Are we prepared to accept the cost of renewables?

The financial analysis I did recently to determine the cost of switching 80% of U.S. electricity production to wind power, together with a growing trend towards reconsideration of Renewable Portfolio Standards (RPS) has raised a serious question in my mind about the best path forward. In my blog posting I came up with a figure of $3.6 trillion to make the switch to wind power. What I didn't state in that blog post was that I actually don't think even that amount of money gets the job done.

As much as a massive "smart grid" would allow regional balancing of windy and calm parts of the continent there are times when very large high pressure fronts would leave all of the mid-west wind farms in a "dead zone" (see my Christmas, 2012 blog for a somewhat amusing take on that possibility). I do not believe that there is any way to replace that amount of wind production by shuffling energy from other parts of the continent despite what the computer models might indicate. So, as I have stated ad nauseam in my blogs, energy storage is a key component in any real transition to renewables.

The problem is that any energy storage technology we can come up with won't be cheap.

Just to put things in perspective, the world's largest battery complex was recently brought into service by Duke Energy to provide backup power for the Notrees wind farm in West Texas. This facility can provide 36 MW of power for up to 15 minutes to provide 'bridging' power and to smooth the variability that is a characteristic of wind energy production. The facility cost $44 million, half of which was provided by a U.S. government grant. Therefore the cost for the batteries can be calculated as $44 Million / (15/60 x 36) MW-hours =$4.9 million/MW-hour.

The Notrees wind farm itself is a 153 MW facility which probably cost about $300 million to construct. On a windy night this facility could easily reach 80% of capacity so that in 8 hours it would generate 8 x .8 x 153 = 979 MW-Hours of electricity. This electricity would probably not be needed because it was generated in a period of low demand and would be available to be stored in a battery array. The cost of an array large enough to store this energy can be estimated as 979 x $4.9 = $4.8 Billion - about 16 times the cost to construct the wind farm.

Batteries are probably the least attractive of the energy storage options available because of the cost. But there are no other easy options available. I have previously proposed new concepts such as Funicular power, unpumped storage, and using Concentrated Solar Power with Thermal Energy Storage to compliment Photo-Voltaic solar. But none of these concepts have ever been attempted in the real world. And none of them would be cheap. I could see my estimate of $3.6 trillion ballooning to $4.5-6 trillion once the cost of storage technology has been included (although there would be a significant saving because the effective capacity factor for the wind farms would be increased - it would be impossible to determine beforehand if this would offset the cost of storage).

Is there an alternative? Yes and no.

Combined cycle gas turbine (CCGT) facilities are the most efficient and cleanest burning non-renewable electrical generation sources available. And whether we like it or not the construction cost for these plants is very low - less than $1/watt. In fact, it would be possible to replace all U.S. coal-fired plants with CCGT plants for less than $250 Billion. CO2 production would be cut by about 50% with the elimination of coal.

What about natural gas supply and price? I have said previously that this resource will run out some day and well before that the price will rise dramatically. The latest estimates are that the U.S. has 2,000 TCF or more of natural gas reserves. Currently about 7 TCF per year is being used to generate electricity. By replacing coal with natural gas this usage would triple to about 20 TCF per year and total production would rise to something like 35 TCF/year. So based upon those numbers the U.S. has about 65 years of supply available. There are a great many assumptions in that number but I think it is safe to say that supplies would get somewhat constrained and prices would go up in the next 30 years.

The financial cost difference between a future based upon renewables and one primarily dependent upon CCGT is stark; potentially $4.5-6 trillion vs. about half a $trillion (if 80% of electricity was produced using CCGT). But that is not the only factor. Natural gas will run out so that concern is still valid. Operating costs for CCGT, including the cost of gas are significant and will rise over time. Advocates of renewables claim an almost unlimited service life for wind and solar facilities but that is not realistic either. Wind turbines need repair and become obsolete (for example, most of the original turbines in the Altamont wind farm are being replaced). Same goes for solar panels. But the operating costs are certainly much, much lower with renewables.

So all things considered, have I changed my opinion about what we should be doing with the development of renewable resources? Fundamentally, no. I still feel that the public policy initiatives outlined in my Sustainable Energy Manifesto provide the best path forward, with one addition.

Because of the time that will be required to develop utility-scale energy storage options I believe that it would be wise to use CCGT plants to replace the oldest coal-fired plants in the U.S. generation fleet - those that will be forced to close because they cannot be retrofitted to meet MACT requirements for a reasonable cost.

The challenge with that strategy is that without some level of price certainty it will be difficult to finance the construction of these plants. For example, in Europe Moody's Investors Service published a note on November 6, 2012 warning that it expected "rising levels of renewable energy output to further affect European utilities' creditworthiness". The situation is not much better in North America.

That leads once again to the last point in my Sustainable Energy Manifesto. It is time to end the era of deregumania; time to admit that for life-critical services like water and electricity an increasingly short-sighted free market will not deliver the stability and reliability needed. There is no shame in admitting that deregulation of the electricity market was a mistake. The same cannot be said for continuing down a path that is clearly leading nowhere.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


The Time is Right for Optimum Reliability: Capital-Intensive Industries and Asset Performance Management

Imagine a plant that is no longer at risk of a random shutdown. Imagine not worrying about losing...

Going Digital: The New Normal in Oil & Gas

In this whitepaper you will learn how Keystone Engineering, ONGC, and Saipem are using software t...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...

Leveraging the Power of Information in the Energy Industry

Information Governance is about more than compliance. It’s about using your information to drive ...

Latest PennEnergy Jobs

PennEnergy Oil & Gas Jobs