US renewables: Dropping in price, growing in significance

Wind, having passed coal, now getting competitive with natural gas.
The Department of Energy's Lawrence Berkeley Lab has taken on the task of doing an annual evaluation the state of solar and wind power in the United States. With the data in hand from 2015, it recently completed a look at the trends in the two renewable power sources, both of which appear to be booming. Thanks to a restored tax break, wind installations have returned to levels last seen in 2012. But that's tame compared to solar, where 2016 is on track to see more than double the previous record for utility-scale installations.

As a result of the booming market, state renewable energy standards are now lagging behind the time. To meet them, we'd only need to install 3.7GW of solar and wind energy a year; last year saw over 40GW of wind installed alone.

Trends in solar

There are a number of interesting changes mentioned in the report on solar energy. One is that the price of photovoltaic panels has dropped so much that it's changing the way the plants are set up. We're seeing more installations where the total direct current output can exceed the installation's capacity to convert it to alternating current, which is needed before the electricity can be put on the grid. In other words, it now makes economic sense to buy more panels than are strictly needed, just to make sure your DC-to-AC hardware is kept at full capacity when the generating conditions aren't ideal.

Another thing that's changing is that solar tracking devices are becoming more common—typically, these tilt the panels to follow the Sun as it moves from east to west over the course of the day. While this adds to the hardware cost, it has less influence on the price than other factors (including the cost of approval and permitting), while allowing the installation to produce more power. It also lets solar help service more of the period of peak load on the electric grid.

Partially as a result of this, the average capacity factor (the ratio of the actual generation compared to the facility's potential) of utility-scale solar is going up. While the overall mean capacity factor for the projects the DOE looked at was 25.7 percent, it had gone up to nearly 27 percent in more recent projects. This increase is coming despite the fact that more plants are being built outside of the Southwest, and thus in locations where the solar resources aren't as great. (One project had a capacity factor of over 35 percent.)

The net result of these changes is that electricity generated by solar can be offered at a better price. Levelized prices dropped by an average of over $20 per MegaWatt-hour each year through 2013 and have still dropped another $10 dollars annually in recent years. This has brought them to below $50 per MW-hr, with some projects now priced at $30/MW-hr. While that means they aren't especially competitive with an existing natural gas plant, the economics look favorable when compared to building a new natural gas plant.

Overall, the US is on track to install another 16GW of solar in 2016, with more than 10GW of that being utility scale. That will bring the nation closer to having 50GW of total photovoltaic capacity. Which is good news for solar but looks a bit paltry when compared to wind.

Which way the wind blows

Wind, as a more mature and cheaper technology, experienced a large boom about a decade ago. Since then, it's gone through boom and bust cycles, based on the existence of a federal tax credit. In the year the credit was set to expire, installations shot up, then plunged the year afterwards. 2014 and 2015 represented plunge years but, with the credit back on, 2015 started a rebound, making it the fourth largest year for wind installations yet. It accounted for over 40 percent of all generating capacity added in the US last year.

According to Lawrence Berkeley's wind analysis, over 8GW of capacity were installed, bringing the US' cumulative capacity to nearly 75GW. That still trails China's capacity, which is nearly double that. But, because the US has such excellent resources, it generates more electricity through wind than any other country; wind now accounts for over five percent of the total electricity generated in the states.

One area that's gone untapped is offshore wind, which has been prohibitively expensive compared to onshore. Globally, there are 12GW of capacity installed; in the US, the number is zero. But that should change this year, as the first offshore turbine installations are now in progress along the coast of Rhode Island.

Nearly everything about the turbines being installed is also getting bigger. The average capacity in the US is now two MegaWatts, up from about 1.4 a decade ago. The average rotor height has become about 10 meters higher in that time. And the blades have grown considerably larger: "In 2008, no turbines employed rotors that were 100 meters in diameter or larger; by 2015, 86 percent of new installed wind capacity featured rotor diameters of at least 100 meters."

Part of this is happening because wind installations are expanding out from the areas that have the best generating potential. To get the most out of installs in areas with weaker average winds, it pays to put turbines higher and install larger blades.

Despite the trend towards installations in sites with lower wind speeds, capacity factors have risen slightly over the past decade, hovering a bit over 30 percent. Projects built in 2014, however, had an average capacity factor of over 40 percent, though, so it's possible that this figure will rise considerably in the future.

Overall, the cost of wind power has dropped to the point where power purchase agreements are running at prices that are competitive with the costs of the fuel for a natural gas plant. (While solar is just now dropping to close to $30 per MW-hr, wind has been averaging a bit below that in recent years.) They're expected to be stable over the coming decade, meaning they'll decline in real-dollar terms. In contrast, natural gas prices are expected to rise slightly; the report concludes that "The price stream of wind [power purchase agreements] executed in 2014-2016 compares very favorably to the EIA’s latest projection of the fuel costs of gas-fired generation extending out through 2040."

There are some added costs due to the intermittent nature of wind. But the report indicates that many grids handle it at a cost of less than $5 per megawatt hour, which would be enough to drop wind below the projected cost of natural gas by 2020. By 2020, however, the tax break that benefits wind power will be permanently phased out, based on current legislation. But the credit has also been extended 11 times so far.

In any case, the overall picture painted by these reports is clear: onshore wind is a mature, competitive generating technology, and photovoltaics are getting close to joining it in that category. As a result, economics are driving adoption at a far higher rate than most state standards would ever drive installations (a possible exception being California). And both technologies are now seeing installations in areas like the Southeast, where neither had been used much previously. The only thing that's holding them back at this point is the unusually low prices for natural gas.