End of Renewable Energy Subsidies?08 Sep

Renewable energy technologies, such as wind and solar, are expensive compared to their fossil fuel counterparts, and are therefore supported by numerous federal, state and local incentives. The Database of State Incentives for Renewables and Efficiency (DSIRE) provides a detailed compilation of these subsidies.

Policy analyst might ask, “When will these subsidies cease so that renewable energy technologies can stand on their own in the market place?” An answer to that question can be framed in terms of levelized cost of electricity (LCOE).

The LCOE is a significant benchmark to compare electricity generation technologies. “Levelized cost represents the present value of the total cost of building and operating a generating plant over an assumed financial life and duty cycle, converted to equal annual payments and expressed in terms of real dollars to remove the impact of inflation. Levelized cost reflects overnight capital cost, fuel cost, fixed and variable operation/maintenance cost, financing costs, and an assumed utilization rate for each plant type.”

By supporting R&D cost reduction technologies, the Department of Energy (DOE) projects that LCOE for large-scale solar installations to about (5-6) cents/kWh by the end of this decade and without subsidies. Current unsubsidized LCOEs for  renewables in 2009 are:

  •  Photovoltaic (single axis, public utility): 32cents/kilowatt hour (kWh)
  • Solar parabolic trough: 27cents/kWh
  • Onshore wind: 8 cents/kWh

The average retail price of electricity in the United States in 2010 was 9.88 cents/kWh.

The following figure depicts the unsubsidized LCOE for several generation technologies in 2016 based on a comprehensive model from the Department of Energy. This figure shows that offshore wind, solar PV and solar thermal are substantially more costly than other technologies and greatly exceed the DOE goal ranging from (5-6 )cents/kWh by 2020 for unsubsidized LCOE. It is notable that onshore wind at 10 cents/kWh is close to the average retail price of 9.88 cents/kWh in 2010.

Conclusions: In the case of solar PV and solar thermal, game-changing R&D must occur in four years from 2016 to 2020 to achieve DOE aspirations for affordable electricity from solar installations. Similar comments apply to offshore wind if that technology is to become free of subsidies. Meanwhile, what happens to these renewable technologies if state and federal governments can no longer afford subsidies? Do the Chinese win? They have cash and patience in abundance to outlast the United States.

 

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6 Responses to “End of Renewable Energy Subsidies?”

  1. United States Slipped to Third Place in World Clean Energy | JHEverson Consulting Reply

    […] Conclusions: governments support wind and solar energy technologies with various subsidies out of necessity because these technologies are not able to stand on their own in the market place. Only when the levelized cost of electricity (LCOE) for renewable energy technologies is on a par with that of fossil fuel energy generation technologies will the need for government subsidies abate and that may not happen for another ten years. This issue was discussed in one of my previous posts. […]

  2. Rising Cost of Home Heating Oil, Exports and Oil Company Subsides | JHEverson Consulting Reply

    […] the levelized cost of electricity generated from solar PV and off shore wind. Please see my previous post on […]

  3. Record Setting Home Heating Oil Prices Caused by U.S. Exports | JHEverson Consulting Reply

    […] Recommendation: Oil companies are making profits from exported distillate fuels and federal subsidies, while state and city government are vainly attempting to provide heating oil assistance to financially stressed families. Although oil companies are free to sell products to whomever, nevertheless they are not entitled to totally unnecessary subsidies. Some portion of those subsidies could be diverted to poor families for home heating oil payment assistance, while the remaining subsidies could support renewable energy R&D, especially to decrease the levelized cost of electricity generated from solar PV and off shore wind. Please see my previous post on LCOE. […]

  4. Everson Quoted in Article on Solar Photovoltaic Technology | JHEverson Consulting Reply

    […] key metric in this case is the levelized cost of electricity (LCOE), a subject of my recent blog post. Until the LCOE of solar PV is equal to or less than that of fossil fuel generators, then the need […]

  5. Solart Group Reply

    The sun offers an unlimited source of energy. JHEverson sees a cut in the subsidies for solar energy in the near future. At Solart, we believe that solar energy will become one of the most affordable sources of energy. Subsidies have helped solar energy become a trusted and profitable source of energy. With the cut of subsidies and the rise of the electricity prices, homeowners will still want to invest in solar panels tomorrow.

    Learn more about solar energy and solar panels on http://www.solartgroup.com !

  6. Senator Scott Brown of MA: No Interest in Energy Issues | JHEverson Consulting Reply

    […] Energy subsidies […]

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About Dr. Everson

Prior to forming this SBIR consultant practice, Dr. Jeffrey Everson was director of business development for QinetiQ North America’s Technology Solutions Group (previously Foster-Miller, Inc.).

Dr. Everson has won and been the principal investigator for several SBIR programs, including a Phase I program for NASA, a Phase I project for the U.S. Air Force, and Phase I and II contracts from the U.S. Department of Transportation. For the Phase II program, he received a Tibbetts Award for exemplifying the best in SBIR achievement.

Previously Dr. Everson held senior scientist positions at Battelle Memorial Institute, The Analytic Sciences Corporation (TASC), Honeywell Electro Optics Systems Division, and Itek Optical Systems Division.

He holds a PhD in physics from Boston College and a MS/BS in physics from Northeastern University.

Contact

For more information about how JHEverson Consulting can help your company with its SBIR and STTR proposals, please contact Jeff Everson.

JHEverson Consulting is based in the Boston area but consults for clients throughout North America. It also is supported by affiliated consultants.