…Worldwide Costs for Power Generation…
The International Energy Agency (IEA) recently issued a report, World Energy Outlook WEO 2018, on the energy transition that, according to the IEA, is underway in an effort to combat climate change.
The IEA claimed that the cost of wind and solar is declining and that they can replace fossil fuels.
The IEA’s report, however, seems to contradict this claim and proves that wind and PV solar are more expensive than electricity generated from coal or natural gas.
The chart shows the amount of new power generation being installed by 2020.
The capacity factors for PV solar, Wind, Coal, and natural gas were calculated using information from the IEA chart. (Capacity factor is the amount of electricity a wind turbine, or any other power generation method, produces over a year, compared with how much it should produce using its nameplate rating.)
Capacity factors derived from the IEA chart:
- PV Solar: 6%
- Wind: 31%
- Coal: 55%
- Natural Gas: 46%
These capacity factors appear low. The U.S. Energy Information Administration (EIA) estimated CFs for Coal of 85% and natural gas as 87%. The EIA also estimated wind at 35% and PV Solar at 25%. Recent EIA reports omit CFs for Coal, and uses estimates of CFs in 2022, not actual CFs for 2018.
The IEA’s PV Solar CF can likely be accounted for by where PV Solar was installed. Most PV Solar installations in the United States are in areas having insolation levels reasonably conducive to PV Solar, while most PV Solar installations elsewhere in the world are at higher latitudes where insolation levels are not conducive to PV Solar.
I emailed the IEA and asked for their CF data in an effort to determine why the IEA’s CFs were so low, but was told I would have to buy their WEO 2018 report.
Rather than buying the IEA WEO 2018 report, the data from the above IEA graph was used to calculate capacity factors and costs.
The cost per KW, using US costs, for building each type of power plant is shown here:
- PV Solar: $1,000
- Wind: $2,000
- Coal: $2,800
- Natural Gas: $1,000
Calculating the cost of constructing each type of power plant, i.e., by multiplying the gigawatts being installed (from the chart) by the cost per KW, and then dividing the total cost by the total amount of electricity actually generated by each source, results in the following costs per Terawatt hour.
Cost per Terawatt hour:
- PV Solar: $2,043 million
- Wind: $727 million
- Coal: $583 million
- Natural Gas: $250 million
This establishes that renewables, i.e., wind and PV Solar, are more expensive than generating electricity from coal-fired and natural gas combined cycle (NGCC) power plants.
The media has repeatedly reported contracts between suppliers and utilities where wind and PV Solar are less expensive than electricity generated by coal-fired and NGCC power plants, implying that wind and solar are the least costly methods for generating electricity. As the above calculations demonstrate, the contracts reported by the media must be incorporating subsidies to reduce their costs.
Summary:
The IEA WEO 2018 supports a worldwide energy transition and forecasts capacity additions in power generation, by type, by 2020.
Using data from the IEA chart, the above calculations demonstrate that electricity from coal-fired and NGCC power plants is far cheaper, four times less expensive when comparing NGCC power plants with PV Solar plants, than renewables.
There is no need to delve into levelized cost of electricity (LCOE) and all the minutia associated with LCOE calculations. The cost and output of units being installed worldwide establishes, unequivocally, that wind and PV Solar are more expensive.
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(47)
I looked to see what WEO 2018 costs: $120 EUR
but found much of it is free: https://www.iea.org/weo2018/scenarios/
Also a free executive summary and presentation: https://www.iea.org/weo2018/
Yes, I know. I decided not to spend 120EUR as the data from the chart was sufficient. I just couldn’t determine why the CFs were so low but had a reasonably good idea with respect to PV solar.
I don’t ask people to donate to what I do so I use my money to get the reports I need. I spend a few thousand dollars a year on gathering information, publishing it and distributing it.
This way I’m beholden to no one for what I do.
I read the executive summary and read or scanned the information on the WEO 2018 that was free. I didn’t see any data that would provide details on CFs.
Nor was I implying the CF info was available for free. I merely wanted to show there is much of what’s in the report without paying for it.
Besides, paying for propaganda just encourages them.
That said, it would be helpful knowing how much of their projections are linked to Lazard. But it’s not worth $129 EUR.
Good question. Lazard has made some extreme claims.
Thanks for the update Donn,
I see the EIA has a post up indicating EE, and new technologies, are going to affect “Electric intensity for US homes(1 …. The “47%” reduction for home heating sure sounds impressive.
It would of been nice to have used less energy the last few weeks as our PV systems has been snowed in and the off and on high winds have been bone chilling. Our capacity factor has been essentially zero this month. Hence we have had to buy energy from the grid and as the EDF(2) noted a few years ago timing is rather important these days on when and how much energy you use.
