The energy landscape changes so fast, even experts have trouble keeping up. Prices for renewable power are plummeting, technologies for storage are becoming more cost-effective and what’s competitive today isn’t what was competitive five years ago –shifts that will only increase in the coming years.
“Air pollution” is the theme as we observe the 45th World Environment Day on Wednesday. Carbon pollution caused by burning fossil fuels is a major contributor to the greenhouse gases causing global warming. To stop the process, we need to stop burning fossil fuels.
The debate over how to do so has gone on for decades. As it has, the energy field has changed dramatically, shifting the outlines of the discussion. Here’s a quick overview of where things stand:
Coal is over
Coal is more expensive than other major electricity generation systems. U.S. utilities no longer build coal-fired power plants because newer, more efficient natural gas and renewable power plants produce cheaper electricity.
That’s partly because of clean air requirements, partly because the coal infrastructure is getting older but mostly because “the price of producing power at natural gas plants and with wind and solar has declined so dramatically,” said David Schlissel, director of resource planning analysis at the Institute for Energy Economics and Financial Analysis, an energy research firm based in Cleveland.
Coal’s share of the U.S. electricity mix fell from 48% in 2008 to 27% in 2018 and is projected to be 22% in 2020, according to the U.S. Energy Information Administration, the statistical agency of the U.S. Department of Energy.
“We’re retiring a coal plant every month. Coal will all be gone by 2030,” said Bruce Nilles, a managing director at the Rocky Mountain Institute, a think tank in Colorado that focuses on energy and resource efficiency.
Prices per megawatt hour from electricity for coal-fired power plants range from a low of $60 to a high of $143, according to Lazard, a financial advisory firm that publishes annual estimates of the total cost of producing electricity. This is the levelized cost, which includes the cost to build, operate, fuel and maintain a power plant.
Wind is significantly cheaper: Unsubsidized, levelized prices per megawatt hour of electricity from wind range from $29 to $56, according to Lazard’s most recent figures. In contrast, a decade ago, wind costs topped out at $70 per megawatt hour, according to the U.S. Department of Energy’s most recent report on the wind technologies market.
For solar electricity, unsubsidized, levelized prices range from $40 to $46, according to Lazard figures. In 2010, the average was closer to $120 per megawatt hour, said Mark Bolinger, a research scientist with the electric markets and policy group at Lawrence Berkeley National Laboratory in Berkeley, California. Berkeley Lab conducts scientific research on behalf of the U.S. Department of Energy.
For reference, the average U.S. home uses about 10 megawatt hours of electricity each year.
Renewables are getting ever cheaper
The rise of fracking has produced a natural gas boom in the USA. Though less polluting than coal, it’s still a fossil fuel, and burning it pumps carbon dioxide into the atmosphere. Natural gas is cheaper than coal, which it has rapidly replaced, and produces 35% of U.S. electricity, according to the Energy Information Administration.
Wind and solar power are becoming competitive with natural gas in many cases and are likely to grow even more competitive. The cost to produce a megawatt hour of electricity from natural gas ranges from $41 to $74, according to Lazard.
“It’s fair to say that taken as a whole, there are parts of the country where wind or solar are competitive with natural gas generation,” under current market conditions, said Chris Namovicz, who leads the renewable electricity analysis team for administration.
Even with federal subsidies for wind and solar power generation being phased out, they are increasingly one of, if not the most, cost-efficient options for utilities.
“They’ve definitely come down quite a bit over the past decade, to the point where they’re comparable just with the cost of burning natural gas in an existing gas plant,” Bolinger said. “You’re seeing some utilities recognizing that, and they’re buying wind and solar power, and they’ll back down their gas plants to save fuel.”
Regulators are beginning to agree. In April, the Indiana Utility Regulatory Commission rejected a proposal by Vectren, an energy company, to build a natural gas-fuel power plant to replace an aging coal-burning generating station. In denying approval for the plant, the commission cited the potential financial risk to Vectren customers, who would take on a 30-year debt when the energy industry is rapidly evolving.
The commission said it didn’t appear the company made “a serious effort to determine the price and availability of renewables.”
Batteries are becoming a thing
The prevailing wisdom has long been that wind and solar power were all well and good, but they weren’t that useful because there was no way to store the energy when the sun sets or the wind is not blowing.
That’s less true than it used to be for two reasons. The first is that energy grids are getting better at moving power from renewable sources around.
The other is an increase in utility-scale energy storage systems. “Most solar projects that are being bid these days include a battery. It’s almost become the default,” Bolinger said.
These battery installations typically hold about four hours worth of electricity, enough to power the grid as people come home from work and cook dinner after sunset, he said.
These utility-scale battery installations typically hold about one-third the capacity of the solar power plant, so if you have a 100-megawatt plant, the battery is 30 megawatts.
“It pushes prices higher by maybe $4 to $7 per megawatt hour, so it’s not a deal-killer,” Bolinger said.
Some are even bigger. Last week, Utah announced an initiative to launch what will be the world’s largest energy storage project, a facility that will be able to store 1,000 megawatts of power. It would be enough storage to completely serve the needs of 150,000 households for a year, said Mitsubishi Hitachi Power Systems, which is developing the project with Magnum Development.
To be sure, energy production is a highly regulated industry with many entrenched and overlapping interests, not all of which are focused on what’s most cost-effective for the customer.
But in areas where markets set the agenda, they increasingly lean toward more cost-efficient carbon-neutral solutions, said Mike O’Boyle, director of electricity policy for Energy Innovation, a research nonprofit group focused on reducing greenhouse gas emissions.
“We should be open to a multitude of solutions, knowing that innovators are going to find ways to keep the system running at a low cost,” he said. “That’s what America thrives at – setting clear signals and allowing the market to innovate to capture that value.”