A free-market energy research group and a coal-backed trade association have released a study showing the levelized cost of electricity from existing resources is significantly lower than costs for new resources.
The study, though, is catching flak from the groups on the losing end of the report.
Representatives for wind and solar industries have denounced the analysis from America’s Power and the Institute for Energy Research as industry-backed dreck. But the groups behind the report say their innovative analysis used data reported by the energy generators to the U.S. Energy Information Administration and the Federal Energy Regulatory Commission to compare both existing and new electricity sources. The Institute for Energy Research supports free-market solutions to energy challenges
“This new study is unique because it provides an apples-to-apples comparison of existing and new electricity sources,” said Michelle Bloodworth, president and chief executive officer of the American Coalition for Clean Coal Energy, which also goes by America’s Power.
The study’s overriding point is that the cost to build new wind and solar power generators is two to three times more expensive than the investments required to keep existing coal, nuclear, conventional gas, and seasonal hydroelectric facilities up and running.
“The data we analyzed indicate that on average, existing power plants have lower fixed costs, yet similar variable costs, compared to their most likely replacements,” the report stated in the executive summary. “The reason new plants have higher fixed costs is that they begin their operational lives with a full burden of construction costs to recover.”
Levelized Cost of Energy Analyses is a detailed look at the lifetime costs of power generation divided by the amount of energy produced. Calculations assume the lifespan of the facility and allow for comparisons of different energy types as it relates to capital costs, capacities, overall risk and a return on investment. The study from America’s Power and the Institute for Energy Research notes that it looked at the imposed costs of wind and solar generation plus costs of operating existing power sources in addition to building and running new facilities.
Among the key data that IER points to from its calculations in the report are the average costs of existing power sources per megawatt hour – $41 for coal; $36 for conventional combined cycle gas; $33 for nuclear; and $38 for hydroelectric – compared to the cost for new wind facilities at $90 or new PV solar at $88.70. A one-page document accompanying the report notes that the cost for a new nuclear power plant would come to $75 per megawatt hour.
The executive summary also points to the end goal of the report, opining that forcing the early closure of existing plants would lead to an increase in what ratepayers would have to contribute to subsidize the cost of building of newer facilities.
“Our findings could have been different,” according to the study’s authors–Tom Stacy, a former member of the American Society of Mechanical Engineers Energy Policy Committee, and Palmetto Energy Research Director George Taylor, Ph.D. “The fuel savings from the higher efficiency of new plants might have more than paid for new capital investment. Or the cost of replacement modules purchased at one time could have been higher than the cost of building an entire new plant. But according to the data we analyzed, neither is the case.”
Bunk, says a representative for the solar power industry.
“There is an obvious reason why utilities are closing old generating facilities and building dozens of gigawatts of new solar and wind, and it isn’t because renewables are more expensive,” said Dan Whitten, vice president of public affairs for the Solar Energy Industries Association, who also took aim specifically at IER. “The market, once IER’s friend, has now turned against these purveyors of pollution. And IER’s response is to tie themselves in knots to produce a fabricated report intended to keep uneconomical power plants afloat.”
Solar energy’s popularity continues to grow, with the market posting its best first quarter and forecasting 25 percent growth this year compared to 2018. U.S. Solar Market Insight Report from Wood Mackenzie and the solar trade association announced that there are now 2 million solar systems installed in the U.S.
Although a spokesman for the wind power industry did not comment on the report, he did point to non-industry analyses from Bloomberg New Energy Finance and Lazard, the largest independent investment bank.
Lazard’s 2018 Levelized Cost of Energy Analysis found a “continued decline in the cost of generating electricity from alternative energy technologies, especially utility-scale solar and wind.” It noted that the costs of some alternative energies are either comparable or below conventional energy costs. For instance, the low-end levelized cost for onshore wind power is $29 per megawatt hour while coal is at $36 per megawatt hour. The subsidized costs for onshore wind are $14 per megawatt hour and solar power is $32 per megawatt hour.
Representatives for Lazard declined to comment on the ACCCE-IER methodology of comparing existing plants to the costs of building new ones.
Whitten pointed to the U.S. Department of Energy’s Annual Technology Baseline as additional research showing “favorable impacts of turning on renewables.”