Open thread: the cost of renewable energy


in Economics, Geek stuff, Politics, The environment

Especially in comparison with energy conservation, carbon capture and storage, and nuclear power, much of the debate about renewable energy as a climate change solution concerns cost. Which forms are most and least affordable? How do they compare to other energy options? How should intermittancy and energy storage issues be incorporated?

Another set of questions concerns the rate and scale of deployment. How much of the carbon challenge can renewables address, and how quickly can they do so relative to the timescales necessary to stabilize emissions safely?

{ 15 comments… read them below or add one }

Milan January 27, 2014 at 4:20 pm
. January 27, 2014 at 4:20 pm

“Britain gets more electricity from offshore wind farms than all other countries combined. In 2012 it added nearly five times more offshore capacity than Belgium, the next keenest nation, and ten times more than Germany. Its waters already contain more than 1,000 turbines, and the government thinks capacity could triple in six years. Boosters think Britain a global pioneer. Critics say ministers are flogging a costly boondoggle.

China and Japan have a growing appetite for offshore generators but little capacity. America has only a single prototype turbine.

Unfortunately, offshore wind power is staggeringly expensive. Dieter Helm, an economist at Oxford University, describes it as “among the most expensive ways of marginally reducing carbon emissions known to man”. Under a subsidy system unveiled late in 2013, the government guarantees farms at sea £155 ($250) per megawatt hour for their juice. That is three times the current wholesale price of electricity and about 60% more than is promised to onshore turbines. It is also more than the £92.50 which Britain’s new nuclear plant at Hinkley Point will get—though that deal is for 35 years, not 15.

The industry says offshore wind power would become cheaper more quickly, and boost Britain’s economy, if the government agrees to build lots more offshore farms. The Department of Energy and Climate Change (DECC) says that 10 gigawatts (GW) of offshore capacity is “achievable” by 2020. That is three times the amount already deployed, and would provide about the same capacity as Britain’s nine nuclear power stations combined (although wind farms produce power only about a third of the time). Still, ministers once had loftier ambitions. Wind-farm operators worry that the government will divert subsidies to other kinds of low-carbon generation, such as nuclear and gas-fired stations.”

. February 17, 2014 at 7:08 pm

But Mr Gabriel, who is mulling a run for chancellor in 2017, will by then be judged on a more daring project. As part of his coalition deal with Mrs Merkel, he is now a “super minister” combining two portfolios, energy and the economy. He is thus in charge of rescuing Germany’s most ambitious and risky domestic reform: the simultaneous exits from nuclear and fossil-fuel energy, collectively known as the Energiewende, a term that means energy “turn” or “revolution”.

More a marketing slogan than a coherent policy, the Energiewende is mainly a set of timetables for different goals. Germany’s last nuclear plant is to be switched off in 2022. The share of renewable energy from sun, wind and biomass is meant to rise to 80% of electricity production, and 60% of overall energy use, by 2050. And emissions of greenhouse gases are supposed to fall, relative to those in 1990, by 70% in 2040 and 80-95% by 2050.

German consumers and voters like these targets. But they increasingly dislike their side-effects. First, there is the rising cost of electricity. This is a consequence of a renewable-energy law passed in 2000 which guarantees not only 20 years of fixed high prices for solar and wind producers but also preferred access to the electricity grid. As a result, Bavarian roofs now gleam with solar panels and windmills dominate entire landscapes. Last year, the share of renewables in electricity production hit a record 23.4%.

This subsidy is costly. The difference between the market price for electricity and the higher fixed price for renewables is passed on to consumers, whose bills have been rising for years. An average household now pays an extra €260 ($355) a year to subsidise renewables: the total cost of renewable subsidies in 2013 was €16 billion. Costs are also going up for companies, making them less competitive than rivals from America, where energy prices are falling thanks to the fracking boom.

