am
“Steam systems can be run indefinitely due to their ability to replace components.
I have a double bit felling axe like that. I’ve replaced the handle 3 times and the business end once. Best darn axe I’ve ever owned.
Oh, note that the post is not by Anthony, but by David. Nice post. Interesting comments.
Fundamentals are: If solar was cost effective it wouldn’t need subsidies. It would just be cheaper. It isn’t. Many places in the US have 200 or more cloudy days per year. How is solar going to work there? Binghamton New York is an example. Solar is generally a big giant waste of time and money for most of the US. Where you CAN possibly gain efficiency is to build a system as if you are going to run your home off-grid. Have the storage and charge controllers. Now, charge your system at night off the grid. Have a natural gas generator for charging your system when the power is out. Now if you want to add a wind turbine or solar panels for additional charging, fine. The point here is you have “load shifted” the house to charge at night when electricity prices with the new smart meters might be cheaper. But even that is huge expense gone to get around government regulation.
The primary issue is that there is NO NEED for all of this. The reason they claim to be doing all this is to reduce carbon emissions and nobody to date has shown any good reason to reduce carbon emissions except some computer models that have not matched observations. If you want to get rid of CO2, build nuclear power and recycle the fuel.
@ur momisugly David Middleton,
My question is, what would happen to the capex cost of solar if the cost of a square foot of wafer were halved? The follow up is, is that kind of cost cutting a realistic expectation (understanding they might be coming out of China)?
@Hank Henry,
I don’t know; nor is it relevant to the economics of building comercial solar PV plants today.
Yeah but it’s all about equality and …some endangered species are more equal than others.
The BLM’s new assessment estimates that more than 3,000 acres of tortoise habitat would eventually be lost as a result of construction, and more than 160 adult tortoises in the project area will have to be captured and moved, in addition to 600 dying as a result of the project.
So if I have this straight, if you make the lamest of attempts to move 21% of an endangered species for “the cause”, to hell with the rest and you’re instantly absolved of wrongdoing! If only they could build solar farms in the arctic they could immediately resolve the polar bear ‘problem’ huh?
Is it time to get back into NAT & maybe a little coal? Kind of looks like it… Now that solar imploded…
http://finance.yahoo.com/q/ta?s=UNG+Basic+Tech.+Analysis&t=my
http://finance.townhall.com/columnists/davidsterman/2012/05/02/why_im_now_bullish_on_this_hated_commodity/page/2
Or stick to guns stocks?
A post, well done.
Makes it easy to deflect the detractors 🙂
Let’s not forget the grid disruption caused by cloud shadows in particular,
and more generally by the lack of the inherent grid synchronization capability
of rotating generators. The only kind of solar power plant that avoids this
is the solar chimney, basically a vertical windmill runing steady, 24/7.
But it’s as expensive and land-wasting as the rest.
Rod Everson says:
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Thanks, Rod. The concept of opportunity cost seems to have been sent to some sort of Gulag in the world of greenanomics.
Apparently, there is an endlessly fruitful money tree (known as the Magic Pudding in Australia) whereby you can just keep taking out and squandering forever.
Slightly off-topic: a note on solar power in India:http://www.solardaily.com/reports/Ambitious_Solar_Program_in_India_Drives_Prices_to_Impressive_Lows_999.html
Back to today’s topic:
$820 million divided by 880 MW works out to $931,818 per MW.
$250 million divided by 30 MW works out to $8,333,333 per MW.
That’s nice, but the natural gas plant, at $820 million, won’t produce any electricity. For the production of electricity, it has to buy natural gas, the prices for which, over the next 30 years, are not known, but will most likely average out to more than current gas prices.
Assuming a 25% capacity factor and a 30-yr plant lifetime for the Cimarron Solar Facility, the initial capital expenditure works out to $0.127/kWh… Almost 13 cents per kilowatt-hour! The average residential electricity rate in the US is currently around 12 cents per kWh
Solar power produces electricity to meet peak demand. Other methods of meeting peak demand cost way more than average costs, so this is probably price-competitive, in that area, for meeting peak demand. It would be helpful to know the actual cost in that area, to confirm this; anybody know? Peak demand is strongly driven by A/C, and A/C demands are generally reduced at night, and in cloudy days.
And lastly, PV prices continue to decline. A good solar power review every year at about this time might be a good idea.
I am in favor of building more natural gas fired power plants, but natural gas will not be as plentiful and cheap in the future as solar power.
