Prices plunge for renewable sources
Wind, solar power now cheaper in some markets, studies show.
For the solar and wind industries in the United States, it has been a long-held dream: to produce energy at a cost equal to conventional sources such as coal and natural gas.
That day appears to be dawning.
The cost of providing electricity from wind and solar power plants has plummeted over the past five years. In some markets, renewable generation is now cheaper than coal or natural gas.
Utility executives say the trend has accelerated this year, with several companies signing contracts, known as power purchase agreements, for solar or wind at prices below that of natural gas.
Those prices were made possible by generous subsidies, but recent analyses show that even without those subsidies, alternative energies often can compete with traditional sources.
In Texas, Austin Energy signed a deal this spring for 20 years of output from a solar farm at less than 5 cents per kilowatt-hour. In September, the Grand River Dam Authority in Oklahoma announced its approval of an agreement to buy power from a new wind farm expected to be completed next year. Grand River estimated the deal would save its customers roughly $50 million.
Also in Oklahoma, American Electric Power ended up tripling the amount of wind power it had originally sought after seeing how low the bids came in last year.
“Wind was on sale — it was a Blue Light Special,” said Jay Godfrey, managing director of renewable energy for the company.
According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents per kilowatt-hour, and wind is as low as 1.4 cents. By comparison, natural gas comes at 6.1 cents per kilowatt-hour on the low end and coal at 6.6 cents.
“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard.
Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available from other sources.
But in a straight comparison of the costs of generating power, Mir said the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”