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How Do Costs Compare between Renewable and Traditional Energy Sources?

By Scott Sklar
March 6, 2007   |   28 Comments

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The natural gas pipeline industry received 16 years of tax credits and the nuclear industry 20 years of tax credits in the Energy Policy Act passed by Congress in 2005. In that same bill, the renewables received two years of tax credits that effectively knocked out the larger wind, geothermal, biomass, and concentrated solar generation plants that require longer project development lead times than two years.

The information and views expressed in this article are those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on its Web site and other publications.

28 Reader Comments
Comment
1 of 28
March 6, 2007
Here is a comparison of feed in tariffs. Not sure if that helps.
http://www.wind-works.org/FeedLaws/Canada/HowOntarioTariffsComparewithEurope.html
Comment
2 of 28
March 6, 2007
Excellent response. We cannot compare per KWh prices until we level the playing field. Utilties talk of how expensive renewable are to try to discourage us, meanwhile they are getting money from us in a varitey of ways that we do not directly see on our bill and distroying the environment at the same time. I can't believe the public allows this to continue when we have commercially viable options available now.

We may look to Germany and the way they pay different rates for per KWh for wind vs. solar. Check for info here: http://www.wind-works.org/FeedLaws/Germany/GermanyList.html

I think you also need to think about how much stability you want in pricing. For example, if you buy solar, you will know your costs for the next 25-35 yrs. If you buy into coal gasification, the price of materials may control you. We WILL run out of conventional sources and no one knows what the price will be in the future as the supplies dwindle.
Comment
3 of 28
March 7, 2007
Dick H,

if you want to discuss the biomass option (i.e. KMW's close-coupled gasification technology, swedish tech around for over 60 years, please write to rlepine@kmwenergy.com, for all the details you need.

www.kmwenergy.com
Comment
4 of 28
March 7, 2007
If I read the question a little differently, I am thinking this I can comment to the effect that the capital expenditure for a biomass facility can vary quite a bit, let's say from $3,000 per kw to $6,000+ per kw (USD), depending on the technology one is using.

In terms of operating costs, with the system we provide, using bark as feedstock, let's say, you would produce electricity and or steam for half the price it would cost you to produce the same commodities from Natural Gas or other fossil fuels.

If one takes domestic solid waste, costs come right down, as one gets paid a tipping fee to take the trash. The cost of raw material for wood would be $35 per ton, trash: you get paid $25+ a ton. Easy economics.
Comment
5 of 28
March 7, 2007
The answer is not that difficult. Fixed-price contracts have already been signed which presumably include profit for the developing company.

LA Wind power fixed-price contract at 6.3 cents/kWh:
http://www.renewableenergyaccess.com/rea/news/story?id=45225

Ormat (ORA) contract at 6.1 cents/kWh with So Cal Edison: http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/05-11-2006/0004359286&EDATE

These are both already competitive with any existing, pollution-controlled fossel fuel fired power and both produce no CO2 or pollutants!
The geothermal is particularly interesting as it has 97% uptime, much better than a coal-fired plant. Ormat has been in the business for 40 years and is profitably selling about 500 MW.
http://www.mywesttexas.com:80/site/news.cfm?newsid=17896357&BRD=2288&PAG=461&dept_id=474107&rfi=6
Comment
6 of 28
March 7, 2007
As much as I like Scott Sklar, his answer on this is a real copout. There are many "levelized cost of electricity" analyses available, showing the cost comparisons between technologies, with and without externalities priced in. The CA Energy Commission completed a study in 2003 comparing the costs of geothermal, wind, natural gas and solar PV. It found geothermal was the cheapest, wind second. Solar PV was of course quite expensive - but this answer depends very much on who's buying the system and under what financial structure. San Diego just installed a 1.135 MW solar system at no cost with net savings moving forward - b/c SunEdison paid for the system and bills San Diego as a utility, at a cost savings when compared to SDG&E, the incumbent utility.

