Low Costs of Solar Power & Wind Power Crush Coal, Crush Nuclear, & Beat Natural Gas

December 25th, 2016 by Zachary Shahan

We already published a great article from Nexus Media regarding Lazard’s new report showing the extremely low (and falling) costs of solar power and wind power. However, I’ve been wanting to highlight these awesome new findings since Larmion shared the updated report with us earlier this month, and I want to break out the amazing news in 5 specific ways.

These are 5 messages that I think anyone wanting a better US economy (or a better economy in practically any country), anyone wanting national energy freedom (aka energy independence), anyone wanting to advance the most cost-effective choices for electricity generation, and anyone wanting to make logical energy decisions should know and share with others.

1. Wind & Solar Are Cheaper (Without Subsidies) Than Dirty Energy

The first point is the very basic fact that new wind power and/or solar power plants are typically cheaper than new coal, natural gas, or nuclear power plants — even without any governmental support for solar or wind.

Not only are they typically cheaper — they’re much cheaper in many cases.

For slightly easier viewing/comparison, here’s that chart again but with some orange lines added in on the low and high cost estimates for utility-scale solar:

And here’s one in a different format:

Yes, these are levelized cost of energy (LCOE) estimates from Lazard based on various assumptions, and they are averages for the US as a whole rather than prices for specific locations within the US, but the lower estimated costs for these renewables are reflected in the real world as well, where solar & wind accounted for 69% of new capacity additions in 2015, 99% of new capacity additions in Q1 2016, a large portion of new capacity additions in Q2 2016, and probably ~⅔ of new capacity additions for 2016 as a whole.

But these estimates in the charts above are actually unbalanced in favor of fossil fuels! Some of the assumptions are quite conservative, and some very real costs are left out.

2. Wind & Solar Are Actually Even Much Cheaper Than Dirty Energy (More So Than Lazard Shows)

The estimates above are supposedly “unsubsidized,” but if you include social externalities as societal subsidies (I do), the estimated costs of fossil fuels and nuclear energy are hugely subsidized in those charts.

A study led by the former head of the Harvard Medical School found that coal cost the US $500 billion per year in extra health and environmental costs — approximately 9¢/kWh ($90/MWh) to 27¢/kWh ($270/MWh) more than the price we pay directly. To fool yourself into thinking these are not real costs is to assume that cancer, heart disease, asthma, and early death are not real.

The air, water, and climate effects of natural gas are not pretty either. On the nuclear front, the decommissioning and insurance costs of nuclear power — unaccounted for above — would also put nuclear off the chart.

On the renewable front, costs to overcome intermittency of renewable energy sources (basically, presuming a very high penetration of renewables on the grid) are also not included. Once that is a significant issue (at which point solar and wind will be even cheaper), low-cost demand response solutions, greater grid integration, and storage will be key solutions to integrating these lower-cost renewable sources to a high degree.

Back to Lazard’s assumptions, note that the IGCC and coal cost estimates do not include the costs of transportation and storage.

Given these assumptions unrealistically favoring fossil fuels and nuclear energy, including subsidies for solar and wind is actually an even better way to look at costs of these electricity options. However, if you included historical subsidies as well — coal, natural gas, and nuclear have received a ton (well, many, many tons of subsidies) — dirty energy options would again look worse. In any case, here’s Lazard’s cost comparisons with current subsidies:

Now, looking at these comparisons, one might wonder how any dirty energy power plants get built today. I would say it comes down to the lack of logical behavior and foresight in the market, but that’s a topic for another day.

On a smaller level, though, as Nexus Media pointed out, part of it comes down to lack of grid integration across the United States and varying cost factors in different jurisdictions. More specifically, “a tool from the Energy Institute of the University of Texas shows the cheapest kind of new power plant by county, accounting for land available to deploy a particular technology.” Here’s the result without any extra social or environmental costs added in:

And here’s the result with modest environmental costs added in:

3. Solar & Wind Became Much Cheaper In The Past 7 Years (85% and 66%, Respectively)

No, wind and solar costs didn’t roll off a cliff because of Obama, but his staff did help to hasten the roll to some degree. Programs like SunShot have helped to bring down costs even faster than they were coming down anyway, as did greater deployment of renewables — with greater production and deployment, costs come down almost automatically.

A few years ago, I wrote that the cost of solar was probably “2–100 times cheaper than you think” — the point was that the cost of solar had come down very fast and if people had a cost of solar in their head from a few years before (or, let’s hope not, decades before), their cost assumption was wildly too high.

As the charts above show, the costs of utility-scale solar power and wind power fell 85% and 66%, respectively, in the past 7 years. If you are working on cost assumptions from before President Obama took office, your assumed cost of solar or wind is wildly too high.

If you talk to someone who thinks solar power and/or wind power is expensive, perhaps this is the simple problem — point them in the direction of this piece.

4. The Lowest Solar Costs Shown In The Lazard Report Are Considerably Higher Than Globally Recorded Low-Price Bids

I won’t go into much detail right now, but I will update this article as more record-low prices for solar power and wind power are reported. For now, though, note that we’ve seen solar project bids for under 3¢/kWh in the UAE and well under 4¢/kWh in Mexico — prices that are well below the Lazard’s low-end estimates for the US.

Note that several of the prices in the chart above were the record-low globally for the world (as far as publicly revealed prices go) when they were made — including the first few and the last two. In just a few years’ time, the low-price records have fallen at a dramatic clip.

5. People Can Get Lower Prices But More Jobs With Solar & Wind

Whether American, British, Canadian, Australian, Indian, German, Dutch, French, Spanish, or [fill in the blank], solar and wind power don’t just mean lower prices — they also typically mean more jobs. Much of the price of dirty energy power plants is in the fossil fuel — the physical resource. When we buy that fuel, much of the money goes to the billionaires and multimillionaires who “own” the fuel — the coal mines and the natural gas wells.

Sunshine and wind, of course, are free, but distributed solar and wind power plants have to get built and installed — those are things humans do. When we pay for solar and wind power plants, we pay for human labor, and often help create or support local jobs.

We don’t actually have to choose between low prices or jobs or protecting our air, water, and climate — we get all of those things with renewable energy options like solar and wind energy.

With all of that said, as Nexus Media pointed out, new clean energy power plants compete against existing dirty energy power plants, and we need strong policies in place in order to push the dirtiest power plants off the grid and then replace them (and create jobs) with new clean energy power plants.

In the US, the Clean Power Plan helps to do that. See our archives on the Clean Power Plan for more on that topic.

By the way, Merry Christmas and/or Happy Holidays!











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