Is Renewable Power Cheaper Than Coal?

by Bob Shively, Enerdynamics President and Lead Instructor

It has for many years been accepted “knowledge” in the electric industry that renewable power simply can’t compete with coal power on price. It’s commonly believed that if we want clean renewable power we are going to have to pay more for it.  But that belief is now being questioned, at least for new construction. The latest Energy Information Administration (EIA) levelized cost analysis released in 2011 lists the following levelized cost for units put in service in 2016[1]:

Levelized Cost by Resource in $/MWh

Given these numbers, wind certainly looks competitive, especially given that under current environmental regulations it would be tough to build anything but an advanced coal unit.

In a February 2012 report by the Michigan Public Service Commission (MPSC)[2], the MPSC states:  “Almost all actual renewable energy contract prices are lower than the coal guidepost rate.”  The MSPC’s estimates (based on actual contract costs for renewables) show the following:

Contracted Construction Costs per MWh

Xcel Energy in Colorado recently signed a wind energy power purchase agreement for an initial cost of $27.50/MWh.[3] With an annual price escalator of about 2%, the price of this contract will remain well below the levelized cost of other technologies.

Now, of course we could go on to argue things like capacity value, transmission costs, or the need for backup power, and these would all be valid issues to consider.  But we can at least now say that we can’t just assume renewables are too expensive.  It is time for all market participants to consider this issue more deeply before making future plans!


[2] Report on the Implementation of the P.A. 295 Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards, Michigan Public Service Commission, Feb. 15, 2012 http://www.michigan.gov/documents/mpsc/implementation_PA295_renewable_energy2-15-2012_376924_7.pdf

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
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2 Responses to Is Renewable Power Cheaper Than Coal?

  1. Chris Chamberlain says:

    It really depends what the form of renewable energy you are comparing. To average the cost with so many types now would be very difficult. We are working on a project that has very affordable costs due to the fact that we are also able to produce more then just electricity and our other products have a high demand. The greatest challenge for those of us that are trying to put out renewable energy plants is funding.

    • Enerdynamics says:

      Totally agree that it depends on the type of renewable resource. We get into that a bit in the blog (giving costs for wind and PV) but could write a lot more on that subject! Your project sounds interesting. Maybe we can write a future blog on the topic of funding for renewable projects. Thanks for your comments.

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