by Bob Shively, Enerdynamics President and Lead Facilitator
The U.S. Energy Information Administration (EIA) recently reported that in the last four years, over half of the new utility-scale generation capacity in the U.S. has come from renewable technologies:
Source: EIA Today in Energy, January 10, 2018
As shown in the graph on the right, renewable growth in 2017 primarily came from wind and solar photovoltaic installations. In addition to what is shown here, the EIA estimates an additional 3.5 GW of distributed solar photovoltaic installations.
Meanwhile, the majority of plant retirements came from fossil fuel power plants:
Source: EIA Today in Energy, January 9, 2018
The more than 15 GW of renewable capacity installed well exceeded capacity required to meet renewable energy portfolio mandates. Not too many years ago, growth in renewables seemed driven by government mandates. Now clearly something else is driving the growth: price.
Prices in both wind and solar technology have declined dramatically in recent years:
Source: Lazard Levelized Cost of Energy Analysis – Version 11.0
When compared to other sources of new capacity, renewables are a clear winner. It is important to note that these are unsubsidized costs before any tax benefits are included.
Source: Lazard Levelized Cost of Energy Analysis – Version 11.0
Following are some of the power purchase agreements for renewable power that have recently been covered in the press. These all are the results of offers by for-profit generation developers who are in the business to make money.
- Mexico’s market operator CENACE held its third long-term energy auction in late 2017. The winning bids for renewable energy (which included wind and solar) cleared at a price of $20.57/MWh. At this price, three buyers (CFE, Iberdrola, and Cemex) bought over 5 million MWh of energy plus the corresponding clean energy certificates.
The Canadian province of Alberta announced results of its long-term power auction in December 2017. Through the auction the province selected 600 MW of wind power at a price of $37/MWh.- An Xcel Energy of Colorado All Source Solicitation filing in December 2017 reported RFP (Request for Proposals) results
with 42.3 MW of wind with a median price of $18.10/MWh, 29.7 MW of solar at $29.50/MWh, 5.7 MW of wind/battery projects at $21/MWh, and 16.7 MW of solar/battery projects at $30.60/MWh.
Watching these deals come in, it is clear that we now have a new paradigm in electric supply resource planning. Not only are renewable projects in areas with favorable resources coming in as the lowest-cost new power source, they are coming in at prices lower than the cost of running many existing power plants. In 2018 and beyond, we can expect to see ongoing retirements of existing units.
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