Tag Archives: wind turbines

How to Increase Use of Renewables

The United States has made great strides in utilizing renewable energy sources (such as wind and solar) to provide reliable electricity. From 2007 to 2012, electricity from cleaner, more sustainable sources has nearly quadrupled in this country. Wind power more than tripled in the United States during that same time frame.

Wind farm at sunset

There is already infrastructure in place to transition over entirely to renewables. Now it’s time to employ smart policies and innovation to continue shifting to these renewable power sources in the coming years.

The electricity grid is a highly complex system connecting power sources to consumers. This vast machine is run by grid operators or balance authorities who are constantly matching up electricity supply and demand. Since renewable energy ebbs and flows depending on the sun and wind, this can pose a challenge when it comes to reliability. Thankfully, grid operators are used to dealing with this type of variability and uncertainty. They already have to make constant adjustments for changing demands, outages, and other events, so incorporating more and more renewables shouldn’t post much of a problem.

Conventional power plants have their own drawbacks and reliability issues. Many things can affect a plant’s ability to generate power, including sudden random outages, severe weather events, and extremely hot temperatures and droughts. Renewable resources are not as vulnerable to lengthy disruptions stemming from weather, safety issues, and other causes. Similarly, renewable plants are typically smaller and therefore, if they do go offline, the impact to the grid is minimal. Another perk to renewables is their price stability compared to fuel-powered plants.

Tools for Ramping-Up Renewable Energy

  • Geographic dispersion: Assimilate renewable power sources over larger geographic areas to help smooth out interruptions and increase reliability.
  • Better forecasting: Weather observations, meteorological data, and other information can help better project wind and solar output.
  • Improved scheduling: Allow operators to schedule power delivery on a sub-hourly basis (rather than hourly or a day ahead) to make the grid more efficient, save money, and reduce emissions.
  • Make power plants more flexible: Moving toward more flexible fossil fuel power plants is an easy way to integrate more variable renew­able sources into an electricity grid.
  • Building new transmission lines: New lines would make the electricity system more reliable and efficient, and enable wind power to displace facilities that cost more to operate.
  • Managing customer demand: Offer more “demand-response” programs, which pay large customers to reduce their electricity use when demand is high.
  • Using smart grid technologies: New technologies (sensing, communications, control, and power electronics) can increase efficiency and reliability and provide greater flexibility in controlling power flows, thus enabling plants to integrate large quantities of renewable power.
  • Storage: Use a variety of storage solutions to manage grid variability over short time frames and store electricity.

The Economics of Wind and Solar Power Generation

Those who make power-generation decisions are always looking for less-expensive power alternatives and comparing the economic impact of wind, solar, thermal, natural gas, coal, and others. One effective way to measure these economics is by looking at the LCOE: a measurement of the average cost of producing a unit of electricity over the lifetime of the generating source. Knowing this allows for the comparison of price-to-production for different sources of power.

Let’s look at the LCOE and economic outlook for just two renewables: wind and solar – as described in the Citi Research report entitled “Evolving Economics of Power and Alternative Energy.”

Wind

To assess the LCOE of a wind project, the key factors include:

  1. Wind turbine costs
  2. Financing costs

The costs of operation are minimal, although there are geographic limitations. In the United States, wind generation is primarily in the central corridor (Midwest to Texas), with some wind power in the Northeast and West Coast.

Map of U.S. wind farms

Turbine costs continue to decline – especially as things trend toward larger turbines. The outlook for wind is dependent on the wind levels in the areas it will be built and the cost of base load alternative. Fortunately, the industry continues to innovate and move to aggressively invest to improve turbine economics. In addition, wind financing costs have improved.

Keys to driving down wind LCOE: Reduce turbine costs and improve efficiencies.

Solar

Solar continues to gain market share around the world and the outlook is still very favorable. The lower cost of production and materials will likely decrease module costs. The system costs are comprised of module costs plus balance of systems (BOS). System costs vary based on end user, location, and other factors.For example, the raw input prices (poly, ingot, wafer, cell) are subject to global markets and an industry learning curve while BOS costs are more specific to location.

Solar LCOE is also sensitive to secondary inputs, such as module lifespan, opex, degradation, and IRR. A critical and ever-changing input of the system cost is the PV module which continues to be reduced as cumulative PV installations increase.

Solar is still early in the growth cycle but has already competed with average residential electricity prices in Germany, Australia, and the southwestern U.S. In 2013, solar was the second largest source of new generation capacity behind natural gas.

The future of solar continues to prove optimistic as costs continue to decline and LCOE improves.

Keys to driving down LCOE: Improve efficiencies, lower system costs, and extend life of assets.

The Growing Opportunity for U.S. Renewables

According to a recent Credit Suisse research report, there is great opportunity in the U.S. for renewables to gain more market share thanks to the noteworthy drop in wind and solar costs. This decrease could give renewables a chance to be more cost-competitive with conventional power generation sources.

As the economics of renewables is vastly improving, there is justification for the case for using more. Wind utilization rates have increased by 15 to 20 percentage points. New wind energy machines yield 50 to 55 percent utilization rates thanks to improvements in turbine design, taller towers, bigger blades, and better wind modeling. This higher utilization has led to dramatic drops in levelized costs.

Renewable energy graph comparisons

Solar capital costs have also continued to improve. Today’s utility scale PV tracker is about $2,000 per KW of capacity, down from $3,250 in 2010. Solar has also boasted lower levelized costs, from beginning at well over $100/MWh and lowering down to $65 to 80/MWh.

The Credit Suisse report purports that renewable standard compliance will put downward pressure on power prices in deregulated markets. It suggests that the risk to power markets will be rooted in slower market recovery as more renewable generation is added. This will lead to a step down in power prices – $1 to 2/MWh or about 5 percent relative to a scenario without significant renewables growth.

However, renewables can negatively impact the earnings outlook for competitive generators – particularly in PJM. Credit Suisse sees this resulting because of deterioration in future expected power prices, with the impact of a $1.50/MWH drop in PJM power prices.

Demand for natural gas will still grow, but at a slower rate than once believed. Credit Suisse estimates that annual gas demand growth from power will run at less than 0.5 bcf/d annually through 2020.

Lastly, a significant capex is required. Total direct investment in renewables using an 80/20 percent energy split between wind and solar would require $216 BN through 2025, assuming that, on average, wind and utility scale solar both cost $2,000/KW. Additionally, meaningful capex is expected for transmission investments, particularly associated with connecting new wind. Meanwhile, solar will require less, as utility scale projects shrink to the 20 to 50 MW size that can be built closer to customers than the mega farms built in the desert.