Electrical power comes from a wide variety of sources, each of which has its own set of pros and cons, and each of which has its own cost of generation. As discussed in OWOE: What sources provide electrical power in the United States?
, the primary sources of electrical power are natural gas, coal, nuclear, hydroelectric, wind, and solar. Within these sources are a number of sub-sources; for example, natural gas can be burned to produce electricity in a traditional combustion turbine (CT) power plant or a more modern and efficient combined cycle (CC) power plant (See OWOE: What is a combined cycle power plant?
). Coal can be burned via a variety of different technologies, but coal power plants are generally categorized as conventional, i.e., coal is burned to heat water in a traditional boiler, or conventional with carbon capture and sequestration (CCS) (see OWOE: What is carbon capture and storage (CCS)?
). Each source or sub-source costs a different amount depending upon initial construction costs (see OWOE: How much does it cost to build a new power plant?
), fuel costs, routine maintenance costs, etc. The most common way to put all generation sources on a common basis for comparison is to use the concept of Levelized Cost of Electricity (LCOE - see OWOE: What are LCOE and LACE?
Figure 1 from the latest Lazard 2023 (Version 16)
study shows that over the past 14 years, the LCOE of onshore wind power has decreased 63% while the LCOE of utility-scale solar photovoltaic power has decreased 83%, even accounting for the recent uptick in costs driven by inflation and supply chain issues arising from the COVID-19 pandemic. These decreases have been driven by advances in technology and improvements in manufacturing processes.
Such decreases have made the cost of generating renewable power similar to, or even less than, the cost of power produced from conventional sources. Figure 2 summarizes unsubsidized LOCE for both alternative and conventional power sources from the same Lazard 2023 study. It shows unsubsidized new onshore wind costs ranging from $24-$75 per MWh and utility-scale solar from $24-96. This compares to $39-101 per MWh for the least expensive new plant using conventional sources, which is a new gas-fired combined cycle plant. At the low end of the cost range, i.e., in those locations and conditions that are best suited for wind or solar power, wind and solar LCOE are comparable to an operating nuclear plant ($31 per MWh) and less than a CC gas plant ($62 per MWh). In all cases, new wind and solar are significantly cheaper than a new nuclear plant at $141-$221 per MWh.
However, LCOE doesn’t give the full story because it is based on the fundamental premise that every kilowatt-hour generated is equivalent. This is generally true for conventional power sources like gas, coal and nuclear whose generation can be ramped up or down (to some extent) to meet demand. Wind and solar generation are intermittent and produce electricity that is often misaligned with demand. In particular, solar power is produced during the middle of the day when demand is relatively low and shuts down when demand ramps up in the evening (see OWOE: What is the "duck curve"?
). Therefore, a kW of solar power is not as valuable as a kW of conventional power.
Lazard has addressed this issue for the first time in the 2023 study by introducing the cost of firming intermittency. Firming renewables
is the cost of energy storage or backup power generation required to bolster periods of lower renewable electricity generation in order to match electrical supply with demand. Figure 3 shows the effect of including firming cost to the average of the solar, solar plus PV, and wind LCOE values, both unsubsidized and accounting for current US renewable energy subsidies. Since each region of the country has different costs and other grid related issues, results are shown for each major grid operator. It should be noted that the California Independent Service Operator (CAISO) is assumed to utilize battery storage as the firming resource, while the other operators are assumed to utilize less expensive natural gas combustion turbines. Except for CAISO, the results\ generally fall within the band of the cost of new CC gas plants, indicating that wind and solar remain cost-competitive with traditional fossil-fuel generators. This situation should only improve as technology continues to drive down renewable costs and modernize the electrical grids. It should also be noted that the costs associated with environmental damage, health care, climate change, water usage, etc., which arise through electricity generation using fossil fuels, are also real costs paid by society but not currently included in LCOE calculation.