Thursday, December 22, 2011

Solar power externality and LCOE

I was talking to a very knowledgeable friend about whether solar power will become cheaper than coal in the next decade, and he pointed out a problem in how solar advocates price their power.  It's well known that you can't just estimate a solar panel's value based on its peak production capability, because much of the time that panel is producing less power or none at all, doing nothing to amortize costs.

Solar advocates admit this, and use Levelized Cost of Energy calculations to divide energy actually produced by all costs involved, over time and with a discount rate. While solar's over twice as expensive as coal now, the advocates project the cost differential to continue to diminish at the rate it has in the past, and to disappear in a decade.

So my friend's problem is this doesn't distinguish peaking power costs.  He's not using the denialist line that baseload power can't include solar at all, but that you still require additional power when solar can't provide it.   That additional power is expensive, and this cost externality isn't included in LCOE calculations.

Mulling this over, I think there's an economic and a political angle to take on it.  The economic angle is that if we want to consider externalities, then let's by all means consider all externalities - coal isn't going to do so well on that basis.

The political angle isn't whether we should consider externalities, but whether we will consider the externalities and which ones.  Greenhouse gas externalities will not be fully priced in for decades, especially for costs imposed on areas outside of the country where the gases are produced (why should we care about those effects?), but they will start to weigh in, a bit, on costs.  The brand new mercury rule shows some of the other externalities of fossil fuels will start getting price tags as well.  Overall, I think the political process will catch up more quickly on fossil fuel externalities, if still very inadequately, than on on LCOE pricing.

One other point my friend made that was a good one - discount rates for future costs mean few companies care about costs more than a decade ahead.  I thought new coal plant starts would be potentially affected by solar price competition, but maybe that price competition is still too far away.

UPDATE:  comments point to a good post at Romm's that discusses the various terms and state of play for solar in the US.  Ignoring environmental issues for a second to focus on economics, I think LCOE is fine for any buyer to use to determine whether solar prices out well, but the overall system has to consider other price issues as well.  The grid parity at the link works when you're buying electricity at the high retail rates, but it will take a lot longer if you're a utility that can buy wholesale.


Anonymous said...

But isn't most of the solar power produced during peak demand times making it more valuable?


John Mashey said...

I think this question needs reframing:
1) Some places are better for solar than others, although if Germany can make it work at all, it's not too bad.

2) Some places have more motivation to go solar, if only for air quality, but sometimes for other reasons. Here in Silicon Valley, PV is sprouting like crazy on office buildings, carparks, schools, along with charging stations for EVs.

3) A much bigger factor than LCOE is likely to be cost of gas, which depends on whether or not, and where, fracking is OK.

4) Just like climate change, over-generalizations can be confusing.
For example, regional circumstances are really important.
Some places have great hydro. Some have good wind.
Some have good solar. In the long run, solar prices will keep coming down (if the talks I got to at Stanford are anywhere near close to right), but in the shorter term,I would guess that the easiest route for many coal plants is to turn into gas plants, if externalities are priced right. Some of the gear is saveable, as is the network. Get gas price anywhere near close, and gas plants are way quicker to start/stop than coal.

John said...

Solar power is more expensive than fossil fuels. Solar advocates should admit this, and justify building solar power plants in terms of avoiding catastrophic climate change.
But solar can't be the sole source: what do you do at night? There's a lot of electrical demand at 6 PM, but in the winter there's no sunshine at 6 PM. You can try storing the energy during the day, and getting it back out at night, but in practice about half the stored energy doesn't come back out. So what else?
Wind is OK, but an intermittent source.
Nuclear power can provide baseline power, including at night, even if the wind isn't blowing.

Society now depends on oil, coal, and natural gas.
My bet: in the future, society will rely on solar, wind, and nuclear.

Brian said...

"I would guess that the easiest route for many coal plants is to turn into gas plants"

That's new to me - any more info on that? I remember reading years ago from Romm that coal plants could be converted to biomass, which struck me as a neat trick politically (assuming the biomass isn't a pig in a poke). Gas wouldn't be bad, though (assuming fracking isn't a pig in a poke).

Andy S said...

Coal isn't a peaking power source. The plants can be turned on and off seasonally, but not daily. Onshore wind power is about as intermittent as coal and nuclear (defined as percent time in production on an annual basis); offshore wind is less so. During last winter's cold snap, the Texas power grid operator praised wind power's deft replacement of coal and gas plants that went off line unpredictably due to frozen coolant pipes, etc. Concentrated solar power is capable of producing electricity 24 hours a day, but the cost of these plants (Spain) is much higher than photovoltaic.

Also, cost of production often takes a back seat in determining consumer costs, especially where the industry has been poorly deregulated as in Texas where supply is manipulated by regional power production monopolies. And just as importantly, where the source of peak power is determined by unscrupulous market rules.

If the U.S. wanted to, most power could be produced with renewables with little impact to consumer's bills. But it would take away the huge profits now being made by some companies. It'd be the government picking winners and losers.

When that coincides with the Nation's well-being, I can live with that.

Anonymous said...

The establishment where I work is (or tries to be ) for-profit. We have 85 kw worth of 2007 vintage Sanyo PV panels. We are in California in the territory of the utility PG&E. We have time-of-day industrial pricing--so in the high-peak-demand summer months, we pay $.09 per kWh at night (base load) and ramp up to $.33 per kWh at peak. Except we don't buy peak power--we are net small sellers of peak power through our time-of-day net meter. So of every kWh we run back to grid at say 4 pm we can buy almost 4 kWh at night.We make about 165,000 kWh per year. You do the math.

El Raton

David B. Benson said...

