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Page added on August 22, 2014
Price of US Wind Energy at ‘All-Time Low’ of 2.5 Cents per Kilowatt-Hour
It’s difficult to compete if you can’t calculate or agree on the true cost of your product. That sometimes seems the plight of the wind and solar power industries.
A just-released Department of Energy and Lawrence Berkeley National Laboratory report pegs utility-scale wind power-purchase agreement pricing as averaging $25 per megawatt-hour for projects that negotiated contracts in 2013. That’s cheap power.
But, as Stephen Lacey asked in a recent podcast, how do we calculate the true cost of intermittent renewables?
Lacey and The Energy Gang debated the findings of a recent study from the Brookings Institution that concluded that the costs of wind and solar “are higher than presumed when using a cost-benefit calculation model.” The Economist picked up that Brookings report, which ranked solar PV last and wind next to last, while gas and nuclear led the rankings.
The Rocky Mountain Institute’s Amory Lovins contributed an article to Greentech Media arguing that the Brookings Institution paper’s conclusions were wrong — the fruits of an analysis based on “outdated or otherwise incorrect data.” Lovins wrote that the author “assumed solar and wind to be more expensive and less productive than they actually are, and conversely assumed nuclear and gas combined-cycle to be less expensive and (for gas) more productive than they actually are. All knobs got turned in exactly the wrong directions.”
Lovins also pointed out that the low cost of wind is “consistent with real-world observations, such as when utility Xcel Energy proposed adding 550 megawatts of wind capacity to its system last year — not due to environmental motivations or state renewable-energy mandates, but because new wind power was the cheapest supply option from a list that included gas combined-cycle. Solar and wind similarly beat new gas plants in California electricity auctions.”
So, the most recent DOE analysis finds that wind power is at 2.5 cents per kilowatt-hour, an “all-time low.” One of the authors of the report, Berkeley Lab Staff Scientist Ryan Wiser, wrote, “This is especially notable because, enabled by technology advancements, wind projects have increasingly been built in lower-wind-speed areas.”
Key findings from the report include:
- Wind is a credible source of new generation in the U.S.: Despite 2013 being a slow year for wind, “wind power [accounts for] 33 percent of all new U.S. electric capacity additions since 2007.” Texas continues to lead in installed wind capacity, with more than 12 gigawatts of installed capacity, while California, Iowa, Illinois, Oregon and Oklahoma all have more than 3 gigawatts of installed capacity. Wind power now contributes more than 4 percent of the nation’s electricity supply, more than 12 percent of total electricity generation in nine states, and more than 25 percent in two states, according to the report.
- Turbine scaling is improving wind project performance: Average nameplate capacity, turbine hub height and rotor diameter have all increased substantially over the last decade, enabling wind project developers to economically build projects on lower-wind-speed sites. Projects in high-wind-resource regions are seeing a boost in capacity factors because of improved turbine performance.
- Falling wind turbine pricing continues to reduce installed project costs: “Wind turbine prices have fallen 20 percent to 40 percent from their peak in 2008,” according to the report, and these declines are driving project costs down. Installed costs averaged $1,630 per kilowatt last year, down more than $600 per kilowatt from the apparent peak in 2009.
- Supply chain and import/export balance is recovering: The profitability of turbine suppliers rebounded in 2013, after a number of years in decline, although “more domestic wind manufacturing facilities closed in 2013 than opened.” Employment in the sector has been slashed. Despite these challenges, the data shows that “a decreasing percentage of the equipment used in wind projects has been imported. Domestic content has increased and is high for blades, towers, and nacelle assembly; domestic content is considerably lower for much of the equipment internal to the nacelle.”
Projections for the wind industry see strong growth in 2014 and 2015, with uncertain prospects in 2016 based on policy risk and the price of natural gas.
15 Comments on "Price of US Wind Energy at ‘All-Time Low’ of 2.5 Cents per Kilowatt-Hour"
andya on Sat, 23rd Aug 2014 12:56 am
Ah the old supply and demand. Nobody wants to buy intermittent wind power, so it’s cheap.
rockman on Sat, 23rd Aug 2014 8:42 am
It might sound odd but perhaps Texas is the big leader in wind power because we’re also THE biggest coal burning state by an even wider margin. And it isn’t so much coal as it is lower grade lignite. So how does that work: we have abundant cheap coal with many decades of supply as well as the cheapest NG in the country yet wind has found a nice niche here?
Perhaps it’s no more complicated then when wind can’t handle the demand we just toss a few more million pounds of coal into the boilers. And when wind is pumping out gobs of electricity they just let the embers smolder a bit:
“Texas hit “peak wind” on March 26, 2014 when the state’s wind farms produced 10,296 megawatts of electricity. At that moment, wind turbines provided enough electricity to supply power for 29% of the total electricity load of the state’s main power grid.”
