Solar And Wind Finally Coming Of Age

If a New York Times article is to be believed, wind and solar power generation is on the cusp of greatness. The article reports on recent long-term contracts wind and solar generators have signed to supply power to utilities at prices at or below comparable natural gas or coal-fired power generators.

The fact that costs have plummeted in the last 5 years is nothing new, a combination of volume equipment manufacturing, generating plant economies of scale, Chinese equipment suppliers undercutting domestic manufacturers and technology improvements have all rightly or wrongly played their part in driving down the cost of generating a kilowatt-hour of power and, thereby, creating a viable future for both technologies. The article, though, points to additional developments, saying, notably, that both industries have managed to bring down costs through a combination of new technologies and approaches to financing and operations.

Solar is coming of age thanks to new technology and some subsidies.

According to a study by Lazard Bank, the cost of utility-scale solar energy can be as low as 5.6 cents a kilowatt-hour, and wind as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kw/hr on the low end and coal at 6.6 cents. Their report goes on to add that without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kw/hr at the low end, with wind at 3.7 cents, yet in Texas, Austin Energy signed a deal this spring for 20 years of output from a solar farm at less than 5 cents a kw/hr suggesting the solar farm expects to continue to receive subsidies for many years to come.

We have not been a fan of federal subsidies supporting both industries, but if they have accelerated the point at which solar and wind can pay their own way we are happy to eat humble pie, however such deals suggest the industry expects to be on the drip for decades to come. Nor is the cost per kw/hr the only issue, the intermittent nature of sun and wind mean that until low-cost and efficient electricity storage can be devised back up power generation, usually in the form of combined cycle gas fired plants, at higher cost should be factored into the renewable price to achieve a realistic average.

On the plus side, rising environmental costs levied on conventional power generators will work in renewables’ favor, a trend that has been underway for years with progressively more stringent limits on carbon dioxide, sulfur dioxide and particulate emissions, all of which add to conventional power generators’ costs.

Any dreams of an emission-free power generation industry are a distant dream until the intermittency can be overcome and the costs have fallen further, but the industry has made great strides and for the first time it can be said that, for some developments in some locations, solar and wind finally make a viable and sustainable part of the power generation landscape, and that is to be applauded.

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Written By: MetalMiner