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 …

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