Solar & Wind Power To Be Cost-Competitive Without Subsidies By 2025 (NREL), While Fossil Fuels Still Subsidized Through Externalities

Solar and wind power could be cost-competitive — without federal subsidies — with conventional power sources if new renewable energy development is focused around highly productive locations, according to a new study from the National Renewable Energy Laboratory (NREL). As is often the case, this assumes fossil fuels (e.g., natural gas) retain their huge subsidies in the form of externalities, which common citizens (and disproportionately the poor) pay through illness, early death, healthcare bills, higher health insurance premiums, disasters relief, and so on.

The new report, titled Beyond Renewable Portfolio Standards: An Assessment of Regional Supply and Demand Conditions Affecting the Future of Renewable Energy in the West, makes the case for renewables by directly comparing the cost of unsubsidized renewable energy generation from the most productive renewable energy resource areas of the West with the cost of electricity from a new natural gas-fired generator built near the customers it serves. The figures for “costs” include transmission and integration costs.

“The electric generation portfolio of the future could be both cost effective and diverse,” stated NREL Senior Analyst David Hurlbut, also the lead author of the new report.

If renewables and natural gas cost about the same per kilowatt-hour delivered, then value to customers becomes a matter of finding the right mix.

Renewable energy development, to date, has mostly been in response to state mandates. What this study does is look at where the most cost-effective yet untapped resources are likely to be when the last of these mandates culminates in 2025, and what it might cost to connect them to the best-matched population centers.

Image Credit: Wind Energy via Flickr CC

The new report incorporates previous research that the lab performed for the Western Governors’ Association — work that identified the areas throughout the West where renewable energy development would be most effective, while having a minimal effect on wildlife habitat.

Some of the key findings from the new report:

• Wyoming and New Mexico could be areas of robust competition among wind projects aiming to serve California and the Southwest. Both states are likely to have large amounts of untapped, developable, prime-quality wind potential after 2025. Wyoming’s surplus will probably have the advantage of somewhat higher productivity per dollar of capital invested in generation capacity; New Mexico’s will have the advantage of being somewhat closer to the California and Arizona markets.
• Montana and Wyoming could emerge as attractive areas for wind developers competing to meet demand in the Pacific Northwest. The challenge for Montana wind power appears to be the cost of transmission through the rugged forests that dominate the western part of the state.
• Wyoming wind power could also be a low-cost option for customers in Utah, which also has its own diverse portfolio of in-state resources.
• Colorado is a major demand center in the Rockies and will likely have a surplus of prime-quality wind potential in 2025. However, the study suggests that Colorado is likely to be isolated from future renewable energy trading in the West due to transmission costs between the state and its Rocky Mountain neighbors.
• California, Arizona, and Nevada are likely to have surpluses of prime-quality solar resources. None is likely to have a strong comparative advantage over the others within the three-state market, unless environmental or other siting challenges limit in-state development. Consequently, development of utility-scale solar will probably continue to meet local needs rather than expand exports.
• New geothermal development could trend toward Idaho by 2025 since much of Nevada’s resources have already been developed. Geothermal power from Idaho could be competitive in California as well as in the Pacific Northwest, but the quantity is relatively small. Reaching California, Oregon, and Washington may depend on access to unused capacity on existing transmission lines, or on being part of a multi-resource portfolio carried across new lines.

Something to keep in mind — the report notes that future energy demands will be highly influenced by a variety of factors which are hard to predict far into the future, such as: changes in the price/supply of natural gas; consumer beliefs; technological changes; improvements in energy efficiency; and government policies/regulations. It’s important to note that the study’s supply forecasts are based solely upon empirical trends and recent evaluations of resource quality.