The results of the Energy Commission report on levelized costs are available at: http://www.energy.ca.gov/electricity/levelized_cost.html.
Comment
7 of 28
March 7, 2007
Erich

Why bother continuing down a path of limited supply when the sun and wind will be here as long as we are. Large power plants need a lot of water, which can cause shortages for other needs. What about the complete inefficiency of cnetralized power sysytems and carbon created getting the coal to the plant? What about the mining that destroys the environment to get the coal? Renewables can offer reductions/efficiencies simply due to their decentralized nature. Generating power where you use it is one of the most important contributions that is often not recognized.

I used to think that was the way until I read Herman Scheers book "Energy Autonomy." A must read for every one as far as I am concerned.
Comment
8 of 28
March 7, 2007
Charcoal / Ammonia Scrubbing Technology for Fossil Fuel Power Plants Emissions:

A way to burn coal till the cows come home with no GHG emissions;

Here is a great article that high lights this pyrolysis process , ( http://www.eprida.com/hydro/ ) which could use existing infrastructure to provide Charcoal sustainable Agriculture , Syn-Fuels, and a variation of this process would also work as well for H2 production and Charcoal-Fertilizer, while sequestering CO2 in the form of ammonium bicarbonite, NOX and SOX from Coal fired plants to build soils at large scales ,alos The Charcoal ammended soil emissions of N2O and CH4 are reduced by 30%. be sure to read the "See an initial analysis NEW" link of this technology to clean up Coal fired power plants.
Soil erosion, energy scarcity, excess greenhouse gas all answered through regenerative carbon management http://www.newfarm.org/columns/research_paul/2006/0106/charcoal.shtml
Comment
9 of 28
March 7, 2007
Our state is debating a RES, as are many others. The utilities most effective argument for killing a renewable standard is higher cost. The public is vulnurable to this argument. Good info about cost will go a long way to making gains in this areana. I agree that it is a very complex equation however many of the large utilities have concluded wind is the curent winner in the price war. These regulated utilities have integrated resource plans that show this.
Comment
10 of 28
March 7, 2007
Just another thought, the cost of renewables have trended down - especially in recent years. Any projections on the inflection point for just generation alone? What are the major technologies on the horizon that will really bring this in line?

While a carbon tax would help to even the playing field - it is not realistic.

It is frustrating to hear the discrepancies in subsidies between traditional and renewable energy. However, the subsidies will not push renewables to the masses either.

They can help, but ask yourself: What sold more hybrid cars last year?
1. Tax subsidies
2. Higher gas prices
Comment
11 of 28
March 7, 2007
I agree with both Paul and Christina. First, those of us who feel comfortable with renewable energy should lay out the alternative costs first, including known subsidies per source; then secondly, underline the unequal playing fields with more discussion. When one does not identify the known internal costs per alternative source first, it would appear to many "lunchbuckets" that renewables cannot yet play on any playing field...and this isn't true. My grid power on Cape Cod costs me $.25/kwh today, escalating at perhaps 9% per year.

At these current and projected rates over the next twenty years (the conservative life of a solar pv installation, I hazard an assertion that, amortized over 20 years, solar makes sense (and cents) for me today, not down the road. We can't wait for some version of alternative energy subsidy parity; there will always be unequal treatment.

So, I suggest that Scott should attempt to answer the question more straight-on.
Comment
12 of 28
March 7, 2007
Right On Scott. Every Joe Lunchbucket needs to have this message pounded into their brain: The Government is stealing YOUR money in the form of taxes to subsidize their Pals who are polluting us with sulfur, mercury, CO2 and much more. This is not a real market. It is con job.
Comment
13 of 28
March 7, 2007
The true price of gasoline, calculated to included subsidies, environmental pollution, health effects, ect. is $12 to $14 per gallon. It should be paid at the pump- then we have a true market and people could make real decisions about the vehicle that they want to drive. Hey polluters- afraid to go head to head on a level playing field or hide behind the Fed's Skirts?
Comment
14 of 28
March 7, 2007
Although this is a difficult question, it is one that should be answered better. While there will be a great deal variability in the cost estimates, the exercise is worth it. Throwing up your hands and saying it's not an equal comparison will get you no where.

