Guest essay by Eric Worrall [See update by Willis Eschenbach at the end]
h/t Dr. Willie Soon – great news, wind power is so cheap government subsidies and market favouritism are no longer required.
New wind and solar generation costs fall below existing coal plants
Estimates jeopardise Trump’s hopes of reviving mining industry in US
Ed Crooks in New York
NOVEMBER 9, 2018
The cost of new wind and solar power generation has fallen below the cost of running existing coal-fired plants in many parts of the US, threatening to wreck President Donald Trump’s hopes of reviving the mining industry.
New estimates published on Thursday by Lazard, the investment bank, show that it can often be profitable for US generation companies to shut working coal plants and replace their output with wind and solar power.
The calculations suggest that closures of coal-fired plants are likely to continue, eroding US demand for coal and jeopardising Mr Trump’s ambition to “put our coal miners back to work”.
The falling cost of renewable energy is adding to the pressure from cheap gas and stagnant demand for electricity, which have cut US coal power output by more than 40 per cent since 2007.
Retirements of US coal-fired plants are expected to hit a record high this year, and companies including FirstEnergy and American Electric Power have in the past few months announced further closures. Many of the plants being shuttered are reaching the end of their working lives, but even some relatively new capacity is being shut because it is no longer economically viable.
Read more (paywalled): https://www.ft.com/content/af6915c8-e2eb-11e8-a6e5-792428919cee
Former Vice President Al Gore celebrated the predicted loss of coal jobs;
Electricity from new wind and solar power is now cheaper than from existing coal plants in many regions of the US. The economic benefits of clean energy are here and now. https://t.co/zHIZmv3qEl
— Al Gore (@algore) November 9, 2018
However the article linked by Al Gore (which in turn links to the FT article above) points out that estimates of renewable energy cost may not properly account for the cost of energy storage and additional grid infrastructure required to connect renewables.
… “Although in its formative stages, the energy storage industry appears to be at an inflection point, much like that experienced by the renewable energy industry around the time we created the LCOE study eight years ago,” said George Bilicic, vice chairman and global head of Lazard’s Power, Energy & Infrastructure Group.
Still, Lazard says that battery storage is not yet cost-competitive to the point where it can drive the “transformational scenarios envisioned by renewable energy advocates.” In that it refers to grid defection, pointing to the issue of battery life rather than capacity. But it may not be far away. …
Digging deeper, the Lazard analysis contains caveats, which suggest the future may not be entirely rosy for renewables;
- LCOS v4.0 has revealed significant cost declines across most use cases and technologies; however, Industry participants noted rising cost pressures for future deliveries of lithium-ion storage systems due to higher commodity pricing and tightening supply
- Sustained cost declines have exceeded expectations for lithium-ion technologies, while cost declines for flow batteries are less significant but still observable
- Future declines in the cost of lithium-ion technologies are expected to be mitigated by rising cobalt and lithium carbonate prices? as well as delayed battery availability due to high levels of factory utilization
- Consistent with prior versions of the LCOS, shorter duration applications (i.e., 4 hours or less) remain the most cost effective for the commercially prominent energy storage technologies analyzed
- The underlying costs and performance of commercially available energy storage technologies continue to make them most attractive for applications which improve the grid’s ability to respond to momentary or short duration fluctuations in electricity supply and demand (e.g., wholesale services such as frequency regulation and spinning reserves and use cases serving the C&I segment such as demand charge mitigation)
- Project economics analyzed in the Value Snapshots have revealed a modest improvement year-over-year for the selected use cases, primarily reflecting, among other things, improved costs rather than rising revenues
- As costs continue to come down, particularly for shorter duration lithium-ion applications, returns have incrementally improved year-over-year; however, in most geographies, project economics depend heavily on subsidized revenues or related incentives
- Among the currently identifiable revenue sources available to energy storage systems, ancillary service products (such as frequency regulation, spinning reserves, etc.), demand response and demand charge mitigation represent potentially attractive revenue opportunities in selected geographies
- Project economics analyzed for solar PV + storage systems are attractive for commercial use cases but remain challenged for residential and utility-scale projects
- Combining energy storage with solar PV can create value through shared infrastructure (e.g., inverters, interconnection), reducing the need to curtail production by delaying the dispatch of electricity onto the grid and/or by capturing the value of “clipped” solar production (e.g., solar PV output that is in excess of the system inverter)
- Energy storage is increasingly being sold with commercial and residential solar PV systems to provide for potentially increased customer reliability benefits and to enable customers to use solar PV production to avoid demand charges
- The Value Snapshot analysis suggests commercial use cases for solar PV plus storage provide moderately attractive returns in the markets assessed (e.g., California and Australia) while residential solar PV plus storage and utility-scale solar PV + storage remain modest for those projects analyzed
Even if we accept the cost analysis at face value, the “cost effective” four hours battery backup really isn’t useful in the middle of winter, when your solar panels are buried under snow and your wind turbines are frozen solid. Plants capable of providing power through dark, cold and snowy winter months will still be required.
If the USA embraces renewables the way countries like Australia and the UK have, consumers will be stuck with paying for two sets of energy infrastructure – the energy infrastructure which is used when the sun shines, and the 100% fossil fuel backup kept idling, ready to step in when the sun stops shining and the wind stops blowing.
JoNova points out the cost of paying for two parallel sets of infrastructure is having a real impact in Australia – businesses are being hit with up to 120% increase in electricity costs during the current round of wholesale electricity negotiations, thanks to Australia’s infatuation with expensive renewables.
[UPDATE by Willis Eschenbach] I trust that Eric won’t mind if I expand a bit on his excellent post. Lazard gives a graph on page 6 of his treatise on Levelized Cost of Energy, which I reproduce below (click to expand):
Note that the cost of either unsubsidized wind or unsubsidized solar is greater than that of coal or nuclear, at both the cheap and the expensive ends of the spectrum. And that is without considering the extra costs:
• capital cost of equivalent installed fossil-fuel or other dispatchable capacity, for times when the wind or sun are not available.
• running cost of equivalent installed fossil-fuel or other dispatchable capacity, which must be kept online at very inefficient operation for times when the wind or sun are not available.
• transmission lines from the areas (generally well away from the population centers) which are suitable and large enough for wind or solar.
Starting out more expensive and adding in all of those additional costs, I’m sorry, but that dog won’t hunt.
In California where I live, the green mafia has imposed “renewable mandates”. These have, of course, made only a trivial difference in CO2 emissions, but they have increased my power cost by 50% … and don’t think for one minute that energy-intensive industries haven’t notices. They’re fleeing the state like cockroaches when you turn on the light at midnight …
Best to all,