COST AND NEW ENERGY

Cost of Green Power Makes Projects Tougher Sell
Matthew L.Wald and Tom Zeller Jr., November 7, 2010 (NY Times)

"…Even as many politicians, environmentalists and consumers want renewable energy and reduced dependence on fossil fuels, a growing number of projects are being canceled or delayed [in states including Florida, Idaho and Kentucky as well as Virginia] because governments are unwilling to add even small amounts to consumers’ electricity bills…By the end of the third quarter, year-to-date installations of new wind power dropped 72 percent from 2009 levels…

"…[New Energy advocates say] the focus on short-term costs short-sighted…Prices for fossil fuels have dropped [significantly below prices for wind and solar] in part because the recession has reduced demand. In the case of natural gas, newer drilling techniques have opened the possibility of vast new supplies for years to come…The gap in price can pit regulators, who see their job as protecting consumers from unreasonable rates, against renewable energy developers and utility companies, many of which are willing to pay higher prices now to ensure a broader energy portfolio in the future."

Cost for the New and Old energies will become progressively competitive. (click to enlarge)

"In April, for example, the state public utilities commission in Rhode Island rejected a power-purchase deal for an offshore wind project that would have cost 24.4 cents a kilowatt-hour. The utility now pays about 9.5 cents a kilowatt hour for electricity from fossil fuels…The state legislature responded by passing a bill allowing the regulators to consider factors other than price. The commission then approved an agreement to buy electricity from a smaller wind farm, although that decision is being challenged in the courts…Kentucky Power argued that [a contract to buy wind power in Illinois] would benefit customers [in the long run]…[but Kentucky commissioners agreed with] attorney general, Jack Conway, joined by business and industrial electricity users, [who] opposed the deal, contending that it would have increased a typical residential customer’s rates by about 0.7 percent…

"Companies that make solar cells and wind machines argue that a national energy policy is needed to guarantee them a market that will allow their industry to develop. Clean power will be an important industry globally for years, they say, and if the United States does not subsidize renewable energy now, it risks falling far behind other countries…They point to China…Ernst & Young [just, for the first time,] identified China as the most attractive market for investment in renewable energy…[in part due to] the failure of American lawmakers to pass a national renewable energy standard and the looming expiration of a Treasury program that allowed renewable developers to receive cash grants in lieu of tax credits."

The International Energy Agency says renewables can take over BUT ONLY IF...(click to enlarge)

"…To be sure, a lot of renewable power development is still going forward. The American Wind Energy Association estimates that wind farms capable of producing 6,300 megawatts of wind power are under construction, and that a busy second half of 2010 would leave installations about 50 percent behind last year. Solar power is becoming less expensive, and its use is expanding rapidly. But it still accounts for less than 1 percent of the nation’s electricity needs, providing enough to serve about 350,000 homes.

"Renewable energy supporters argue that higher fossil fuel prices will eventually make renewable energy more competitive — and at times over the last two decades, when the price for natural gas has spiked, wind power in particular has been a relative bargain. Advocates also argue that while the costs might be higher now, as the technology matures and supply chains and manufacturing bases take root, clean sources of power will become more attractive…Fold in the higher costs of extracting and burning fossil fuels on human health, the climate and the environment, many advocates argue, and renewable technologies like wind power are already cheaper…"