Cost of New Electricity — Pt 1/2

I’ve been getting lots of questions on the cost of new electricity. How do costs compare?

Estimates are all over the place. Sierra Club uses various government estimates: coal costs from 4.5 – 5.4¢/kWh, wind from 4.7 – 6.3¢, geothermal 4.8¢, hydroelectric from 4.9 – 8.5¢, natural gas from 5.2 – 6.5¢, biomass from 5.5 – 6.4¢, solar from 12.4¢. Nuclear is priced at 5.9¢/kWh with the Lovins caveat that this includes massive federal subsidies and that without these subsidies, nuclear power could not compete with energy efficiency or renewables. Actually, no energy source can compete with efficiency, up to a point.

Re massive subsidies, it is true that since 1950, nuclear power received twice as many federal incentives (covers a variety of subsidies) as renewables, but since 1976, the federal government has spent more on photovoltaic (PV) – solar panels – R&D alone then all fission research. The second largest recipient is solar thermal (concentrating solar power to run a conventional power plant). We hope that solar (many at the state level, $3.2 billion just for the recent CA million solar roofs program) + wind + geothermal incentives in the next few years pass total current subsidies for nuclear power – but if they do, the subsidies/incentives for these sources will be considerably greater/kWh than for nuclear. If so, should we then reject solar power?

There are other estimates. PV is costed at least 20¢/kWh by Kammen, founding director of the Renewable and Appropriate Energy Laboratory, but believes that it can drop to 10 – 14¢/kWh by 2016. But only if we fund R&D – contact your legislator! Note that R&D is funded at levels considered way too low, on many of the energy sources, and especially improving efficiency.

Wind costs are probably right for the US, though add up to 0.3¢/kWh for intermittency. Capacity factor is lower in Germany, so a German windmill will produce only about three fourths as much energy as American.

The solar and wind costs below come from the International Energy Association book, Renewables for Power Generation- Status & Prospects), unless otherwise indicated.

Costs for grid-connected systems are about $4,500 – 6,000/kW. Installation adds another $5,000 – 9,000/kW. Costs are lower in areas with experience and for new construction. Operation and maintenance adds another 1 – 3%. In good locations, costs may be less than $0.20/kWh. Costs in Germany might be 70% greater than in parts of California, because irradiation in CA is 70% greater.

Costs have been coming down by a factor of two each decade; this could continue for a decade or two, bringing costs down to $3,000 – 4,500/kW for PV as early as 2010 (in 1995 dollars).

One kW of nuclear power in the US produces almost 5 times as much electricity as one kW of PV. In Europe, the ratio is even higher.

Wind Power
Wind installation costs are now about $850 – 950/kW for on-land turbines. The turbine’s share of that is $600 – 800/kW; the rest is civil engineering infrastructure and grid connections. In areas where large-scale wind power is used, the grid must be upgraded at significant costs. Germany expects to spend 3 billion euros by 2020 just for the wind-related grid upgrades. (Today, this is $3.0 billion.) Offshore wind turbines are 35 – 100% more expensive than on-land ones, requiring more expensive infrastructure and grid connections.

Germany expands the grid.
Germany expands the grid.

Operating and maintenance can add another half-cent/kWh to the cost, more for turbines in mountainous regions or offshore.

Wind power is likely to cost 5 – 5.5¢/kWh in the US in large quantities – the price of windmills will drop, but transmission lines and inefficient natural gas backup will raise the price.

One kW of nuclear power produces 3.5 times as much electricity as one kW of wind power in the US, 4.5 times as much in Germany.

3 Responses to “Cost of New Electricity — Pt 1/2”

  1. Maury Markowitz says:

    “but believes that it can drop to 10 – 14¢/kWh by 2016”
    “Costs for grid-connected systems are about $4,500 – 6,000/kW. Installation adds another $5,000 – 9,000/kW”

    This post appears to have been posted in 2007. In the time since then, PV prices have plummeted. Today, it is typical to install large industrial systems, including *everything*, for about $3.50 a watt. Small residential systems are around $5, or less.

    If one assumes a 40 year lifespan during which you need one inverter replacement at 50 cents, then the 40-year lifespan cost on a large system is just over $4 a watt.

    In Mohave, fixed orientation panels make just a shade under 1600 kWh/kW/year. So over 40 years that’s 64000 kWh per kW of panels. At $4 that’s about 16 cents a watt.

    So it seems to me that Kammen’s prediction is almost certainly a good bet.

    It’s worth pointing out that this reduction in price had nothing to do with subsidies. It was due entirely to market forces and a massive buildout of polysilicon fabs that came online in 2008-09.

  2. Karen Street says:

    One question to begin—I’ve read inverters need to be replaced every 10 – 15 years. I assume that’s why the lifetime of PV is given as 25 years. If that’s changed, it’s a major price reduction. Can you point me to a source that says that one should assume a 40 year lifetime for PV?

    I intend to look at solar soon. What major reports should I include? I just took a look at International Energy Agency 2011, and they don’t see solar or wind as competitive with fossil fuels in the next 2 decades+. IEA had pretty high prices for O&M.

  3. Maury Markowitz says:

    Sorry Karen, I just noticed this post now – normally I would get an email ping.

    Anyway, inverters are generally warranty for 10 to 12 years, although most also offer a 20 to 25 year extended warranty. Most micro-inverters come with a 25 year warranty. For instance, google up “enphase warranty” (or enecsys, sparq, etc).

    For long-term predictions, some suggest that panel lifetimes on the order of 100 years should be considered. 40 years is more typical. But here’s some good reading:

    Solar Photovoltaics: Competing in the Energy Marketplace