As governments and the private sector across the country and the globe slowly start to invest in renewables, we have been hearing more people voice their concern over why so much tax money is being invested into these relatively new sources of energy.
Context in Time
What we considered the traditional sources of energy depend largely on the temporal and geographical context. Some countries, regions or even provinces have been experimenting with renewable energy for longer than others. The number of adults growing up having access to renewable energy is definitely increasing which normalises it and makes it seem more “traditional”.
For instance, I grew up in an area where hydropower was the main source of energy for the production of electricity. Unbeknownst to me, some regions in the country barely use this source of energy. Instead, they rely heavily on fossil fuels. But as is common knowledge, if we took note of the use of various sources of energy over the past, we would see that fossil fuel energy from sources such as coal, oil and natural gases, have been around for much longer than renewables.
To put this into context, the world’s first selenium cell to utilize solar power was invented in 1883 by Charles Fritts in New York. While wind power has been utilized by humans for over two millennia for activities ranging from sailing to grounding grains and pumping water. However, the first wind turbine was built in 1887 by Professor James Blyth in Scotland[i]. Shortly thereafter, the first geothermal power generator was tested as early as 1904 by Prince Piero Ginori Conti in Italy[ii]. In contrast, there is evidence of fossil – coal – being used as early as 3490 BC[iii].
Considering the relative newness of renewable energy technology, it makes sense that it is more expensive.
The Cost of Renewables versus Non-Renewables
The U.S. Energy Information Administration published data on the “[c]ost and performance characteristics of new central station electricity generating” from their Annual Energy Outlook 2017. The parameters studied include but are not limited to the plant size, lead time, overnight cost and Operations & Maintenance (O&M) rates. Here are a few conclusions that were drawn from analyzing this data.
First, on average, the total overnight cost of renewable energy plants are higher than non-renewables[iv]. Nonetheless, wind technology is considerably low and it is accompanied by Photovoltaic and Conventional Hydropower below the median. This generally means that more capital is required to build a renewable energy plant from start to finish.
Second, the average fixed O&M are higher for renewable energy[v]. Photovoltaic technology is still on the lower end of the spectrum at a few points below the median[vi] and conventional hydropower is in the top 5 most efficient O&M[vii]. This generally means that more capital is required to keep a renewable energy plant functional.
These two factors translate to this: The construction, operation and maintenance tends to be higher for renewables than it is for non-renewable technology from traditional sources of energy in the United States today. However, what this fails to take into account is the cost of the source of energy being used – which is free.
Renewable Technology in the Global Market
As we know, a lot of capital is required to be invested into research and development for new products. As sourcing becomes more cost-efficient and the cost of R&D are covered through the profits, companies are able to provide the same quality product and better for a more competitive price.
The price of the source of energy is free or very low since we use common goods to create renewable energy. Solar and wind energy, for instance, have no source of energy input cost. So there was no surprise when an article popped-up on March 27th, 2017 on OilPrice.com explaining how wind energy is now directly competing with coal on the US coast[viii]. For as long as we have the Sun, we should have access to a free source of energy for both with and solar technologies. Considering the fact that the cost of renewable technology is decreasing
The cost of fossil fuels on the other hand has been proven to be unpredictable at time. Furthermore, as its reserves are depleted, the cost of if continues to rise. Below, you can see a table replica[ix] of the prices in a four-year timeline. It illustrates how prices are going up and not down for fossil fuels unlike the trend for renewable energy.
AS we can see here, many different factors must be taken into consideration for us to fully understand what the real cost of renewable energy is. However, what we do know is that for the time being, renewable energy is slightly more costly than non-renewables and that the cost of renewables is decreasing as that of non-renewables is increasing.
However, I believe it is best we change the way we analyse “good investments”. We should all know by now that the point of renewable energy is not to be affordable. Its affordability is a necessity to compete in the global market. We need renewable energy to help us protect the environment, wildlife and humankind’s health while securing a reliable inextinguishable source of energy for future generations. This means that factors beyond profitability should be taken into consideration when determining the real value of renewables.
To conclude, I must stress the fact that this is by no means a complete analysis. However, it does help us understand the variability of renewable energy technology costs.
[i] Science on the Streets. “James Blyth”. Retrieved 30 Mar 2017 from: http://scienceonstreets.phys.strath.ac.uk/new/James_Blyth.html.
[ii] MIT Education. “A Brief History of Geothermal Energy Use”. Retrieved 28 Mar 2017 from: http://web.mit.edu/nature/archive/student_projects/2009/bjorn627/TheGeothermalCity/History.html
[iii] John Dodson; Xiaoqiang; Nan Sun; Pia Atahan; Xinying Zhou; Hanbin Liu; Keliang Zhao; Songmei Hu; Zemeng Yang (March 3, 2014). “Use of coal in the Bronze Age in China”. The Holocene. 0959683614523155 (5): 525–530. doi:10.1177/0959683614523155. Retrieved 11 April 2014.
[iv] The difference is by 1008 $/kW.
[v] The difference is by 76 $/ kW/year.
[vi] The median is 33.21 $/kW/year, the value for Photovoltaic technology is 21.66 $/kW/year, the average is
[vii] Its value is 14.93 $/kW/year.
[viii] Brew, G. (27 Mar 2017). “Wind Energy Now Directly Competing With Coal on Coast”. OilPrice.com. Retrieved 30 Mar 2017 from: http://oilprice.com/Energy/Energy-General/Wind-Energy-Now-Directly-Competing-With-Coal-On-Cost.html.