{"id":1567,"date":"2015-02-04T08:38:01","date_gmt":"2015-02-04T14:38:01","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=1567"},"modified":"2015-02-04T08:55:44","modified_gmt":"2015-02-04T14:55:44","slug":"renewable-cost-dropping-impact-to-resource-planning","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2015\/02\/04\/renewable-cost-dropping-impact-to-resource-planning\/","title":{"rendered":"Renewable Cost Dropping – Impact to Resource Planning"},"content":{"rendered":"

A very good report on renewable cost is supplied by IRENA – Renewable Power Generation Costs in 2014.<\/a>\u00a0 The absolute price numbers presented are hard to confirm, but the trends are likely undeniable.\u00a0 Most of the report is based on Levelized Cost of Electricity (LCOE).\u00a0 I have noted LCOE is not the best metric given the structure of the electricity market per my old article in 2012<\/a> (which, by the way, is the most popular page on my website for the last few months \u2013 not sure why, but it is).\u00a0\u00a0 IRENA did note the issue with LCOE in their report.<\/p>\n

The results from this report lead to implications that go beyond the obvious that renewable cost are coming down and potentially being very competitive with fossil generation.\u00a0 The first implication is the fact a report like this will lead to significant second guessing and planning work by resource planners.<\/p>\n

Price discovery and the realities of renewable projects should be made transparent.\u00a0\u00a0 IRENA report notes cost is very dependent on location.\u00a0 In states or local areas with renewable mandates with incentives, an open platform for project submissions should be created given ratepayer subsidies.\u00a0 Developers, ratepayers, utilities, and government officials \u00a0should be able to access this site.\u00a0\u00a0 I noted this in my article with my concerns to Senate Bill 310 in Ohio<\/a>.\u00a0\u00a0 There was an advance energy requirement in SB 221 which was removed per reasoning that there was a lack of projects under the guidelines of advance energy. \u00a0My main concern with SB221 was the failure of the legislation to enable<\/strong> the commission to regulate and enforced the targets set forth. \u00a0 An enabler could have been budgeting and creating an open bidding platform promoted and managed by the state for advance energy projects. \u00a0The platform would remove the concerns of pricing and the availability of advanced energy projects.\u00a0 This is beneficial to all parties. The utility removes the second guessing of the market place.\u00a0 Ratepayers and the commission know the project premiums and the depth of projects available.\u00a0\u00a0 The cloak of the “evil” utilities preventing renewables will be removed with an open bid platform for advance energy.\u00a0 Cost produced from reports like IRENA will quickly be confirmed or denied.\u00a0 There is no need for commercial secrecy and competitive advantage when the ratepayer is willing to subsidize and potentially pay a premium.<\/p>\n

The second implication from this report is to realize utility scale projects saves money.\u00a0\u00a0 The report shows utility scale vs. residential PV produces a savings of over 50%.\u00a0\u00a0 This savings not only comes in scale of projects, but by the utility cost of capital and other business intrinsic properties.\u00a0 Utilities should move into the PV space as Tucson Electric Power has done<\/a>.\u00a0 There is no doubt a utility can drive more installation than a private company given the correct leadership and vision.<\/p>\n

The third implication is the need to revisit biomass opportunities.\u00a0\u00a0 Biomass generation\u2019s ability to operate more closely to traditional resources offers significant operational advantages over wind and solar.\u00a0 The cost from this report indicate the premium for biomass is in line if not more favorable than many wind and solar projects.\u00a0 Many coal plants are making the conversion to gas.\u00a0\u00a0 However given the trends and technology improvements in biomass a serious option to consider is the conversion from coal to biomass or even co-firing.\u00a0 The initial biomass projects in the US were a disaster in many cases.\u00a0 However, as with anything new, sometimes it takes a few failures to become a great success.\u00a0 The ratepayers should be equally willing to pay a premium for biomass as they do for solar and wind.<\/p>\n

A final implication I will discuss is the subsidies applied to renewable generation.\u00a0\u00a0 According to the IRENA report all their numbers represented cost without subsidies.\u00a0\u00a0 Perhaps subsidies need to be removed from the most developed forms of renewables (e.g. wind) and the subsidies rolled down to other advanced energy forms.\u00a0 Advanced energy initiatives can be consider as insurance to the unknown of the future.\u00a0\u00a0 As a society, we should be able to realize paying an insurance premium at a certain level is reasonable.\u00a0\u00a0 Legislatures and commissions need to work to establish that reasonable level.\u00a0\u00a0 Progress from anything new will come with some failures, but we must learn from these failures and move forward.\u00a0 The trend in falling prices from renewables was stimulated from government mandates.\u00a0 As generally a libertarian, this claim is hard for me to make, but being a realistic libertarian one realizes the system is not free to begin with therefore ideal principles cannot always work in an unideal environment.\u00a0\u00a0 Utilities in their design are quasi-governments with limited competition.\u00a0\u00a0 Stimulating the renewable investments from government mandates were likely necessary to achieve the fall in prices being observed.\u00a0 Much credit still must be given to the market players who took advantage of the mandates and delivered the cost improvements.\u00a0 It is my hope that at some point the subsidies and mandates will not be needed and we will have the capability to remove them.\u00a0 History is not our friend on subsidy removal.\u00a0\u00a0 The agriculture industry still sees subsidies developed from the great depression.\u00a0\u00a0 Even though our economy has shifted from agriculture, we continue with huge subsidies for farms no longer owned by families, but large corporations.\u00a0 Common in today\u2019s political climate, we accept corporate welfare much easier than we accept social welfare.\u00a0 The reason for this is likely the effective capability of recycling corporate welfare dollars to the political process.\u00a0 I guess corporations are people to \u2013 right (Citizens United vs. Federal Election Commission<\/a>)?<\/p>\n

All Energy Consulting<\/a>\u00a0examines all the areas involved in energy and works hard to be open minded to the changing landscape.\u00a0 Please do consider us for your consulting needs as we are here for your success and have a proven track record of successfully identifying the paradigm shifts.<\/p>\n

Your Continually Advancing Energy Analyst,<\/p>\n

David<\/p>\n

David K. Bellman
\nFounder\/Principal
\nAll Energy Consulting LLC- “Adding insights to the energy markets for your success.\u201d
\n614-356-0484
\ndkb@allenergyconsulting.com
\n<\/a>@AECDKB<\/p>\n

Sign Up to AEC Free Energy Market Insights Newsletter<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A very good report on renewable cost is supplied by IRENA – Renewable Power Generation Costs in 2014.\u00a0 The absolute price numbers presented are hard to confirm, but the trends are likely undeniable.\u00a0 Most of the report is based on Levelized Cost of Electricity (LCOE).\u00a0 I have noted LCOE is not the best metric given […]<\/p>\n","protected":false},"author":1,"featured_media":16,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,6,17],"tags":[354,59,355,147,20,145,18,193],"class_list":["post-1567","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-power","category-renewables","tag-advance-energy","tag-biomass","tag-generation-cost","tag-lcoe","tag-renewables-2","tag-resource-planning","tag-solar","tag-wind"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1567","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=1567"}],"version-history":[{"count":7,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1567\/revisions"}],"predecessor-version":[{"id":1574,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1567\/revisions\/1574"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/16"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=1567"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=1567"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=1567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}