WetEV
Posts: 1786
Joined: Fri May 04, 2012 8:25 am
Delivery Date: 16 Feb 2014
Location: Near Seattle, WA

Economics of Renewable Power, simplified.

Sun Dec 01, 2013 6:57 pm

I'm going to use fairly round numbers to keep this simple. The numbers are also intended to be optimistic, as well. At the current time, need to about double the cost to match reality.

Assume renewable energy has only the capital cost, and that is 10% per year of the installed cost of $1/watt. 10% cost implies some combination of maintenance, replacement and return of capital, summing to 10% of the invested cost per year. Might be 20 year life and 5% return on capital, for example. Assume that the capacity factor is .25, so cost per kWh of direct renewable energy is:

Cost per kWh = Installed cost *.1/(capacity factor*hours in a year)
= (1000 watts/kW)*1 * .1/(.25*365*24)
= $0.045 per kWh

This of course ignores several factors. The power distribution network adds to this cost, and that something else needs to provide power for much of the time, and if we generate more than a certain amount of renewable power we will start increasing the costs of the other power source, and if we generate more than the load we start needing to waste power. All of which suggest that while the first kWh might cost $0.045, once we get to 20% of load the cost will have risen. For example, suppose the other power source is natural gas, and assume the cost of generation is 2/3 fuel, 1/3 capital. Note that to the extent that renewable power is correlated with the peaks in energy use, it is at worst a straight displacement, and may actually improve the capacity factor of the rest of the system, which would under fair accounting slightly lower the cost of renewable energy. As more renewable energy is generated beyond this correlation, the fraction of capital cost for the other power source rises as it depends on the capacity factor:

Cost per kWh (natural gas, no renewables) = fuel cost + capital cost
= $0.06 + installed cost/(capacity factor * hours in a year)
= $0.06 +0.03
= $0.09

Assume the first 10% is no net change in gas generation capacity factor, and the second 10% is reduced capacity factor:

Cost per kWh (natural gas, 20% renewables) = fuel cost + capital cost
= $0.06 + $0.03/(reduced capacity factor)
= $0.06 + $0.03/(0.9)
= $0.06 + $0.033

As this is a cost associated with increasing renewable power, fair accounting would move this cost to the cost of the renewable power:

Cost per kWh(renewable @20% of load) = $0.045 per kWh + $0.003333/(fraction of renewable power)
= $0.045 per kWh + $0.003333/.2
= $0.045 per kWh + $0.016
= $0.061 per kWh

At 30% renewable, a choice. Add batteries, or shut down some renewable generation at peak times, or perhaps both? At the peak, there will be more renewable generation than load, so something has to change.

Shutting down some generation will increase the cost, as we are reducing capacity factor to improve availability. Batteries will increase cost, and they will not improve the capacity factor much as we are not yet wasting much renewable power, by shutting it down. Keeping phase stability (far beyond the level of this discussion) might require adding batteries even though the cost is higher.

If we shutdown renewable on the peaks as we are generating more than the load, the capacity lost is a little less than 1% using a fairly simplistic capacity and load model.

Cost per kWh = Installed cost *.1/(capacity factor*hours in a year)
= (1000 watts/kW)*1 * .1/(.24*365*24)
= $0.0476 per kWh

Again, adjust for the reduction in capacity factor on the fossil fuel source:

Cost per kWh(renewable 30% of load) = $0.0476 per kWh + $(0.03/.8-0.03)/(fraction of renewable power)
= $0.0476 per kWh + $0.0075/.3
= $0.0476 per kWh + $0.025
= $0.073 per kWh

As the amount of renewables increases, some will need to be shutdown at times to prevent producing more. This will further increase the cost of renewable power. So as costs are rising, we need to find an alternative "other" source.

So lets add some batteries to the mix. Assume batteries are 100% efficient, and last a long time, and the cost is 10% per year of the installed cost of $50 per kWh of storage (much less than the cost of BOB in Texas, the largest battery in the US. At this cost, a Leaf battery + charger + inverter would be $1,200). So how many batteries to we add to the mix?

Suppose we add 4 hours worth of batteries. The average capacity factor over a year isn't constant. We have a sunny, windy days, that might reach closer to 75% or more, and cloudy, windless days, that might be very close to zero. So on the best days, we might provide 100%, and on the worst days, zero. So what is the cost of renewable power? It is getting more complex, of course, as there are lot of questions that aren't that easy to answer exactly. How high of fraction of the load can the renewables supply? How will this combination realistically impact the other power source?

