It can be very confusing trying to cut through all the various sources of information and what appears to be conflicting data regarding what is the cost of alternative forms of energy.   Here’s another article adding to that dialog.  

One of the questions that you need to answer for yourself when you think about this topic is what you’re trying to find out.  One way to view this is to look at simply the raw cost of producing the energy.  Another way is to take into account all the incentives (subsidies) and consider what the consumer actually pays.  A third way is to add in the social cost such as public health cost of air and water pollution or CO2 emissions and the impact that has on the climate.  

One thing that seems fairly certain, and this article confirms, is that the cost of wind and solar continue to fall significantly while the cost of fossil fuel energy continues to rise.  The result is that on an absolute (as they call it, levelized cost) basis, wind and energy are now becoming the least expensive alternative in some areas of the world.  Furthermore, they continue to get closer on this basis everywhere.

The result is that “Renewables are the cost-competitive choice“.  And that is what we are seeing in more and more places including in the US.  As a result, renewables are being installed at increasingly greater rates.  

 

Wind costs fall to match coal, gas in key energy markets — report

Daniel Cusick, E&E reporter

Published: Wednesday, October 7, 2015

In a finding that should resonate across global energy markets, Bloomberg New Energy Finance revealed this week that wind energy has achieved cost parity with fossil fuel power in two key European markets, while solar continues to close the energy price gap across many parts of the world.

BNEF, updating its levelized cost of electricity (LCOE) figures for the second half of 2015, found that the cost of onshore wind power fell globally from $85 to $82 per megawatt-hour for the second half of the year, while costs for solar photovoltaics fell from $129 to $122 per MWh.

Over the same period, the cost of coal-fired power generation rose across all markets, averaging $73 per MWh in Asia-Pacific (up from $68), $75 per MWh in the Americas (up from $68) and $105 per MWh in Europe (up from $82).
Power from combined-cycle natural gas units showed similar cost increases, ranging from $82 per MWh in the Americas (up from $76) to $118 per MWh (up from $103) in Europe, the Middle East and Africa.

“Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs,” Seb Henbest, Bloomberg’s head of Europe, the Middle East and Africa analysis, said in a statement announcing the findings.

“Meanwhile, coal and gas have got more expensive on the back of lower utilization rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform,” Henbest added.

‘Renewables are the cost-competitive choice’
In the United States, coal and gas remain cheaper than renewables for power generation, at roughly $65 per MWh, according to BNEF. Levelized cost for U.S. onshore wind power dropped slightly, to an average of $80 per MWh, while PV solar stood at $107 per MWh without tax credits, according to the analysis.
Levelized cost analyses differ from other pricing mechanisms because they go beyond the simple marginal cost of producing a megawatt-hour of electricity to account for the full range of costs required to generate a unit of power. LCOE estimates factor for upfront capital outlays and development expenses, the cost of equity and debt finance fees, and operations and maintenance costs.
Levelized cost analyses also strip out subsidies that are attached to the sale of electricity, such as the U.S. production tax credit for wind energy and the investment tax credit (ITC) for solar and other renewables, allowing for a direct and meaningful comparison among various energy fuels.
Ethan Zindler, BNEF’s head of policy analysis and the Americas, based in New York, said in an interview that levelized cost analyses can be particularly revealing in countries with generous energy subsidies because the price paid for electricity by utilities and consumers is often much lower than the cost of production.
For example, Zindler said, “In Texas we’ve seen offers for solar PV on power purchase agreements for as low as $50 per megawatt-hour, which seems on its face like a very low price. But one of the main reasons they’re offering that low price is that the project will potentially benefit from the 30 percent investment tax credit.”

But even when accounting for subsidy distortions, “there are a growing number of places where you can say with some degree of certainty that renewables are the cost-competitive choice,” he added.

Such is the case for wind energy in Germany and the United Kingdom, Europe’s No. 1 and No. 3 energy markets respectively, according to E.U. estimates of energy consumption.
BNEF found that onshore wind “is now fully cost-competitive with both gas-fired and coal-fired generation” in those two countries when the costs of carbon emissions are taken into account.
“In the UK, onshore wind comes in on average at $85 per MWh in the second half of 2015, compared to $115 for combined-cycle gas and $115 for coal-fired power,” BNEF reported, while in Germany onshore wind power cost $80 per MWh, compared with $118 for gas and $106 for coal.
BNEF’s analysis assumes a higher cost on carbon after European leaders agreed to market reforms in 2019 that would remove excess allowances from the world’s largest carbon credit trading program, known as the Emissions Trading System. The buildup of E.U. carbon allowances in recent years, driven by oversupply and slower economic growth, has depressed credit prices in the ETS, experts say.
Coal still king in China
In China, BNEF found that onshore wind energy is cheaper than gas-fired power, at $77 per MWh versus $113 per MWh, while solar achieved a levelized cost of $109 per MWh for the second half of 2015. But coal remains China’s cheapest electricity resource by far, at $44 per MWh of production.
Among other low-carbon fuels, offshore wind power saw its global average LCOE drop slightly to $174 per MWh over the first half of the year, while costs for biomass power held steady at $134 per MWh. “Nuclear, like coal and gas, has very different LCOE levels from one region of the world to another, but both the Americas and the Europe, Middle East and Africa region saw increases in levelized costs, to $261 and $158 per MWh respectively,” BNEF said.
Zindler noted that shifts in LCOE are always associated with broader market factors, including a region’s resource base and government policies around energy production. He also said the latest numbers do not necessarily suggest a permanent shift away from fossil fuels.
“People are innovating around extracting natural gas at lower and lower prices,” he said. “So it’s not as if renewables are moving down the cost curve while everybody else is sitting tight.”
Email: cusick@eenews.ne