All Generation Methods Aren’t Equal, Pt 2

Until recently, the objective was to produce electricity at the lowest possible cost.

This was seen as being best for consumers, who need to use electricity for lighting, refrigeration, air-conditioning and other modern day necessities, where the cost of electricity can jolt consumer pocket books.

It was also deemed best for industry, where low-cost electricity improved industry’s international competitiveness.

The advent of renewables and a drive to cut CO2 emissions has turned this on its head.

As a result, government is providing large subsidies for renewables. While some claim that fossil fuels and nuclear receive larger subsidies, the facts seem to say otherwise. See Fossil Fuel Subsidies.

Today, largely because of the drive to cut CO2 emissions, renewables are seen as being  more important than generating electricity at low cost.

Table I shows the cost of building various types of power plants based on their nameplate ratings1. These investments need to produce a return to those who provide the funds for building the power plants.

 

TABLE 1

 
Method Investment Cost per Nameplate Kilowatt
Natural Gas Combined Cycle $1,100/KW
Traditional Coal $2,000/KW
Wind, Land-Based $2,000/KW
Ultra Supercritical Coal $2,800/KW
Solar Concentrating, without thermal storage $4,500/KW
Wind, Off-Shore $5,000/KW
Integrated Gasification Combined Cycle $5,500/KW
Nuclear $6,000/KW
Solar Concentrating, with 6 hours thermal storage $8,000/KW

 

Parabolic Trough, Concentrating Solar Power Technology
Parabolic Trough, Concentrating Solar Power Technology

The effect of capacity factor can be seen in Table II, where the investment cost is adjusted for the amount of electricity each dollar of investment actually produces.

 

TABLE 2

 
Method Adjusted Investment Cost using capacity factor
Natural Gas Combined Cycle $1,300/KW
Traditional Coal $2,400/KW
Wind, Land-Based $6,700/KW
Ultra Supercritical Coal $3,300/KW
Solar Concentrating, without thermal storage $18,000/KW
Wind, Off-Shore $12,800/KW
Integrated Gasification Combined Cycle $5,900/KW
Nuclear $6,700/KW
Solar Concentrating, with 6 hours thermal storage $17,800/KW

 

The cost of fuel is not included in this assessment, but it would require large amounts of coal or natural gas to offset the disparity in costs between coal-fired or NGCC power plants, and these renewables.

This representation of costs is dramatically more revealing than levelized cost of electricity (LCOE) calculations that can be affected by various assumptions, such as the life of the equipment, interest rates and capacity factor. The EIA and others also may include a cost for carbon in the LCOE calculation that further distorts comparisons.

For example, the EIA statement on LCOEs says that a 30 year life is used for their calculations, but wind turbines only have a 20 year life — and possibly less. The EIA also adds a cost for carbon when calculating the LCOE for coal-fired power plants.

Without subsidies, investors probably wouldn’t be able to obtain a satisfactory return on wind and solar investments.

Until the subsidy for new wind farms ended last December, new wind farms received 2.2 cents per kWh for the electricity they produced … whether the electricity was needed or not. Now there is a push to revive this subsidy.

Without subsidies, it’s doubtful people would invest in wind farms. Wind farm owners have sold the electricity they produced at a loss, so as to get the 2.2 cents / kWh subsidy.

Americans need to decide whether their interests are best served by low cost electricity or using tax payer dollars to cut CO2 emissions.

 

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0 thoughts on “All Generation Methods Aren’t Equal, Pt 2

  1. Donn,
    Do your numbers in Table 2 include the costs of maintaining and repairing equipment? If not, how much would such costs change the numbers?

    • Here’s a pretty good one I was able to find. http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

      In my opinion, if the goal is to provide cheap energy while reducing our CO2 footprint then the solution is to phase out Coal-fired plants in favor of Natural gas plants. Here are my reasons

      -Low capital cost
      -low fuel cost (thanks to fracking)
      -domestic production
      -transportation is relatively easy
      -Natural gas is the best of the worst (cleanest fossil fuel out there)
      -The power output of NG plants can be modulated easier to meet instantaneous electrical demand

      • Jon:
        This could be the eventual outcome if market forces are allowed to work.
        A few comments re your observation:
        First, natural gas power plants will never reduce CO2 emissions enough to cut CO2 emissions 80%. That is why the Sierra Club has initiated a war on natural gas.
        Second, new pipelines will have to be built to ensure there is enough natural gas available for power generation, since home owners automatically get preference if pipeline capacity is insufficient. (I certainly hope this will be done over the next few years.)
        Third, Natural gas combined cycle plants are more flexible than coal-fired power plants, but they really weren’t built to absorb the wide swings caused by wind and solar. Single cycle NG plants, normally used for peaking, are best for sudden swings in power.
        Forth, there would be no need for cycling plants if it weren’t for wind and solar.
        Fifth, the link to the EIA site on LCOE is worth reading as it makes the point that LCOEs aren’t necessarily the best way to compare cost. And, as I have mentioned elsewhere, the calculations don’t take into consideration the cost of storage or of back-up power.
        Avoided cost is a tricky concept, and has been injected into the discussion by those wanting to eliminate building new power plants.
        I wouldn’t rely on avoided cost for any decision making, because it eventually results in inadequate capacity. It also is a very squishy calculation with opinions involved. We had an outstanding cost reduction program at GE, until avoided cost was interjected into the system. With avoided costs, the results became ridiculous and, in my view, the cost reduction program was badly compromised.
        Finally, natural gas combined cycle power plants meet all your criteria, so long as market forces are allowed to work and coal-fired power plants aren’t arbitrarily shut down.
        I would add that ultra-supercritical coal-fired power plants meet most of your criteria, but can’t be cycled up and down without causing damage to the units.
        Thanks for your comment.

  2. No. I don’t know anyone who has accurate numbers regarding maintenance for all these types of power generation.
    Wind and solar installations are too new for anyone to have accurate numbers on them. Coal is being adversely affected by cycling, the need for load following due to renewables, but this is relatively new and, again, no one has accurate numbers for this added cost.
    There probably are good numbers for NGCC and nuclear power plants, but I don’t have them.

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