Wind and Solar are the Cheapest Sources of New Electric Generation – With or Without Subsidies
by Bob Shively, Enerdynamics President and Lead Facilitator
When facilitating Enerdynamics seminars at utilities or other energy companies, we commonly encounter those who believe that wind and solar are expensive forms of electricity. And when we tell them that wind and solar are the two cheapest resources for electric generation, inevitably someone will say “but that’s because they are subsidized." Thus, we feel it is critically important to make it clear to those in the industry and the public: Wind and solar are the cheapest sources of new electric generation with or without any subsidies.
The lifetime cost of generation sources can be measured using the levelized cost, which represents the average cost of generating electricity in $/MWh across the life of a unit. This includes initial construction costs as well as ongoing operating, fuel, and maintenance.
Here are the latest numbers for the unsubsidized cost of new generation from the well-respected Lazard’s Levelized Cost of Energy Analysis Version 13.0 released in late 2019:
Interestingly, the costs are even getting close to the current average marginal operating costs of existing units, with coal at $33/MWh and nuclear at $29/MWh. More expensive existing coal units may have a marginal operating cost as high as $41/MWh according to Lazard, which means a new solar plant could be built and already be competitive with these existing units.
A recent study by Bloomberg New Energy Finance
indicates this is true globally as shown by its map of cheapest new generation sources in various parts of the world:
One reason many in the energy workforce (and in the general public) don’t realize the cost competitiveness of renewables is that costs have fallen so far, so fast. Indeed just a few years ago, renewables were expensive relative to conventional forms of energy. From Lazard’s historical data, following is the average change in cost of new generation in the decade from 2009 to 2019:
With such rapidly changing costs, it is not surprising that many are still caught up in old paradigms.
So what does this mean? We can expect to see increasing displacement of traditional forms of generation with low-cost wind and solar. This will require new ways of planning assets and operating the system to provide the flexibility and levels of backup necessary for reliability. It also means that companies whose business models are tied to traditional forms of generation will need to adjust rapidly. And it means politicians whose constituents have well-paying jobs tied to traditional forms of generation owe it to these workers to be honest and help them transition to new careers. Of course, none of this can happen until everyone acknowledges the facts around generation costs.
Interested in educating your workforce about issues related to the changing world of energy? Explore Enerdynamics online, classroom, and virtual live courses at www.enerdynamics.com.
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