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Media arguing that the Brookings Institution paper’s conclusions were wrong -- the fruits of an analysis based on "outdated or otherwise incorrect data."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.