Leland Teschler's Editorial: The Economics of Renewable Energy

Appears in Print As: Leland Teschler's Editorial: The Economics of Renewable Energy

August 18, 2009

Judging by the mail we receive at MACHINE DESIGN, a lot of our readers are skeptical of wind and solar energy. But whether we like it or not, indications are that a huge green-energy boom is coming. It’s coming because U.S. state and federal governments say it will.

Thirty-two states (and Washington, D.C.) have set minimum requirements for renewable-energy sources. To fund this effort, the federal government will provide construction grants for up to 30% of the cost of alternative- energy projects breaking ground by the end of next year. The Dept. of Energy set aside $10 billion to guarantee construction loans needed to build renewable facilities.

You might think that the large amount of taxpayer money thrown at green energy was based on a detailed analysis of economics. Unfortunately, this isn’t the case. There is no comprehensive literature on the prospects for renewable-energy sources or their comparative costs.

Mulling over this lack of definitive information, Geoffrey Heal, a business professor at Columbia University, surveyed renewable-energy economics in a paper for the National Bureau of Economic Research. He concluded that renewables face a major problem: intermittency. After all, the wind doesn’t always blow and the sun doesn’t always shine. He says intermittency hasn’t been adequately factored into discussions about renewable sources. “Without new storage technologies that can overcome this intermittency,” says Heal, “much of the decarbonization of the economy will have to come from nuclear, carbon capture and storage, and energy efficiency.”

The problem Heal highlights is that intermittency prevents renewables from being used to handle what’s called base load: the level below which power demand never falls. To play a role in handling base load, renewables would need to store power generated when there is no demand for it. Heal says the cost-per-kilowatt figures used to compare renewable sources with conventional power generators never include the cost of storage. Until there is a practical way of setting up this kind of storage, there will be a continuing need for coal or nuclear sources to handle baseload power.

There is an additional problem with wind turbines in that the best sites for wind lie far away from connections to the national power grid. But figures for wind-power costs don’t include those for stringing grid lines out to wind farms. And these costs can be significant. A recent study of costs for connecting wind farms in the Texas panhandle to major cities arrived at prices ranging from $1.8 to $2.07 million/mile.

Heal also tries to figure what it would take to meet the U.S. DoE’s goal of getting 25% of the nation’s electricity from renewables by 2025. He comes up with about 2 trillion dollars plus the cost of grid connections. This is about 15% of our current GDP or about 1% of GDP annually for the next 15 years. That’s probably not going to happen.

One lesson from Heal’s work is that deliberate efforts at energy efficiency are going to be important for our national energy goals. And that is the reason the publishers of MACHINE DESIGN recently debuted a new publication on the subject. Energy Efficiency & Technology magazine published its first issue this month. You can find out more at www.eetweb.com.

— Leland Teschler, Editor

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Comments

Space Based Solar Power

On August 28th, 2009 Rob Mahan (not verified) says:

I believe we will be getting the vast majority of our energy from space-based solar power within the next 100 years. This technology is capable of providing baseload power anywhere on the face of the earth and is completely scaleable and an infinite source of clean energy. Space-based solar power will be a big and expensive engineering project. We better get started soon!

The problem with an article

On August 27th, 2009 Anonymous (not verified) says:

The problem with an article like this is it confuses data with information and is somewhat insulting to engineers. How does $2 million a mile translate into consumer energy costs? How does the $2 trillion compare to current ongoing capital expenditures, and how much will be replaced by this alternate spending? How does it translate into consumer costs? etc.

Renewable energy aka solar/wind

On August 27th, 2009 Del (not verified) says:

An article I read recently in Investors Business Daily stated that global warming is a religion not a science. They were kind. Glogal warming is a cult dedicated to ridding us of fossil fuel based energy! Every potential alternate energy source has it's advocates, few of whom are technically competent or informed enough to defend their positions. No one knows or can know which path we should take. Wind and solar have daunting costs to implement on a scale large enough to have a real impact unless we have significant technical breakthroughs. Not probable; expect incremental improvements until they become cost competitive if they ever do. It doesn't matter how much the wind blows or how much solar engergy impinges on the earth the costs and environmental impacts of harvesting these sources will drive acceptance. Costs include design, manufacture, construction, operation and regulation compliance. We know how to generate the energy we need with fossil fuels and nuclear. And yes, they have their downsides. But we have no choice but to stay with them until a superior technology comes available, spell that proven, in place and working.

renewable energy

On August 27th, 2009 Bryan Willman (not verified) says:

Noone should ever confuse what government does, especially in an economic crises, with broadly rational policy. Then again, probably nobody else does any better.

