CASPIAN POWER - Renewables threaten economics of new gas

Renewables threaten economics of new gas



BAKU, Azerbaijan, March 4

By Leman Zeynalova - Trend:

Renewables are threatening the economics of new gas, Trend reports citing Energy Innovation, a nonpartisan energy and climate policy firm.

“Historically, renewable generation technologies have been derided as costly and inadequate to compete with more conventional fossil fuel powered technologies. However, that line of argument has rapidly waned as solar and wind costs have continued to tumble, and show little sign of slowing their downward price trajectory.87 Today, new unsubsidized wind costs $28-54/MWh, and solar costs $32-44/MWh, while new combined cycle natural gas costs $44-68/MWh (see Figure 2 below).88 In short, in almost all jurisdictions, utility scale wind and solar now offer the cheapest source of new electricity, without subsidies,” reads a report published by Energy Innovation.

The company said that while comparing the levelized cost of energy (LCOE) only tells part of the story, the economics for clean energy resources remain compelling when utilities compare portfolios of clean energy resources to new natural gas plants.

“NV Energy’s recent procurement of 1,200 megawatts (MW) solar and 580 MW of four-hour battery storage already beats new natural gas on price. NV Energy paid $20/MWh for solar and $13/MWh for enough battery storage to shift 25 percent of daily energy, resulting in a total cost of $33/MWh per MWh delivered (including federal tax credits),” said the report.

The firm stresses that a premium of $13/MWh is already not much to pay to make solar and wind dispatchable.

“With solar costs projected to continue falling, this “adder” for shifting solar and wind to make it competitive with natural gas plants will only fall. And storage is not the only competitor to shift energy from times of excess to times when it is needed - flexible demand, transmission connectivity, or improved market operations also provide these services at a discount if policy changes can unlock these resources.”

Natural gas power plants built by rate regulated utilities after 2020 will have remaining capital account balances for which customers will likely be paying until 2045 or 2050 assuming regulators grant utility requests for cost recovery, Energy Innovation predicts.

“In an investor’s worst-case scenario, as new plants lose market share to cheaper renewables before the end of their productive life, regulators may face enough pressure to consider prohibiting or reducing utility cost recovery from customers for relatively new but underutilized natural gas plants. The costs from this accelerated retirement will likely fall on consumers, akin to discussions today about who pays and how much for uneconomic regulated coal-fired power plants. In the future; however, it is possible that regulators may question leaving rate payers with full responsibility, especially where concerns were raised in planning processes and approval hearings.”