Clean Energy Cost Comparisons Looking Better and Better

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.

Comments

[Sumocat]

"For years, coal industry moguls (and clean-energy naysayers) have touted the stuff as plentiful and cheap." -- And they leave out the part about how they keep it cheap by blowing off the tops of mountains to get at it, skirting mine safety regulations, and keeping their mining towns dirt poor and undereducated. Our reliance on coal requires the exploitation of hard-working Americans and the destruction of their local environment. That alone is reason enough to change.

[blueshield]

One fact never seems to be highlighted in these discussions - that the price of oil and gas, being finite resources, will rise indefinitely, while we have already seen the HIGHEST point of cost for renewables, which will continue, with market efficiencies, to drop to some plateau.

For policy decisions, these seems a vastly more important focal point.

[hey0there]

Dominion Power here in Virginia just got an18.3% hike passed on Friday, with barely a whisper in the news. It goes into effect July 1st. I can imagine a record profit is coming for them, most people seem to be clueless about it here right now

[Aaror]

Probably not a record profit.
If you sell widgets, and the price you buy widgets for doubles, while you only raise what you charge for them by 18.3%, you will still be hurting.
Yes, the cost of the fuel is only part of what electric companies have to pay, but it is a big part, which has doubled...

[joebhed]

You're looking at the price of electricity in the wrong way.

Electricity pricing for the most part represents an embedded cost market with average selling prices, which is what you say are going up by double digits.

Here in VA almost 20 percent.

MUCH MORE IMPORTANT - the new generation of coal and nuclear plants are likely to come in at 10 cents per kilowatthour and HIGHER. If you roll that into the embedded electricity selling price today, it has a perceptible, but manageable, increase in rates. - maybe another 20-25 percent.

People forget that the NEW plants will be needed for the NEW growth in demand.

If you were running your household or your economy - which we are not - you would think twice about raising EVERYBODY's rates just to accommodate and pay for those causing the NEW growth.

You have to aim your cost/price comparisons at when the new nukes would come on, maybe 2015 or possibly 2018, and when the CCS-equipped coal plants are available around 2020.

On the basis of that type of a planning horizon, renewable and green technology can compete now.

But, like I said, we defer the management of the economy of this country, and the economic interests of its people, to that invisible hand behind the back of the capital markets.

[Donkslayer]

I love the "job creation" argument.

What do you suppose are going to happen to the jobs in the traditional energy sector?

[Idytme]

I was really surprised to find out how much more we pay for electricity in California compared to other states. But, I am also really surprised when people from back east stay with us about what energy hogs they are. I guess the 20 years of TV commercials have worked, because we only have lights on in the rooms we are using, etc.
As people are paying more for electricity they are going to learn to turn off lights, install fluorescent lights and do all the things we are already doing.
I read in a washington post article that if you live in a warm state, having a white roof saves as much energy as putting up solar panels. We have a white roof, but I would sure like to be able to put solar on my roof for a more reasonable rate. At least now PG &E will allow you to have solar without a lot of hassle, as there was an article about a man who had enough solar to power his entire house and PG&E made him sign a waver that he would have to pay for the whole power lines if they blew up dealing with his electricity (which they wouldn't have.. but it was intimidation). I have also read that farmers who are generating their own electricity with manure cannot keep extra electricity. The power company gets it all for free, they do not have to pay him. This has to change.

[Thermodynamics]

In Northern New Mexico I bought a house that already had an installed solar water heater. It worked great. We covered the south porch with clear plastic panels and the sun heated the living room. We spent about $60/month for some electric heat. My conclusion was that solar is great but you have to make compromises. The bedrooms stayed cool. We slept under comforters.

We bought a another house in the same subdivision but with no solar gain. The new house cost us $250 every month in winter for propane to fire the boiler for the subfloor thermal system. The old house saved us over $1000 every winter.

[research]

The time for wind solar and electric cars is NOW!

Wind 1.4$ per watt average.

solar from NanoSolar 4$/average watt going to .4$/watt average.

A123 batteries are nearly ideal and only 5k for a 60M ecar.

http://www.huffingtonpost.com/users/profile/research

[seawolf77]

WRONG! The time for that was ten years ago. I think back when Tony Soprano was asked by the hapless sporting goods store owner when his store was being cleaned out for debts he owed the mobster. "What's the end game here?" he asked. "It's a bustout. Chapter 11. Bankruptcy­." The store owner started crying. I was watching "Till Debt do us Part" or something like that about America's addiction to credit and spending and one of the economists asks a Congresman "What's the end game here?" talking about America's ballooning deficits. He just smiled at her.

[research]

Yeahm that would have been better.

This is our Last Chance to switch so to solar and wind!