The Energiewende has, in effect, upset the economics of building new conventional power plants, especially those fired by gas, which is cleaner but more expensive than coal. So existing coal plants are doing more duty. Last year electricity production from brown coal (lignite), the least efficient and dirtiest sort, reached its highest level since 1990. Gas-fired power production, by contrast, has been declining (see chart). In effect, the Energiewende has so far increased, not decreased, emissions of greenhouse gases.

. February 17, 2014 at 7:14 pm

Europe’s confusion is due, in part, to conflicting national priorities. Germany is giving up nuclear power and betting heavily on solar and wind energy (all while burning more coal). France remains heavily committed to nuclear and bans shale-gas exploration. Britain is going all-out for shale gas (and nuclear), being a laggard in renewables. But it also does not help that Brussels has too many commissioners with overlapping responsibilities. The latest package was agreed on only after an 11th-hour battle between Ms Hedegaard and Günther Oettinger, the German energy commissioner who, unlike the German government, wanted only a modest emissions-reduction target of 35%.

. September 11, 2017 at 9:21 am

Huge boost for renewables as offshore windfarm costs fall to record low

Green groups say record low price should sound death knell for Hinkley Point C after subsidy auction sets price for windpower below even lowest forecast

. September 11, 2017 at 9:21 am

Industry watchers had expected the guaranteed price for power from windfarms around Britain’s coast to come in somewhere between £70 and £80 per megawatt hour, below the £92.50 for a new nuclear power station at Hinkley Point.

But the “exceptionally low” results of a government auction on Monday for subsidy contracts show two offshore windfarms will be built for £57.50 per MWh, way below even the most extreme predictions. The price is half of what new offshore windfarms were being awarded just two years ago.

. July 2, 2018 at 6:25 pm

Renewable-energy advocates talk of a “tipping-point” at which renewables become cheap enough to drive fossil fuels out of the electricity mix. To hear them talk about falling costs, you would think the world was almost there:

Yet excluding hydropower, renewables still produce only 8% of the world’s electricity, and far less of the energy needed for heating, cooling and transport, which are harder to decarbonise.

Moreover, Mr Sivaram argues that although solar panels are cost-competitive as a niche energy source, their economics become less attractive the more they are deployed. That is because they cannot be turned on and off, so they flood the electricity market when the sun is high, driving down wholesale prices. The more solar power is added to the grid, the lower its value.

. August 26, 2019 at 10:32 am

Most important, the economics of power is being turned on its head by the falling costs of renewables. The “levelised” cost of electricity—which includes capital and operating spending to generate it over a plant’s lifetime—is now lower for wind or solar power than it is for coal. Coal’s share of power generation has sunk from about half in 2005 to 27% in 2018. It will fall further, despite President Donald Trump’s plan, announced in June, to loosen regulation of coal plants.

But big investments in gas—such as Duke’s plan for it to account for two-thirds of the Carolinas’ new generating capacity—carry risks. The first is that some gas plants, like coal ones before them, become uneconomic as renewables keep getting cheaper. In April, Indiana’s utility commission rejected a proposal for a gas plant by Vectren, another utility, for just that reason. If America one day sets a price on carbon emissions, customers could be left paying for utilities’ bad bets on fossil fuels.

. October 7, 2019 at 7:58 pm

By some measures, results have been a big success. In the past decade offshore-wind capacity in Britain has grown 20-fold, meaning it now comprises a quarter of renewable generation. The lowest price secured in the first round of auctions, in 2015, was £114.39 ($142) per megawatt hour (mwh). In 2017 the cheapest projects, including Orsted’s Hornsea Two, won with bids of just £57.50. The next contracts are expected to be announced on September 20th.* Other countries, including America and Taiwan, now have their own plans for offshore wind, benefiting from the expertise that companies honed in Britain.

. December 24, 2019 at 1:28 pm

Your article on British offshore wind suggested that the technology remains expensive (“The experiment”). Yet the latest auctions produced a price of about £40 ($50) per megawatt hour, well below the current wholesale price of electricity. Offshore wind is now the cheapest way of producing power in Britain.