Everyone on this site already knows it is not an equal comparison. The pollution created from traditional sources is an externality (Economist term) that no-one is currently forced to pay the cost directly.

Why not, 1. provide the estimated costs of generation from all sources; 2. provide the estimated costs of the externality (pollution). These costs will be difficult to determine and few will agree on the exact numbers. But it is a much better answer to the question than just saying it's not apples to apples.
Comment
15 of 28
March 8, 2007
Tom,

Your comment on wind power costs is ridiculous. In good areas in the midwest, wind costs 5 - 6 cents/KWH before subsidy reduces the price. In Minnesota, studies have determined that it is the least cost option. Even solar PV in the desert southwest is almost at your 20 cents/KWH level. Get your numbers straight sir.
Comment
16 of 28
March 8, 2007
It is relatively easy to calculate the costs of electricity production with any technique. The answer was a total cop-out beacuse any real, installed wind/solar/biomass etc system has a cost per kwh that would scare the living daylights out of any consumer out there.

The 6.3 cent/kwh figure quoted above is an example of how much distortion government tax breaks and subsidies are throwing out the real cost of wind power. A very simple calculation shows that wind power costs about 20 cents/kwh to produce.

This stuff is so expensive it is ridiculous. The government has to stay out of this corporate hand - out game if we want to make real changes to the levels of CO2 in the air. Taxing CO2 production is simple, foolproof, and the only way to find out which generation/conservation schemes will work.
Comment
17 of 28
March 8, 2007
The Real Costs

Conventional energy's costs are well hidden,
And like a wild bull about to be ridden,
Can cause the rider unexpected harm,
Bruise a few ribs, or break a forearm,
Traditional sources are something like that,
Fuel prices can jump, and not just a tat,
Sending your costs right through the ceiling,
Has it happened to you, and sent you reeling?
Scott Sklar is hitting the nail on the head,
"Tax incentives" are keeping the carbons well fed,
Renewables it seems are being left high and dry,
And tossed merely crumbs causing projects to die,
Our congress appears is the root of the cause
They vote in a way making everyone pause,
Not giving their backing for where it is needed,
They've shown by their voting, it must be conceded,
Poor judgement for sure and to say, in the least,
They all seem to thrive on a carbon based feast,
Not a care in the world as to what must be done,
Except when elections are ready to run.

adrianakau@aol.com
Comment
18 of 28
March 9, 2007
We humans here on Earth want to believe that we have master this "thing" we call electricity.

Luke 16:1-12

Or has it mastered us?

How can a "thing" that has no person, no soul, no entity enslave us humans that have all of these tributes, you ask?

Matthew 6:22-23 (Luke 11:34-36)

Just remember that these parables, that have I have used out of text, were spoken over 2,000 years before mankind new how to generate and utilize electricity.
Comment
19 of 28
March 9, 2007
Or we could just turn it all off.
Unless of course all of you are just plain scared to turn off the electricity? Its a simple thing to do really. Just flipping a switch. Nothing to be scared of. What could happen? You wont go to jail. Well, not yet anyway. Electricity, as we know it, is not keeping us alive. We are keeping it alive.
Have you ever heard the story of the villagers that found a monster in the cave? In short form, as long as they kept feeding it the monster protected thier village from dangers. The monster grew and grew. No one messed with these poeple and they prospered, but the monster got so big that one day there wasnt enough food for the monster. I think you can surmise the rest of story.
Comment
20 of 28
March 10, 2007
Scott- Its an alligator swamp since mo one agrees the definitions and models before starting , and most inputs are from those with axes to grind.

However without someone somewhere doing a good job of the comparison issue , we actually could do practically anything with a positive EROEI as errors on the cost estimates, subsidies, market distortions, energy cost and availability profiles ( one of which gives a factor of 6 between the VALUE of overnight coal produced electricity and home produced solar ) etc exceed the differences.

we are where the IPCC was ten years ago , before the huge amount of research and structured argument led to the latest valuable reports.