If more power is generated than can be used on the peak days, improving availability at the cost of capacity factor, then we might get close to 80% of the load supplied by renewable power. See:

http://www.reiner-lemoine-institut.de/s ... l_proc.pdf

Based on the above source, average load for that system is about 1.58MW and the average amount of wasted power is about 1MW. This works out to about a 60% reduction in the renewable capacity factor. (but an improved availability) The above source (Scenario A) has about 3.5 hours of battery.

Cost per kWh = Installed cost *.1/(.6*capacity factor*hours in a year) + battery cost
= $0.075 + 4 hoursStorage@$50/kWh *.1 / 365
= $0.075 per kWh + 4 hours * 50/kWh * .1 /365
= $0.075 per kWh + $0.054
= $0.129 per kWh

Ah, but what will that do to the cost of the other power (assumed to be natural gas)? First, we reduce the capacity factor for the other power from the original, by about 80%, but then we let the other power run at a higher capacity factor, by using the battery to level daily peaks. The first factor would increase the capital cost by about 5x.

Cost per kWh (natural gas, 80% renewables) = fuel cost + capital cost
= $0.06 + $0.03/(reduced capacity factor)
= $0.06 + $0.03/(0.2)
= $0.06 + $0.15
= $0.21

Again, fair accounting would add the excess cost ($0.12) across the renewable power

Renewable cost = $0.129 per kWh + $0.12/fraction renewable
= $0.129 per kWh + $0.12/5
= $0.129 per kWh + $0.024 per kWh
= $0.153 per kWh

Now, if you are still reading, and I've not made any major mistakes (and these estimates, again, are optimistic, and don't include network operation cost):

0% renewable Power rate will be $0.090 per kWh
10% renewable costs $0.045 per kWh Power rate will be $0.086 per kWh
20% renewable costs $0.061 per kWh Power rate will be $0.084 per kWh
30% renewable costs $0.073 per kWh Power rate will be $0.085 per kWh
80% renewable costs $0.153 per kWh Power rate will be $0.140 per kWh

When I hear a cost for renewable power, I ask, which price is being discussed? 10% of load, or 80% of load? 100% of load is rather more complex, and I'm going to avoid that for a bit. But notice that the price rises as the share of the renewable energy increases.
(edit 12/4/2013) added blended power rate, totaled "other" fossil fuel cost.
(edit 12/4/2013) Added 30% renewable, corrected typo)
Last edited by WetEV on Wed Dec 04, 2013 11:49 am, edited 2 times in total.
WetEV
#49
Most everything around here is wet during the rainy season. And the rainy season is long.
2012 Leaf SL Red (Totaled)
2014 Leaf SL Red

AndyH
Posts: 6329
Joined: Fri Apr 23, 2010 3:43 pm
Location: San Antonio

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 12:03 pm

Interesting numbers. I wonder if any of them are valid? If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true. If your estimates included a price for carbon, a tally of corporate welfare given to fossil fuel generation that is not given to renewable generation, and state and federal government subsidies to maintain power monopolies, then I suspect your models might more accurately reflect reality.

http://stateimpact.npr.org/texas/2013/11/26/should-texas-pay-power-companies-just-for-having-power-plants/
Right now, power companies get paid when they produce electricity. The change could end up paying those power companies twice: once for the power they produce, and a second time just for owning or building power plants. The proposal is aimed at encouraging power companies to build new plants – to help avoid power shortages that have led to rolling blackouts in the past.

This is up to $4 billion in new payments to power operators that are already being paid to generate electricity - these are the same thermal generation operators that have had to derate or take their systems off-line during our 10+ year Texas drought because they couldn't get enough cooling water. That $4 billion, and more, should be used to expand the wind and solar generation that continues to support the fossil fuel plants that can't take the heat.
"The stupid become extinct."-Bill Mollison

2015 smart Electric Drive "The Bumblebee"
OpenEVSE Plus DIY

User avatar
Randy
Moderator
Posts: 2064
Joined: Thu Apr 22, 2010 12:29 pm
Delivery Date: 04 Jan 2011
Leaf Number: 0191
Location: San Diego, CA

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 1:07 pm

I can tell you definitively, Andy, that purchased power at the utility level is more expensive here in San Diego due to the "percentage of the mix" renewable requirements that have been put into effect for the California utilities...

TimLee
Posts: 2810
Joined: Thu Jan 20, 2011 9:40 am
Delivery Date: 17 May 2011
Leaf Number: 2026
Location: Chattanooga, TN

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 2:00 pm

AndyH wrote:If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true. If your estimates included a price for carbon, a tally of corporate welfare given to fossil fuel generation that is not given to renewable generation, and state and federal government subsidies to maintain power monopolies, then I suspect your models might more accurately reflect reality.