Ironic: by having a huge supply of the worst polluting fossil fuel Texas leads the country (and most of the world) with the least polluting source of electricity.
steve on Sat, 23rd Aug 2014 9:54 am
I did a large wind generator for a famous rich gentleman but it was for his large inefficient house—-I determined it must have just been for looks in the end…If he really cared he could have built a smaller house…I wonder if we will live to see small houses built right worth a lot and large inefficient houses in suburbs worth nothing…If you go back and look at old houses built in the 1890 and early 1900 you can see that they built them for the climate….now they are built for an endless supply of cheap energy…
Davy on Sat, 23rd Aug 2014 10:13 am
Steve, that is part of the attitudes and lifestyle changes required. In my brother neighborhood they are tearing down older smaller nice surburban homes and building monstrosities. It is insane! I admire the old American farm houses in the countryside. They were built for sustainability not trying to keep up with the Jone’es.
Bob Owens on Sat, 23rd Aug 2014 11:53 am
This is great news. At these prices Utilities will take notice and start the switch to renewable energy. It won’t be the environment that counts, but price. I wish it were otherwise, but at least we are starting to move in the right direction. Large wind turbines coupled with huge batteries to increase power availability will make the sell more compelling. Utility opposition will soon end.
Kenz300 on Sat, 23rd Aug 2014 11:54 am
Quote — “Lovins also pointed out that the low cost of wind is “consistent with real-world observations, such as when utility Xcel Energy proposed adding 550 megawatts of wind capacity to its system last year — not due to environmental motivations or state renewable-energy mandates, but because new wind power was the cheapest supply option from a list that included gas combined-cycle. Solar and wind similarly beat new gas plants in California electricity auctions.”
The transition to safer. cleaner and cheaper alternative energy sources is speeding up around the world.
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future of energy production.
——————–
Global Renewable Energy Status Uncovered
http://www.renewableenergyworld.com/rea/news/article/2014/08/global-renewable-energy-status-uncovered?page=all
———————
Renewables Provide 56 Percent of New US Electrical Generating Capacity in First Half of 2014
http://www.renewableenergyworld.com/rea/news/article/2014/07/renewables-provide-56-percent-of-new-us-electrical-generating-capacity-in-first-half-of-2014
——————
Renewables to Receive Lion’s Share of $7.7 Trillion in Global Power Funding
http://www.renewableenergyworld.com/rea/news/article/2014/07/renewables-to-receive-lions-share-of-7-7-trillion-in-global-power-funding
energyskeptic on Sat, 23rd Aug 2014 3:37 pm
The fact that the search engine of energy.gov gets zero hits on EROEI and EROI gets only only 11, and life cycle assessment based reports are scarce and when they exist concentrate on ghg means their reports are pretty bogus
Makati1 on Sat, 23rd Aug 2014 8:49 pm
Wind and solar are ‘feel good’ energy converters. Neither can provide new replacements with their produced energy let alone any growth. Without hydrocarbon energy, they will go the way of the dinosaurs.
rockman on Sat, 23rd Aug 2014 9:39 pm
M – “Neither can provide new replacements with their produced energy let alone any growth.” To a fair degree that’s been the case in Texas. While we have more wind power then the #2 and #3 states combined it hasn’t been developed as a substitute for fossil fuels but as a supplement.
Tom S on Sun, 24th Aug 2014 12:46 am
energyskeptic:
“The fact that the search engine of energy.gov gets zero hits on EROEI and EROI gets only only 11 … means their reports are pretty bogus”
No it does not mean that. It means that the ERoEI of renewables is settled (their ERoEI is good enough and usually better than fossil fuels) so it’s not an interesting question. There’s no point in addressing the same mistaken topic over and over again.
The ERoEI of renewables is generally higher than that of fossil fuels. I wrote about this topic on my blog at:
http://bountifulenergy.blogspot.com/2014/07/renewables-have-higher-eroei-than.html
-Tom S
Tom S on Sun, 24th Aug 2014 1:29 am
Makati1:
“Wind and solar are ‘feel good’ energy converters. Neither can provide new replacements with their produced energy let alone any growth.”
That’s all wrong. There are obvious, straightforward ways of making new renewable plants using the energy from existing renewable plants. For example, the electricity to manufacture new solar panels can come from existing solar panels. The process heat required (for smelting ores, melting silicon as part of the Czochralski process, etc) could come from solar thermal plants. Trains to transport the ores can be powered by overhead cables with electricity from renewables (this is already done in Europe to a significant extent). Although mining machinery would be difficult to power by batteries or cables, such machinery could just as easily be powered by anhydrous ammonia, which is a liquid fuel suitable for use in diesel engines, and which can be produced using stranded wind turbines.
No technological advancements are required for those things to happen. All of the things I listed are already well understood. Some of them are not economic at present (especially process heat from solar thermal plants) but all of them are entirely possible using today’s technology.
Fossil fuels do not have any magical properties which are impossible to obtain using other means. Fossil fuels have been used thus far because they were cheapest. However, fossil fuels will be replaced by substitutes as they become cheaper. There are obvious substitutes for ALL uses of fossil fuels.