Higher efficiency is a fine thing, but rising use (because it's cheaper) means that actual consumption may not fall.

If global warming turns out to be as bad as some predict, the only answer will be to shade the planet in some way. The self-denial crowd hates this. Everybody else will be just fine with it.

Other than that, the way for oil to end is for oil to end. That is, dependency on petroleum will most likely only be resolved when *it has to be*. Many clear thinkers would like a better plan, who can blame them, but reality is things don't change until they are forced to.

In the mean time, building up solar, wind, nuclear, hydrogen, etc. technologies may be a good thing. It'll certainly act as a kind of stimulus.

Economics of Renewable Energy

On August 27th, 2009 E. D'Angelo (not verified) says:

I have to agree with JT Coyle. We have to stop thinking of ways to keep the large energy companies in business and move to local generation and storage. If we estimated that there were about 100 million households in the US, and it cost say $20K to fit each home with wind and/or solar and/or geothermal power/heat, it would cost us approx $2 trillion. It could be less if we were mass producing the equipment to accomplish such a feat. Each home would produce all of the electricity and heat it needed right there on site. Now THAT is what I call freedom.
Also have to agree with Rich Rosenthal on the true costs of fossil fuel and nuke energy. How much have these wars in Iraq & Afghanistan cost us so far? For what we'll end up spending on Iraq, we could accomplish what I've outlined above. And, if you think that war wasn't about making sure Russia, China & France didn't get the contracts to develop Iraqi oil fields, you are seriously naive.
What about the cost of dumping spent nuke waste in the ocean off the east & west coasts? France has been dumping theirs off the coast of Somalia... no navy you see. We've also dumped a fair bit in Iraq too in the form of Depleted Uranium munitions. What do you think will be the long term health implications of that for our returning soldiers not to mention the Iraqi people?
I read somewhere that if the true cost of gasoline were factored into the price at the pump, we'd be paying somewhere around $9/gal. How long do you think we'd be driving our gas buring vehicles at that price?
I think it's pretty obvious that Mr. Teschler is bit biased against renewable energy, doesn't believe in global warming, is against mass transit and generally is in favor of maintaining the status quo, no matter how unsustainable it is.

Renewable energy

On August 25th, 2009 J.T.Coyle (not verified) says:

Each time a new tech comes along, it tends go in directions noone anticipated when it first appears. I agree completely with the high cost of moving energy from where it's made to where it's used. And where will the copper, if that MUST be the medium, come from?
But there may be another option. The new tech makes it possible to produce it on site- where it's used. This could force relocation of the large consumers. To the sun- to the wind.
The mass generation and distribution model may to some degree be outdated. Local storage- same idea. Then I think, once we start down the road, advances are going to be rapid-fire as they have been other fields; in the half century since the first semiconductors and computers appeared, for instance.
2 Points: 1. Noone can predict where this will go. But we have to start it or it won't go anywhere, and 2. We are going to employ a LOT of engineers in taking it wherever it goes.

economics of renewable energy

On August 25th, 2009 lteschler says:

If Japan, a country beset with earthquakes on a regular basis, can operate 55 nuclear power plants with more on the way, then nuclear power can operate anywhere. Japan reprocesses spent nuclear fuel to minimize waste storage. The details are here:

http://www.japannuclear.com/nuclearpower/fuelcycle/facilities.html

Undoubtedly there will be improvements in wind and solar-based technologies. But there is nothing on the horizon today that will drastically alter their economics. Ditto for the reality of stringing $2 million/mile power grid connections.

Economics of renewable energy

On August 20th, 2009 Rich Rosenthal (not verified) says:

I am not sure what you mean about "comprehensive literature on the prospects for renewable-energy sources or their comparative costs". Is there anything like this for nuclear or fossil fuels? I suspect that all you will find is costs for what was with a broad range of predictions for the future.
I can offer you some economic certainties for renewable energy that is so obvious that it is hardly ever mentioned. The sun will not deplete for a few more billion years and shares its energy globally without any pollution. As technology improves it will only cost us less to harvest and store renewable energy.
Also, thermal solar plants do factor in energy storage in its costs. Do you think the costs of radioactive waste that last thousands of years can be reasonably understood? Did the cost of defending ourselves from "dirty" nuclear bombs enter into cost equations just fifty years ago? The costs of depleted fossil fuels will only go astronomical. Simple supply and demand.
Soon there promises to be ultracapacitor technology that will make large scale electrical energy storage possible (google EEStor). Costs of PV and wind are only going down. The trends point only to renewables with the interim served by nuclear and fossil fuels on their way out.
That our government is investing in promoting renewable technologies is finally great news as a problem of this magnitude and severity requires an appropriate response.