Solar Power Is Not Merely Least Expensive

December 29th, 2016 by George Harvey

We’ve seen a lot of commentary on the fact that utility-scale solar power has become the least expensive source of electricity in many places. There is more than that to be found in the data in Lazard’s Levelized Cost of Energy Analysis, Version 10.0, however, and what it tells us is that solar and wind power have benefits apart from the simple facts that their costs are low.

We have always needed a variety of power sources. Conventional baseload power provided by coal-burning and nuclear plants lacks flexibility and is, in fact, a really bad match for grid demand. Baseload generation cannot be ramped up or down as demand changes, and this is one reason why such power plants never provided all of our electricity. There always had to be other, more flexible generating facilities available.

The greatest need for power is often on warm, sunny afternoons, when air conditioners are running in work spaces, stores, and homes, in addition to normal human activities. These have been the times when peaking plants could make their money. With high demand, come the high prices they need to be profitable.

As solar photovoltaics (PV) have come on the market in quantity, however, sunny afternoons suddenly bring the sun as a competing power source. The early evening, after the sun has gone down, is still potentially a time of high demand, when solar power does not cut into the use of fossil-fuel peaking plants. This situation, however, is clearly coming to an end.

According to Lazard, the levelized cost of utility-scale solar power with storage is $92 per megawatt-hour (MWh). This means that solar-plus-storage can be highly competitive, even after dark, with natural gas peaking plants, which have levelized costs ranging from $165 to $217 per MWh. It is even competitive to a degree with gas-powered reciprocating engines, whose costs are from $68 to $101 per MWh.

There is more to this story, however. It happens that wind power is usually strongest when the sun is not shining brightly, and solar power output is often highest when the wind does not blow much. A storage system that is charged by the sun could be charged by the wind when the sun does not shine. This means that a solar-plus-storage system can be made more valuable by storing excess power from wind as needed.

The fact that power from solar-plus-storage is becoming relatively inexpensive makes it likely that the combination will increasingly be used instead of peaking plants using fossil fuels. This will increase production of batteries, and it will increase research and development into storage technologies. And these changes imply further reductions in costs.

The declines in costs of energy storage have already been impressive. Tesla lithium-ion batteries are delivering about double the amount of electricity that they had been providing when they were first introduced, and their cost has not increased appreciably. This implies that the cost of the electricity from them has been roughly halved. Other battery technologies have also seen exciting developments. For example the ViZn flow battery shows a number of improvements over earlier designs at considerably lower costs. Salt water batteries, such as those from Aquion Energy, also come to mind. As fast as the price of electricity from solar PVs has been dropping, we should not be surprised if the costs of solar-plus-storage or wind-plus-storage drop considerably faster.

There are other advantages implicit in adding storage to the power supply. One is that the power can be ramped up or down much faster than it can be with conventional approaches to equipment. Power demands on batteries and some other storage solutions can be ramped up or down in fractions of a second.

Indeed, the storage component moves us into a situation where solar and wind, with support from other types of renewable energy, can take on larger baseload power systems. Clearly, if utility-scale solar + storage = $92/MWh, it will always be less expensive than the $97 to $136 per MWh cost of nuclear power. It is competitive with power from coal. The only fossil fuel remaining in Lazard’s analysis that is clearly less expensive than solar-plus-storage is combined cycle natural gas, with a cost range of $48 to $78 MWh, and we have no guarantees those prices will last. And remember, this is not solar power alone, but solar with energy storage.

We seem to be moving into a new age, and it is not merely an age when the sun and wind provide the least expensive power we have. It is an age when the sun and the wind may replace baseload power altogether, not only as the least expensive solution, but as the best general solution. And we might come to that faster than we dreamed possible.











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