In the USA about 20% of electricity is produced by the nuclear power plant (NPP) fleet. The best run of these maintain a 92% capacity factor (CF), that is, generate the equivalent of full power 92% of the time. The CF for wind here in the Pacific Northwest averages out to 26% and typical California CF for solar is about 20%.

Wind is highly variable and so requires some balancing agent (backup). Look at
Solar, on the other hand, is rather more predictable and hence more beneficial. Still, balancing agents are required for cloudy days.

I've run the LCOE for model grids invovling just NPPs and wind. It is the case that 100% NPPs is less costly than adding any wind component. (I'm still struggling with the question of solar PV.) In any case, solar thermal, despite its advantages, is considerably more costly than NPPs and also suffers the cloudy day problem.

All of these questions, with some answers, are throughly thrashed out on
with contributions from a number of highly knowledgable scientists and engineers. (Many, elsewhere, fail to understand the technical and economic questions involved in running and updating power grids. Some of that sort have commented above in this thread.)

John Mashey said...

re: coal => gas

Suppose you have a big coal plant.
You can start building smaller gas units, and they can use the same power lines. In some cases, you can retrofit in place, I think.
See for example.
You do need to get a gas supply line of course, but in some places that is way easier than covering an area with wind turbines and utility-grade solar, simply because the "footprint" is the same.
Of course, I'd prefer a jump straight to {solar, wind, geothermal, hydro, Gen IV nuclear}, but getting rid of coal sooner is goodness.

David B. Benson said...

I know of two coal burners here in the Pacific Northwest which will be replaced with natgas burning combined cycle turbines. As both stations have nearby natgas burners running a natgas pipe is a minor expense. I doubt the old switchyards can be reused, but the transmission lines certainly will be.

And yes, in South Carolina a 400 MW coal burner is being switched to burning 'biomass', surely forestry wastes. I believe this requires replacing the actual firebox and possibly the boiler.

David B. Benson said...

I did another analysis of wind+NPPs. Provided the penitration of wind is modest (~5%) and other conditions are met (usually are) then indeed wind can be balanced by NPPs. But about an average energy component of around 7.5% for wind is the upper limit for backing via NPPs.

John Mashey said...

On front page of WSJ today is article by Rebecca Smith, "The Coal Age Nears Its End."
Owners cite EPA ... But
"Energy experts say there is an even bigger reason coal plants are losing out: cheap and abundant natural gas..."
"Coal consumption by the power sector is expected to fall 2% this year and 4% next year."
10-20% of coal capacity will get shut by 2016.
Some have only been used intermittently anyway, since the older ones are inefficient.
Peabody stock dropped 50% since April.

On p.2 notes that utilities fended off earlier rules where major upgrades were supposed to trigger addition of scrubbers... And now it isn't worth it so they close.

Rebecca also p.2 has article on clearing of AP1000 reactor, a passive design.

sidd said...

I draw attention to the excellent series of articles on wind power, in particular:

and especially the discussion of the Merit Order Effect

Th whole series is here:

David B. Benson said...

sidd --- Thanks for the links.

quokka said...

It's not very accurate to describe backup for PV as "peaking" power. In places like Germany the seasonal variation is huge. On many winter days the output from PV is next to useless. There is a quasi real time display of German solar production here

Skip back through the last few days and it is clear that there are frequently days where the output from a nominal 21 GW installed PV is barely able to reach 0.5 GW maximum at the best time of the day. It is quite clear that essentially the entire PV capacity must have backup and backup that is dispatchable.

The flip side of the coin is that at the best time on the best days in summer that 21GW capacity may output maybe 17-18GW. A threefold expansion of PV in Germany would be close to a situation where every other generator on the grid would have to ramp down to zero so that the PV output could be utilized. And that includes wind.

A threefold expansion of PV in Germany would produce no more than ~%10 of Germany's electricity.

quokka said...


On-shore wind is NOT "about as intermittent" as coal or nuclear. Nuclear capacity factor in the US has been 90% or better for the last decade. Worldwide average is about 80% and that includes France which has so many nuclear plants that load following is used.

On-shore wind has a capacity factor of about 30%, I believe, in the US, about 26% in the UK and in Germany no more than 20%. Furthermore much of the downtime for nuclear for refueling and maintenance is scheduled and generally happens during periods of the lowest seasonal demand.

I fail to see what making up wild claims achieves.

Anonymous said...

Climate Progress has details on solar LCOE today:

Pete Dunkelberg

Brian said...

"It's not very accurate to describe backup for PV as "peaking" power. In places like Germany the seasonal variation is huge"

Granted, but note the "in places like Germany" part. Too bad that some of the countries with the most political readiness to do something about renewables are poorly situated for solar.

Brian said...

Nice link, Peter! I'll update.

David B. Benson said...

As Denmark, ERCOT (the Texas grid) and the Pacific Northwest
all demonstrate, whereever wind goes natgas burners are sure to follow. The same is likely to hold for significant penetration of solar PV.

solar pv mid wales said...

Thanks for the link peter, Have you been looking at the new products coming out using solar cells. forget the recharging kindle, there a solar powered ATM machine in India. I really think this could have real prospects in the world market just think of how many off grid areas there are where you need access to money.

Mac said...

Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

Solar Energy New Jersey

solar panels gloucestershire said...

I think that the overlaying theme that everyone can agree on, regardless of the cost of solar energy is that we shouldn't be exhausting finite, dirty sources for our electricity.
As well as solar,wind and water energy I also advocate nuclear energy. The massive power yields and surprisingly clean process elevate it above the other methods. People have just gotten scared due to poorly prepared for disasters across the world.
Provided it's done correctly and kept to strict safety regulations then it can be just as safe as any renewable energy source.

solar panels gloucestershire