Seeking Consensus on the Externalized Costs of Solar Power

I would like to leave data but perhaps not everything can be captured in data. Driving coal fueled power out of the market with RE has unintended, albeit foreseeable, consequences. Cheap coal power keeps the price of Nat Gas power low by competition. Same at times with hydropower. But despite the claims that RE is cheaper than all and the fairest of them all, this doesn’t factor in subsidies and cost shifting. How would we provide data for the rise in Nat Gas power prices (rates) due to coal being displaced from the market? And what about the unintended consequences of shutting down Nuke and Coal power in California replaced by RE? Stranded assets of two mega billion dollar Nuke plants. The rewiring of the grid because those Nuke plants are no longer voltage hubs. And the shut down of Nuke plants has led to a rise in C02. This has put more pressure on Nat Gas to back up RE leading to such incidents as the Aliso Canyon gas leak resulting in spillage of huge amounts of C02. And even perhaps the San Bruno gas pipeline explosion can be tied to the shift to RE and accompanying greater stress on nat gas facilities. So arguably California has not reduced C02 at all even with its shift to RE because nuclear and Nat Gas facilities became stressed beyond design capacities. Of course, these incidents are perceived y those in power as more justification for shutting down any competition to RE. How do we data-fy perceptions?

Schalk,

The below economic is for an ACTUAL, 2000 kW, filed-mounted solar system in Vermont.

The economics shows solar is nowhere near competitive with fossil, hydro and nuclear.

http://www.windtaskforce.org/profiles/blogs/subsidized-solar-systems-cau...

The owners receive 13.036 c/kWh for the production, as well as federal and state ITCs, rapid write offs, low-cost loans, etc. The project has an IRR = 9%/y

PV solar Electricity Cost During 25 Years of Operation

Large-scale solar projects usually are financially structured in three phases:

Phase 1, years 1 – 6, the subsidy and write off phase; short term loan being paid off.
Phase 2, years 7 – 18, remaining subsidy phase; long-term loan being paid off.
Phase 3, years 19 – 25, remaining subsidy phase; loans paid off

Phase 1, year 1 – 6: Dividing the “Subsidy costs” and the “Excess paid above Ne England midday wholesale prices” by the 6-y production yields 14.0 c/kWh and 7.0 c/kWh, respectively, and adding the 6.0 c/kWh for NE midday wholesale, yields a total production cost of 27.1 c/kWh, during the first 6 years of operation.

Phase 2, year 7 – 18: The remaining subsidy is the “Excess paid above NE midday wholesale prices” of about 7 c/kWh. Adding other costs, such as paying off long-term loans, the production cost decreases to about 9.8 c/kWh

Phase 3, year 19 – 25: The remaining subsidy is the “Excess paid above NE midday wholesale prices” of about 7 c/kWh. Adding other costs, the production cost decreases to about 8.2 c/kWh.

The weighted average price of all 3 phases is about 13.036 c/kWh for this sample SO project.

This price is similar to the average price of the 4 auctioned Standard Offer solar projects. See table 3 and URL.

http://www.windtaskforce.org/profiles/blogs/from-brownfield-to-greenfiel...

NOTE: The 27.1 c/kWh is less in sunnier areas of the US, such as Texas and the Great Plains.

The above EXCLUDES the costs of EXTERNALITIES, such as:

– Any peaking, filling-in and balancing performed by the other generators
– Any battery systems to stabilize grids with many solar systems.
– Any measures to deal with DUCK curves
– Any grid expansions and augmentations to connect distributed solar systems

What about subsidies? In the article on internal costs, it said, “...these costs typically consist of capital costs, financing costs, operation and maintenance costs, and exploration costs.” So where do subsidies fit?

We are constantly being told that renewables are often competitive without subsidies; at the same time, subsidies are more generous than ever in the US, with a 30% investment tax credit (ITC), plus accelerated depreciation that allows owners to write-off the entire plant over 5 years, with half in the first year (before the US tax rate cut, this would have refunded another 30% of the plant value to the owner).

Meanwhile advocates claim the ITC is being phased out for wind, starting in 2017. In fact, the rules allow any project which was started by 2016 (however slowly) to receive the full 30% ITC as long as construction completes by 2020, this includes the addition of new and un-related project phases.

The 30% ITC for US solar projects is for any project that starts construction before the end of 2019, with completion before the end of 2023.

The 5 year accelerated depreciation for solar and wind never expires, but the 1-year partial bonus depreciation was 50% for 2017, 40% for 2018, 30% for 2019, and zero thereafter.

Of course when we state cost without subsidies, this does not matter, but so often we hear only the power purchases agreement price, which obviously includes not ony the Federal subsidies listed above, but also state incentives and insulation from the same market pressure that has hurt many nuclear plants.

Hi Nathan,

This article examines in detail the effects of subsidies on c/kWh in New England.

http://www.windtaskforce.org/profiles/blogs/economics-of-large-scale-pv-...

Competitively bid, large-scale, field-mounted solar costs about 13.5 c/kWh in New England, HEAVILY SUBSIDIZED.

Excluded Costs: The above EXCLUDES the costs of EXTERNALITIES, such as:

– Any peaking, filling-in and balancing performed by the other generators
– Any battery systems to stabilize distribution grids with many solar systems.
– Any measures to deal with DUCK curves, such as grid-scale storage and demand management
– Any grid expansions and augmentations to connect distributed solar systems

Those costs, as c/kWh, are not easy to quantify, and as a result they are charged to ratepayers via rate schedules, and to taxpayers. Ultimately, they are reflected in the increased costs of goods and services, which usually acts as a headwind to economic growth. There is no free lunch.

Hi Schalk,

Early money is always better than late money.

The Standard Offer projects are structured to provide 9%/y internal rate of return, which is identical to an electrical utility in Vermont, and quite generous compared to long term interest rates.

I suggest you read my article.
After I completed it, the results were an eye opener for me.

During the first 6 years of a solar project, the economic cost of solar is 27.1 c/kWh (using only 3 of the 6 subsidies to simplify the analysis).

Because of rapid solar build-outs, a substantial part of the installed solar capacity, MW, is less than 6 years old, and therefore in 27.1 c/kWh mode, in New England.

The same is true for wind projects.

This acts as a major drag on economic growth.

All that is separate from the list of externalities at the bottom of my earlier comment.

For example, to bring wind from the Panhandle to east Texas, $7 billion of transmission was built. That entire cost was “socialized”, i.e., charged to mostly residential bills.