1) https://www.eia.gov/todayinenergy/detail.php?id=38332
2) http://blogs.edf.org/energyexchange/2015/07/20/timing-is-everything-how-california-is-getting-electricity-pricing-right-and-bringing-clean-power-to-the-people/
They must still have Obama appointees working at the EIA. They seem to think the government is responsible for everything that happens. The EIA said, “The Energy Independence and Security Act of 2007 has led consumers to replace incandescent bulbs …” What a crock. The price of LEDs has come down and people are replacing incandescents with LEDs because it makes sense, not because the government said they should. People are smarter than government bureaucrats.
The 47% in home heating is for electricity use, not for natural gas, if I read that correctly. The 47% represents pennies, while the main savings in home heating was form cheap natural gas, which, as you know, was the result of the private sector development of fracking. I noted a few years ago that the EIA was riddled with Obama appointees who actually lied to Americans. Actually, the EIA still can’t be trusted. Look at their CFs and see that they won’t publish actual CFs but fall back on their estimates of what might happen a few years from now.
I can explain where the 47% estimate comes from. Most home heating with electricity is presently from electric resistance. EIA seems to be predicting more heat pump.penetration.
BTW: what EIA fails to discuss is the effects of “beneficial electrification” that aims (among other things) to phase out gas heating under the guise of “deep decarbonization.”
Thanks.
Good point. Beneficial electrification is an Orwellian term because all electrification is beneficial.
Same can be said of all fossil fuels right? After all, people would not choose to use fossil fuels if there were no benefit.
As you said: “The IEA claimed that the cost of wind and solar is declining and that they can replace fossil fuels.” The claimed objective for replacing fossil fuels with renewables through an all-electric energy monoculture is what I’m referring to. This may not be obvious but that’s what’s happening.
OK, Thanks.
Might the low IEA capacity factors for coal and gas be because some nations require renewable to be used first, when available, thus idling fossil fuel plants for longer then previously? Then the IEA counts the actual fossil fuel output.
Re the comment above about assuming heat pumps produce winter heating rather than resistance heaters. Heat pumps are not efficient in cold (<20F) temperatures. To get enough heat, either an extra large pump must be installed or secondary propane heaters. A housing area near me has no gas available and heat pumps are commonly used. Many homes have a propane cylinder behind the house for extra gas heat in coldest days.
Good point. If renewables must be dispatched before coal or natural gas it would depress the capacity factor, however, I’m not sure renewables must be dispatched first outside of Europe, or for that matter in some parts of the US.
Thanks for the additional information.
In the World Energy Outlook 2018 of the IEA was developed a new metric for competitiveness called VALCOE – Value-Adjsuted Levelized Cost Of Electricity. It combines the projected levelized cost with simulated energy value, flexibility value and capacity value by technology (it does not include network integration costs). It uses the World Energy Model hourly power supply model (the value adjustment depends on the production profile and the share of variable renewables already in the system). The technology with the lowest VALCOE is the most competitive.
This more sophisticated metric for cross technology comparisons shows:
• US LCOE / VALCOE
Gas CCGT 2017: 50 / 45 $/MWh; 2040: 65 / 60 $/MWh;
Solar PV 2017: 105 / 105 $/MWh; 2040: 50 / 55 $/MWh;
Wind onshore 2017: 60 / 70 $/MWh; 2040: 50 / 60 $/MWh
Wind offshore 2017: 180 / 190 $/MWh; 105 / 115 $/MWh.
• EU LCOE / VALCOE
Gas CCGT 2017: 90 / 80 $/MWh; 2040: 120 / 95 $/MWh;
Solar PV 2017: 160 / 165 $/MWh; 2040: 85 / 105 $/MWh;
Wind onshore 2017: 100 / 105 $/MWh; 2040: 90 / 105 $/MWh
Wind offshore 2017: 150 / 160 $/MWh; 90 / 105 $/MWh.
In general, a new CCGT is more competitive than VRE – Variable Renewable Energy (it is not the case of a new coal plant or nuclear plant). In the EU the VALCOEs are higher than in US and there is also a larger difference to the LCOE due to the higher EU VRE penetration level. So, the VALCOE metric shows that until around 2040 VRE continues less competitive than a CCGT used as a benchmark.
Thanks.
Interesting. I’ll look deeper into these.
I’m not surprised by the amounts except a little by the one for wind onshore. The higher NGCC in Europe is also not surprising since their cost of gas is higher than in the US.