You also supported Dieter Helm’s acerbic criticisms of British energy policy for directing subsidies towards particular technologies, such as offshore wind. The recent auctions are a spectacular rebuttal of Professor Helm’s theory. It is precisely because Britain has protected offshore wind over the past 15 years that the technology has now become unbelievably cheap. It is often difficult for economists such as Professor Helm to recognise this, but active industrial policies can work.

Lastly, you repeated the conventional final attack on offshore wind, pointing out that it is intermittent. Other countries around the North Sea have woken up to this problem, usually focusing on various technologies for converting “power to gas” as a way of ensuring this intermittency can be managed at enormous scale. The hibernation of energy policy over recent years has held up progress, but my hypothesis is that Britain will soon conclude, like other countries, that using surplus power to make renewable hydrogen is the logical route forward. This hydrogen will then be used to generate power when electricity supplies are scarce from the North Sea.

Chris Goodall

. January 28, 2020 at 11:12 am

Jim Platts asked whether wind power is truly sustainable, taking into account its cradle-to-grave carbon emissions (Letters, November 9th). Depending on his preconceptions, Mr Platts may or may not be reassured to know that the answer is an emphatic “yes”.

A number of studies convey this, including one by Camilla Thomson and Gareth Harrison in 2015 for ClimateXChange. They conclude that the cradle-to-grave carbon payback for onshore wind farms is six months to two years, unless they are built on forested peatlands; if that is the case the payback period can be up to six years. For offshore wind the range is five months to one year. All of these are well within an assumed lifetime of 20 years.

The authors also considered the impact on efficiency of “conventional” generation of operating at lower capacity because of the presence of wind power in the system, and conclude that the impact is marginal. Wind turbines that were constructed up to 30 years ago are still going strong.

Kit Beazley
Malmesbury, Wiltshire

. June 19, 2020 at 8:10 pm

With its vast deserts, the Arab world’s most abundant clean-energy source is the sun. Non-oil economies were first to take advantage of it. More than a third of Morocco’s energy now comes from renewables (in the eu the average is 18%). Oil producers are catching up. A big project in Abu Dhabi, the capital of the United Arab Emirates (uae), recently received the world’s lowest tariff bid for solar power. Oman, Kuwait and Qatar have large projects, too. The Middle East as a whole generates 9gw of solar power, up from a paltry 91 megawatts a decade ago. Between 2008 and 2018 investment in the field increased 12-fold.

The growing competitiveness of renewables makes analysts optimistic that the trend will continue (see chart). Solar farms are cheaper, faster and safer to build and maintain than oil and gas plants. The uae’s new solar plant will generate electricity at roughly two-thirds the cost of gas and a third that of oil, even at today’s low prices. Several countries in the region speak of becoming renewable-energy exporters.

Investors, though, still have cause to hesitate. For a start, Arab autocrats often promise more than they deliver. Take Muhammad bin Salman, the de facto ruler of Saudi Arabia, who has made renewable energy a pillar of his economic-reform plan. In 2018 he and SoftBank, a Japanese conglomerate, announced the world’s biggest solar-power-generation project in the Saudi desert. It was shelved six months later.

. May 5, 2021 at 7:13 pm

Solar cells spent 50 years getting cheaper and better in a variety of marginal niches. Then, in the space of little more than a decade, they became both widespread and cheap. In 2020, 132bn watts of new solar generating capacity were installed around the world; in many places solar panels are now by far the cheapest way to produce electricity. This transformation was not brought about by a technological breakthrough in the way that photons arriving from the Sun deliver energy to electrons waiting in the panels. It was the result of a decisive shift in German government policy happening to coincide with China becoming the dominant force in global manufacturing.

. May 9, 2021 at 2:55 pm

Renewable Energy Is Suddenly Startlingly Cheap
Now the biggest barrier to change is the will of our politicians to take serious climate action.

By Bill McKibben

. May 24, 2021 at 5:54 pm

Rising prices of solar modules could disrupt the sector | Business and Economy News | Al Jazeera

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