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Clean Energy Cost Comparisons Looking Better and Better

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The global run-up in oil and gasoline prices may be the big story of the year so far, affecting everything from the presidential campaign to the recent Saudi-hosted OPEC summit. But guess what else is going up, in some cases dramatically? The cost of electricity. And that's dramatically changing the market dynamics for clean energy alternatives like solar, wind, and geothermal.

This is mainly happening under the radar of mainstream media, and understandably so. Gasoline prices are ubiquitous, prominently displayed in very visible numerals at thousands of intersections and exit ramps throughout America. Unless you live in Manhattan or a remote rural area, you probably see at least one gas price sign every day of your life. Electricity rates, on the other hand, are buried in the fine print of your monthly bill and the bureaucratese of utility commission hearings (the very thought of which has me stifling a yawn). How many people actually know what they pay per kilowatt-hour?

A lot of people are or soon will be paying much more, and that's because oil isn't the only fossil fuel getting whacked by price increases. The costs of natural gas and coal, which fuel most of the nation's electricity generation, are both way up. Natural gas, like oil, has nearly doubled in the past year (for you energy geeks, from $6.64 to $11.42 per million BTUs). Coal, which fuels half of the electricity in the U.S., has also roughly doubled in 12 months. And this is before any costs for carbon emissions are added in, which will likely happen early in the 2010s after next year's new administration and Congress pass cap-and-trade legislation as expected.

For years, coal industry moguls (and clean-energy naysayers) have touted the stuff as plentiful and cheap. Right now: not so much. Plentiful, maybe. But global energy demand has raised prices worldwide and changed dynamics so much that coal exporters, as the New York Times reported a couple months back, really are delivering coals to Newcastle.

The bottom line? Utilities across the U.S. are hitting customers with double-digit electricity rate increases, citing the increased costs of the coal and/or natural gas powering their generators. West Virginia customers of two subsidiaries of American Electric Power (the nation's largest utility) will be paying 11.35 percent more for their power, mainly due to coal price increases. In Virginia, July 1 brings a 29 percent hike to Potomac Edison ratepayers. Public Service Co. of Oklahoma rates jumped 25 percent on June 1. Missourians will likely be shown electric bills 12.1 percent higher thanks to the increase sought by their largest utility, AmerenUE. Folks in Massachusetts (served by NStar) and northern California (Pacific Gas & Electric) should feel lucky - their rates are only going up 7 and 6.5 percent, respectively.

So as you read the daily headlines about the wild swings and upward climb in the price of oil (it hit $142 a barrel as I write this on June 27), know that comparable things are happening to the other fossil fuels that power most of your electricity. And that's quickly and dramatically changing the game of cost comparisons with the clean energy sources of wind, solar, and geothermal.

The conventional-wisdom knock on renewable energy, especially solar, is that it just can't compete on price with traditional power generation. But at the same time that natural gas and coal prices are shooting up, the costs of solar and wind are, as a general trend, coming down. It's a complicated formula, but improved technologies and better manufacturing efficiencies (as solar panel and wind turbine makers scale up production) are lowering and stabilizing clean energy prices.

This new price-competition dynamic was front and center at the recent Renewable Energy Finance Forum-Wall Street conference in New York. (Anyone who still thinks clean energy is just a crunchy-granola "alternative" novelty should see the 600 wall-to-wall dark suits filling the Waldorf-Astoria's grand ballroom at this event). "That is 20th century reasoning," said Santiago Seage, CEO of Spain's Abengoa Solar, reacting to the conventional wisdom that solar can't compete with cheap coal-fired power. "Cheap electricity at 5 to 7 cents per kilowatt-hour is gone - everything is or soon will be double-digit rates. Whoever doesn't get this won't be competing 15 years down the road."

Clean Edge, the company where I'm contributing editor, spotlighted this transformation in a new report on the U.S. solar power market, the Utility Solar Assessment (USA) Study. In partnership with Co-Op America, we concluded that solar power will reach cost parity with most electric rates in the U.S. in less than a decade, by 2015. Given the recent jump in fossil fuel prices and electricity costs detailed above, we might have been too conservative. This all bolsters the study's main conclusion: as solar prices continue to fall and utilities embrace solar power more aggressively, the U.S. could generate 10 percent of its electric power (up from less than one percent today) from the sun by 2025. And a month earlier, the U.S. Department of Energy released a report detailing a realistic path for wind power to contribute 20 percent of the nation's electricity by 2030.

It's a new energy world. Every day that oil, coal, and natural gas get more expensive, clean energy looks better by comparison - not even taking into account the environmental, climate, and domestic job creation benefits. Many energy experts have been predicting this 'price crossover point,' at some point in the future, for years. In mid-2008, at gas pumps and in electric bills across America, that future is fast becoming the new daily reality.