Here is another contemporary review of solar power pricing and comparisons to other power prices in diverse localities:http://www.mckinsey.com/Client_Service/Sustainability/Latest_thinking/Solar_powers_next_shining
The authors expect a 40% decline in solar power costs over the upcoming 2 years. It would be worthwhile to check back and see how accurate that expectation is.
Arid NM gets lots of (daylight) sun because there are few clouds. Few clouds means little rain to wash off the dust. A layer of accumulated dust means lower efficiency. How much valuable well-water will be needed to periodically clean the panels, where will it come from, and who will do the panel-washing? The solar radiation may be free, but the operating costs are not.
And, just as the cost of natural gas at a distant burner tip can be much higher than that at a wellhead where it is produced (particularly one located far from a pipeline), beware the value ascribed to power generated in a desert far from very many motors and lightbulbs that can utilize it.
jabre says:
May 5, 2012 at 6:27 am
“This is pure bologna based on your own references. Panel manufacturers provide 20 to 25 year 80% performance warranties.”
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Given the track record of solar panel manufacturers lately, how many do you expect will still be in business 20-25 years from now?
Matthew R Marler says:
May 5, 2012 at 11:21 am
“Solar power produces electricity to meet peak demand. Other methods of meeting peak demand cost way more than average costs, so this is probably price-competitive, in that area, for meeting peak demand. It would be helpful to know the actual cost in that area, to confirm this; anybody know? Peak demand is strongly driven by A/C, and A/C demands are generally reduced at night, and in cloudy days. ”
Let me correct you, Matthew. We’ve heard the “Solar power produces at peak demand” meme often. It is not entirely accurate. It must read: “Solar Power, WHEN it produces, it produces most during peak demand hours.” But it cannot replace a peaker plant, as a peaker plant is ready to deliver; that’s part of the contract; solar power can never deliver on demand.
BUT what solar power does very well is it destroys the economics of peaker plants. Under German law, renewable electricity must be preferred by the grid operators. This means that NatGas peaker plants idle even more than they usually would. It has gotten so bad that none of our utilities is willing to invest in new peaker plants. They are urgently needed as the German nuke phase out has created a perilous situation for the grid.
How will that be resolved? Well, guess what, taxpayer Euros or ratepayer Euros will pay for it… a neverending chain of market intervention… chalk another one up for the Greens…
GlynnMhor says:
May 4, 2012 at 9:34 pm
“At least they don’t frequently have the problem of snow covering the panels for weeks at a time…”
Glynn, search engines are your friends. Check annual snowfall records for Raton, New Mexico. It appears that it snows in the area six or more months of the year. Last time I was through there, in 2007, there was a virtual blizzard going on. I’m aware that you cover your bases by saying “don’t frequently” and “weeks at a time”, but snow is nevertheless “likely” to impact power production significantly.
DirkH: solar power can never deliver on demand.
In places where peak demand is heavily influenced by A/C, delivery rises as demand rises. In a lot of places, that is good enough for now. From time to time, in extremely cold weather, gas does not deliver power on demand either, though it is more reliable overall than solar. To my knowledge, solar is not “replacing” peaker plants, but adding new capacity to meet increasing demand.
Our religious friends have not factored a couple more costs into the solar equation. A very real problem is neighbourhood disputes over shading and family breakdown over the wanton use of a hairdryer. I used to live entirely on solar with battery back-up, I say used to as I have had to use 24 hours of diesel generation this year due to Tim Flannery making a mess of our drought in Australia. ( I hate clouds).
When I look at Ted’s field of panels and hear Al/s prediction of more frequent storms of greater intensity, I see a vision of a twister full of flying panels, a cartoon for JOSH?
@ur momisugly David Middleton
“I don’t know” would have sufficed. What’s relevant to a writer is often tangential to what’s relevant to a reader. In addition to what you say I object to regulators trying to mold consumption by interfering with light bulbs – the great icon for *good* ideas.
How do you defend solar farms against a terrorist attack out in the middle of no-where? I can think of a really simple and quick way that would severely disable the entire farm for months for under $1000. (I won’t say what that is here but it doesn’t involve explosives or anything involving permanent destruction at all.)
Probably similar to the problem of the John Hancock Tower in Boston back in the mid 70’s but on a much much broader scale. ‘Pei got his way’ and created an airfoil anchored to the ground at the bottom and twisting in the breeze at the top. The oscillating strain racked the heavy glass panels right out of their frames that came crashing down all around the building. They replaced them with plywood while wrestling with how to fix the problem earning the building the nickname “Plywood Ranch” at the time referencing an existing retail lumber chain of the same name at the time.