-Tom S
andya on Sun, 24th Aug 2014 3:38 am
Tom S, does everything stop when the sun goes down? I think you are glossing over some pretty significant and obvious hurdles. As well as making some pretty outrageous claims. FF were not cheapest but are used because they do have some pretty unique properties. Dense transportable, and storable. Think about it.
Tom S on Sun, 24th Aug 2014 6:16 am
andya:
“does everything stop when the sun goes down?”
No, but renewable power doesn’t stop when the sun goes down. Solar thermal plants can keep operating through the entire night. Windmills are as likely to operate at night. Hydro is dispatchable and can be used when the wind isn’t blowing. Grid batteries could be used. Pumped storage could be used. HVDC lines can extend across time zones.
There are electric heaters which can store heat in a thermal mass, for night time. There are refrigerators and freezers which can store cold by making ice cubes when electricity is cheaper and melting them later. EVs can be recharged during the day time, or when the wind is blowing, using a smart recharger.
“As well as making some pretty outrageous claims.”
The claims I’m making are all straightforward consequences of basic science and already-developed technology.
“[Fossil fuels are] dense transportable, and storable.”
Natural gas isn’t particularly dense or storable. Perhaps you’re talking about oil.
Oil is dense and easily transported, but those qualities often aren’t crucial. Trains, trucks, and buses can easily be electrified using overhead wires, in which case they don’t need to carry their fuel, and energy density is less important. Cars can be plug-in, which implies range limitations (less than 200 miles) because of the lower energy density of batteries, but people rarely drive more than that in a given day anyway.
For the few applications which really require a liquid fuel, anhydrous ammonia can be used. Ammonia can be made using nitrogen from air, hydrogen from water, and electricity from renewable sources. It’s liquid and has all the advantages which you listed (dense, transportable, and storable). Ammonia from renewable sources is more expensive than oil, but would only be required for niche applications where a liquid fuel is really necessary.
-Tom S
Davy on Sun, 24th Aug 2014 8:15 am
Tom, I am sorry but your ideas are only theoretically achievable with the proper conditions that are now lost. The most significant condition missing and never to be regained is time. This whole process needed to begin in the 70’s or 80’s with lifestyle changes to compliment the onset of the new technology. The complex and interconnected nature of globalism needed to deescalate before it attained hyper acceptance. The population needed to stabilize and serious carbon reductions initiated. The “Limits of Growth” revelations should have become gospel instead of capitalism market economics. This would have confronted growth as part of the problem and sought managed de-growth initiatives in agriculture, urbanism, population, and consumption. The polarized world of communism and capitalism would have needed to settle their cold war and unite in this undertaking. It is not clear if the necessary variables of the AltE technology and economies of scale to make this technology affordable would have occurred with these conditions. It is not clear if managed de-growth policies would have succeeded without causing a collapse to the financial and economic system. Instead transport yourself 30 plus years into the future and find that all the wrong lifestyles and attitudes were embraced creating a Mega Predicament of systematic disequilibrium, economic and social dysfunction, and population and carrying capacity overshoot in limits of growth. The technology and economies of scale have been achieved in many AltE sources achieving the technological variable. The key variable lost and never to be regained is time. The secondary variables of attitude and lifestyle changes were not embraced. It is my opinion without less complexity and more sustainability in agriculture and smaller urbanism AltE paradigm shift is not possible. AltE energy not being as dense and storable as fossil fuels precludes the energy intensive, complex distribution, and global productive interconnectedness we see today in BAU. We just can’t manage the complexity today with the lower intensity of AltE. We are now too far along with diminishing returns of fossil fuel energy, diminishing returns to agriculture, limits of growth, and diminishing returns of complexity in the distributive and productive economic system. It is a clear cut case of too little too late. The best AltE can do now is be an energy extender and power lifeboat efforts. Our delusional thinking of a shiny new AltE world is dangerous and creates false hope that will come crashing down as the current BAU collapses around us.
rockman on Sun, 24th Aug 2014 11:12 am
Davey – “The best AltE can do now is be an energy extender and power lifeboat efforts.” Which is why I keep injecting Texas wind into the discussion. If we weren’t developing wind we would be building more lignite fired plants. NG is relative cheap today but everyone in Texas understands prices will eventually rise. Lignite OTOH is very abundant and price stable since it’s bought under very long term contracts.
The Texas economy is booming even outside the energy sector. People and companies are continuing to relocate from other states as well as minor injection of foreign companies thanks to our relative cheap energy base.
I’m not sure how well this model would work in other states given all the variables. We have a lot of sunshine here year round but solar hasn’t taken off as it has in CA. Maybe because the folks in south and west Texas don’t have the scenic views of the west coast. In many of the areas of wind development here the site of towers is an improvement. LOL. But really: you can’t stare at endless expanses of mesquite and prairie grass extending across hundreds of miles of flat land and not quickly get bored.