I love your enthusiasm AndyH, but you seem to badly miss the facts sometimes.
Just look at Germany. A huge important decision to radically increase the renewable percentage.
Where did the cost go?
They can't afford it :!: :!: :!:

I agree that the smart intelligent thing would be for every human being and state entity on the planet Earth to agree to a fair cost for carbon. But not all agree. Even some MNL participants that are on the LEAF advisory board don't agree.
But in any case, that is not going to happen. Politically it is just not going to happen. :oops: :cry: :oops: :cry: :oops: :cry:

Tim Lee
Chattanooga, TN

Man. Date: 03/10/11, VIN # 2026
Delivered 05-17-2011
Blue Ocean, 2011 SL-eTec

AndyH
Posts: 6329
Joined: Fri Apr 23, 2010 3:43 pm
Location: San Antonio

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 3:16 pm

TimLee wrote:
AndyH wrote:If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true. If your estimates included a price for carbon, a tally of corporate welfare given to fossil fuel generation that is not given to renewable generation, and state and federal government subsidies to maintain power monopolies, then I suspect your models might more accurately reflect reality.

I love your enthusiasm AndyH, but you seem to badly miss the facts sometimes.
Just look at Germany. A huge important decision to radically increase the renewable percentage.
Where did the cost go?
They can't afford it :!: :!: :!:

No, Tim, this is absolutely incorrect. We've covered this in some detail in the CA/H2 thread and the key takeaway is that this is German election season and there's all kinds of garbage flying around. In the real world in Germany there are three major things happening in the power world - the Energiewende (energy transition) that's been happening since the 1990s, the regular and routine modernization of the 19th century power grid, and the Third Industrial Revolution that was started by Chancellor Merkel in about 2007.

While electricity prices have increased in some parts of Germany, those are in areas not following TIR or Energiewende progress and are due primarily to increased costs of fossil fuels. Areas that have replaced centralized generation with local production (net positive towns via the Energiewende) have stable prices and pay themselves each month when they pay their energy bills (they've invested in their own generation and use it as a portion of their retirement funds). Other areas on the conventional grid near large-scale renewables have still seen increases in pricing in some instances, but the rate is increase is much smaller than the historical and projected rate of increase under a business as usual projection.

Sorry - there is no simple soundbite here - and if there were, it certainly would't be 'renewables are too expensive' - even if we completely ignore the externalities.

Start here:
http://welcometotheenergiewende.blogspot.de/
http://blogs.agu.org/terracentral/2012/02/04/germany-moving-forward-with-the-third-industrial-revolution/
http://climatecrocks.com/2013/10/24/its-about-ownership-why-germany-kicks-butt-in-renewable-energy/
I lied in #1. Support for Germany’s renewable energy quest isn’t about cost of energy, but about the opportunity to own a slice of the energy system. Millions of Germans are building their retirement nest egg by individually or collectively owning a share of wind and solar power plants supplying clean energy to their communities. Nearly half of the country’s 63,000 megawatts of wind and solar power is owned locally, and these energy owners care as much about the persistence of renewable energy they own as they do about the energy bill they pay. Not only do these German energy owners reduce their own net cost of energy, every dollar diverted from a distant multinational utility company multiplies throughout their local economy.


Tim - just look at one of Wet's suggestions that one should attribute the price for a portion of fossil generation to renewables. Two things that immediately come to mind about the US power system is that renewables take a back-seat to fossil/fissil-thermal generation - the wind is curtailed, not the coal plant. When renewables are not curtailed, they often cause negative pricing. Anyone trying to pin the problems with our 19th century electric grid on renewables is out to lunch. The same things have been happening in Germany - that's why they're building 18 wind to H2 plants - it'll stop curtailment and allow expanded access to carbon free electricity and a reduced-carbon natural gas system.

Last point - if you truly think that renewables cost too much, especially in Germany, how do you explain this?

Image
"The stupid become extinct."-Bill Mollison

2015 smart Electric Drive "The Bumblebee"
OpenEVSE Plus DIY

apvbguy
Posts: 1403
Joined: Tue Apr 09, 2013 1:34 pm
Delivery Date: 10 Apr 2013
Location: Jacksonville FL.