Is there any arganisation actually trying to sort this out?
Comment
21 of 28
March 12, 2007
Giulio:

I think your installer is smoking something. A 12.6kw roof-mounted system should not require 1000 square feet (A sqaure with sides of 31+ feet??) unless s/he is using ridiculously inefficient panels or the roof is remarkably shaded. That price seems very high as well. I know a couple in Jersey who installed a 6kw rooftop system for about 40k. It makes little sense that a system twice that size would be MORE than twice the price (it should be less, in fact).
Comment
22 of 28
March 12, 2007
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Comment
23 of 28
March 12, 2007
For your information I received this answer from a solar system installer for a roof mounted system in NJ:
We could do a 12.6kW DC system that would produce 15,507 kWh per year for that location. Price would be $100,800.00. This system would need 1000 square feet of roof space.2 Mortgage 30 y cost $256.032 per month.
Now I pay $133.00 per month to the electric company.
Giulio Negrini
www.giulionegrinifinancialadvisor.us
Comment
24 of 28
March 14, 2007
The comment about the real cost of fossil fueld electricity versus the real cost of renewable eneregy comes up time and time again. I have never seen a real easy to understand chart of all the hidden breaks the fossil fuel industry gets and then what it would cost without it. If it was possible to produce such a chart and have it understandable to 'Mr Lunchbox' I think that would be a major marketing tool. Is anyone doing that? Does such a chart exist.
Comment
25 of 28
March 14, 2007
Staying w/ Giulio Negrni's pv system quote above, I would like to add to his "facts". His 30 yr mortgage will cost him $256/month to pay for solar, whereas he's "now" only paying $133/month for grid.

Well,let's say that New Jersey grid power is inflating @10% per year (about right for Massachusetts). If that's about right, since @ 10%/yr inflation, Giulio's electricity will double in price every seven years or so, in 28 years...if Giulio never installs solar, he will be paying about 8 to 10 times what he's now paying, or approximately (let's use 8 times $133/month)$1064/month in current dollars for his grid powered electricity.
Comment
26 of 28
March 15, 2007
Chris,
This is my installer comments:
Giulio,

First, We use SolarWorld Monocrystalline Modules which are the most efficient modules available on the market. SolarWorld Modules are 175 watts. Their dimensions are 32inches x 63.9 inches which is about 13.25 square feet. 175watts divided by 13.25square feet = 13.2watts per square foot. 12,600 watts divided by 13.2 watts per square foot = 954 square feet. This system using SolarWorld modules would be 954 square feet.

Secondly, I do not know an installer that would install for the price they mentioned. Most installers cannot even buy their equipment for that price. They are probably discussing the price after the $2.85 rebate. My price after the rebate would be $64,890.00. Please visit this link http://www.clean-power.com/PowerNaturally/Default.aspx. It is the average installed price per watt for installers in New York State. As you see the average is $8.40 per DC watt. My price was $8.00 per watt.
Comment
27 of 28
March 19, 2007
how come nobody will answer the question? Same reason we're 10 uears behind europe. Here's my r.o.m. estimates.
.15 cents per kwh gas/oil
.37 solar
.12 wind
.06 dirty coal
.15 clean coal
2.00 hydrogen
.10 CHP gas or lng
Comment
28 of 28
April 25, 2007
I used to do economic analyses or my clients all the time and the first thing to do is to do a comparison that excludes all of the subsidies (ie, don't factor them in, in the first place) to create a valid comparison of the underlying costs. Except in the fairly rare event that it is the equipment supplier that is being subsidized that is actually far easier than trying to figure out subsidies in each jurisdiction. Once you have a subsidy free comparison of generation costs, layer on the externalities created by the emissions of conventional power plants.

Whether you are an average voter or a senior exec at a Fortune 500 company, it is far easier and more understandable to look at the unsubsidized costs and understand that anything that distorts the comparison is a subsidy that comes out of their tax dollars.
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Scott Sklar

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About: Scott, founder and president of The Stella Group, Ltd., in Washington, DC, is the Chair of the Steering Committee of the Sustainable Energy Coalition and serves... more »

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