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Renewables cost fossil-fueled generators up to $157 million and reduce fuel costs by $7 billion

Top 100 U.S. Organizations Using Renewable Energy

Renewable energy: in a 33% renewable scenario on the western grid there is a net savings of over $6.8 billion dollars each year

From a system perspective, wind and solar can increase annual operating costs for fossil-fueled generators by $35 million to $157 million, while reducing fuel costs by $7 billion reports NREL.

NREL is a national laboratory of the U.S. Department of Energy.

If every household makes a concerted effort to use power from wind and solar instead of power from the grid, the demand on the grid, hence from fossil-fueled generators, will drop.

The unit cost of power fossil-fueled generators will increase till it becomes more than unit cost of power from wind and solar. So Wind and Solar Power are affecting operations, costs and emissions. That’s no secret. But there is more.

2 extra effects

Also, massive use of solar and wind energy worldwide has two more effects:

  1. the decrease of unit costs for generation
  2. the efficiency increase of those production units through R&D

The last 20 years have seen the costs of solar panels reduce a lot, and the efficiency of windmills strongly increase.

The grids and the energy producers, often the states, are not always ready and are often reluctant to develop something which would strongly modify the existing grid and would impact big investments made with a ROI on several decades.

So we are coming from a cheap to install but expensive to operate system and going to a expensive to install but cheap to run system.

Paybacks

There are several arguments that suggest that you cannot compare the LCOE of wind and solar PV directly to fossil plants because of their intermittent nature.

Solar and Wind must be backed up by fossil generation. Assuming that is true, then an understanding of the actual savings of renewable generation have on the system is necessary. The NREL study takes a look at this question.

The estimate they have derived is that in a 33% renewable scenario on the western grid there is a net savings of over $6.8 billion dollars each year. We do not have the data on how much capital is required to attain the savings.

4 – 7 years

However, we know that after the capital cost is covered the savings become real. Paybacks on PV projects vary, but recently have been between 4 to7 years depending on assumptions of subsidies. And wind is less than that.

So in less than 10 years the utilities in the western grid could reduce operating costs by $6.8 Billion dollars each year with significantly less risk to increasing fossil fuel prices.

Without a true metric to compare costs of various generation sources, we want to refer to LCOE estimates. All capital costs for fossil based plants would be required whether renewable energy generation was installed or not. Therefore, they are a sunk cost that is not additional costs to the renewable energy installations.

Geothermal

Based on published EIA data for LCOE, Geothermal is the lowest cost method at 47.9. Geothermal is followed by combined cycle (65), wind at (80.3), coal (95.6), and solar PV (130).

However, comparing these numbers as such, is not a level playing field. Burning natural gas and coal cause health issues as well as harm to the environment. A better comparison is between renewable energy and fossil fuel generation with carbon capture. This comparison tells a different story.

$/MWh Geothermal (47.9), Wind (80.3), Combined Cycle CC (91.3), Solar PV (130.0), Coal CC (147.5)

Based on this metric, geothermal and wind are already cost competitive with all other types of generation. Coal is actually the least competitive of these technologies. Solar PV continues to evolve at a rapid pace. I suspect this list to continue to rapidly change in favor of renewables.

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One Response to Renewables cost fossil-fueled generators up to $157 million and reduce fuel costs by $7 billion

  1. J. Nistler says:

    May I point out that Austin Energy is paying 5.5 cents per watt for their most recent solar PPA. (Announced two months ago). I believe you may wish to look at the date of the data and report from IEA. In other words, the final PPA price to Austin Energy is $55 per kWh.

    Solar has thus dropped in real LCOE by a factor >2 in three years time. Solar and Wind are complimentary for the most part in most locations world wide. Improved wind turbine technologies has lowered the cut in speed to 0.9 m/s, this means that some wind power generation starts in early evening and goes until mid morning. So while Solar PV is starting to die out, wind is starting in and vice versa.

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