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 6:01 pm

AndyH wrote:Interesting numbers. I wonder if any of them are valid? If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true. If your estimates included a price for carbon, a tally of corporate welfare given to fossil fuel generation that is not given to renewable generation, and state and federal government subsidies to maintain power monopolies, then I suspect your models might more accurately reflect reality.


this is where your nonsense is exposed, there is plenty of welfare for all, see solyndra, fisker and so on
WARNING This post may contain material offensive to those who lack wit, humor, common sense and/or supporting factual or anecdotal evidence. All statements may be subject to literary devices not limited to: irony, metaphor, allusion and dripping sarcasm

WetEV
Posts: 1786
Joined: Fri May 04, 2012 8:25 am
Delivery Date: 16 Feb 2014
Location: Near Seattle, WA

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 8:33 pm

AndyH wrote:Interesting numbers. I wonder if any of them are valid?


Of course not, as stated they are optimistic. For example, there is no 100% efficient, 20+ year lifetime battery, and the cost I gave is about a third of a realistic price. A more realistic battery would raise the cost of power at 80% renewable noticeably.


AndyH wrote:If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true.


Germany. Retail electric rate is going up.

AndyH wrote:If your estimates included a price for carbon


In the first order, it would not change the price of renewable power. When including costs of materials, it would somewhat increase the cost of renewable power.


Right now, power companies get paid when they produce electricity. The change could end up paying those power companies twice: once for the power they produce, and a second time just for owning or building power plants. The proposal is aimed at encouraging power companies to build new plants – to help avoid power shortages that have led to rolling blackouts in the past.


Let us take an example with trains. If there is the exact number of trains available to carry the traffic between two points, then the cost is minimum. Almost every seat is full almost every day. Buying another train would increase the cost. Ah, but what if there is a mudslide that covers the tracks and stops travel for a few days? Without the extra train to put into service, a lot of people will be stranded for a lot longer than a few days, or be unable to take a trip they want or need to take.

Or airlines. As they have cut down flights until almost every seat is filled on almost every flight, a winter storm will strand people far from home, with no realistic chance of getting home for sometimes days.

What do you want, cheap seats or reliable transportation?
WetEV
#49
Most everything around here is wet during the rainy season. And the rainy season is long.
2012 Leaf SL Red (Totaled)
2014 Leaf SL Red

WetEV
Posts: 1786
Joined: Fri May 04, 2012 8:25 am
Delivery Date: 16 Feb 2014
Location: Near Seattle, WA

Re: Economics of Renewable Power, simplified.

Tue Dec 03, 2013 9:12 pm

AndyH wrote:Last point - if you truly think that renewables cost too much, especially in Germany, how do you explain this?


Stops in 2011. Use all the data.
WetEV
#49
Most everything around here is wet during the rainy season. And the rainy season is long.
2012 Leaf SL Red (Totaled)
2014 Leaf SL Red

AndyH
Posts: 6329
Joined: Fri Apr 23, 2010 3:43 pm
Location: San Antonio

Re: Economics of Renewable Power, simplified.

Wed Dec 04, 2013 12:44 am

WetEV wrote:
AndyH wrote:Last point - if you truly think that renewables cost too much, especially in Germany, how do you explain this?


Stops in 2011. Use all the data.

I will as soon as government numbers catch up. Surely you're not suggesting that something happened in 2013 that wiped out 27% GDP growth?

There's a rather wide chasm between that chart and the doom and gloom you're implying, Wet, but I suspect you know that already...
"The stupid become extinct."-Bill Mollison

2015 smart Electric Drive "The Bumblebee"
OpenEVSE Plus DIY

AndyH
Posts: 6329
Joined: Fri Apr 23, 2010 3:43 pm
Location: San Antonio

Re: Economics of Renewable Power, simplified.

Wed Dec 04, 2013 12:54 am

WetEV wrote:
AndyH wrote:If your suggestions are correct, then we should see energy prices increase as more renewables are added to the grid - yet just the opposite is true.


Germany. Retail electric rate is going up.

Repeating it doesn't make it true.

The price of 100% renewable power is in line with national rates for those towns that generate 200% of their electricity and heating, plus their utility payments stay in their towns and are part of their personal investments. Strike one.

Areas with renewables supplying up to 61% of electricity on occasion show a price decrease - in some instances they are paid to use electricity. Strike two.

The balance of the country has seen rates of increase SMALLER than historic or predicted rates if the renewables were not on-line. The increases are due to rising costs of coal and gas - more renewables cuts that increase. Strike three.

This has been covered before - repeatedly - with links and sources and pretty pictures.

The fossil fuel bubble will soon burst, as the nuclear bubble did years ago. Let the zombies rest in peace.
"The stupid become extinct."-Bill Mollison

2015 smart Electric Drive "The Bumblebee"
OpenEVSE Plus DIY

Return to “Business / Economy and Politics”