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2014 ended with a bang February 4, 2015

Posted by Maury Markowitz in Uncategorized.
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I’ve been writing this blog for five years now. I started it to cover the goings-on at AECL, but it emerged as something larger, covering renewables as well. And what happened to renewables in those five years I never would have predicted. Here’s a couple of quick notes to start off the year.

2008’s oil peak-n-boom dumped a whole lot of money into two things; oil and gas exploration, and renewable energy development. Today, about six years later, we are reaping the benefits of both. US oil production has roughly tripled, almost to its historical peak of 1970. This has caused them to become the world’s largest producer, as well as causing the prices to crash.

And as quickly as oil and gas prices fell, the cost of renewables did the same. I simply did not expect it to be anywhere near as rapid or as deep as what has actually occurred. Wind is now the cheapest form of electricity in the world. Period. Natural gas co-gen plants, these days hitting efficiency levels over 50%, are very close behind. And only slightly behind them is solar PV. Up from them is coal. Coal! The formerly cheapest form of power isn’t even competitive any more. And way behind that is, well, everything else.

And because of all this motion in pricing, renewables are no longer a fringe topic. They are now covered, in depth, by many groups. And one that’s really picked up the flag and run with it is Lazard, a large investment intelligence firm. They started publishing updates on energy pricing some time ago, and they are one of the most up-to-date and accurate sources available.

Well their latest report is out, Version 8, and it can be summed up as “more of same”. The astonishing downward pricing pressure on PV and wind continues unabated. The price of solar, in particular, is now below the price that was predicted only three years ago as the absolute lowest price it could possibly go based on production inputs only. So much for that!

Here’s what Lazard shows for current projects going in over the last two years:

Power source Average CAPEX CAPEX range
Wind 1.60 $/W 1.40 to 1.80 $/W
Commercial ground PV 1.50 $/W 1.25 to 1.75 $/W
Commercial/Industrial rooftop PV 2.75 $/W 2.50 to 3.00 $/W
Residential PV 4.00 $/W 3.50 to 4.50 $/W
Geothermal ~6.00 $/W 3.80 to 7.50 $/W
Biomass 3.50 $/W 3.00 to 4.00 $/W
Coal ~5 $/W 4.00 to 8.05 $/W
Nuclear ~8 $/W 5.35 to 8.35 $/W
Combined cycle gas ~1.20 $/W 1.05 to 1.32 $/W
Gas peaker 0.90 $/W 0.80 to 1.00 $/W

This explains why the world has installed 80 GW worth of wind and solar every year for the last three, a rate of new supply that far outstrips any form of power in the past. These are, by far, the fastest growing sources anywhere in the world – of all the new power added to the grid in those three years, 72% of it was renewables in Europe, and 68% in China. It’s here in Canada and the US that we’re behind the curve, something I attribute largely to politics.

Now as the astute reader will point out, cost isn’t everything. In fact, for us little guys on the wrong side of the meter, it’s nothing. All we care about is the price.

So let’s look at those numbers, the LCoE. Lazard’s numbers between 2009 and 2014 show a drop in price of wind power from 13 cents/kWh to just over 5 cents/kWh, representing a cumulative decrease of 58%. Solar went from about 36 cents to 7, a decrease of 78%. Solar’s price decrease is slowing, but doing so at a point and a rate far better than anyone ever predicted.

And now we’ll consider the current prices, unsubsidized:

Power source Average LCoE LCoE range
Wind 5 c/kWh 3.7 to 8.1 c/kWh
Commercial ground PV 7.2 c/kWh 6.0 to 8.6 c/kWh
Commercial/Industrial rooftop PV 11 c/kWh
Residential PV 12 c/kWh
Geothermal 12 c/kWh 8.9 to 14.2 c/kWh
Biomass ~10 c/kWh 8.7 to 11.6 c/kWh
Coal ~6 c/kWh 6.6 to to 15.1 c/kWh
Nuclear 12.4 c/kWh 9.2 to 13.2 c/kWh
Combined cycle gas ~6 c/kWh 6.1 to 8.7 c/kWh
Gas peaker ~20 c/kWh 17.9 to 23.0 c/kWh
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