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.
Tags: DSIRE, LCOE, Levelized Cost, Renewable Energy Subsidies, Sate Federal Subsidies, solar, Subsidies, Wind