More than half of electricity generation capacity added to the US grid in 2016 came from renewable resources (Cusick). The growth of solar, wind, hydroelectric, and other renewable energies are all on pace to overcome coal and gas on the usage and the overall cost is going down. This paper will examine the current costs of renewable energies including solar and wind to show how they will cost less than fossil fuels in the near future.
Executive Summary
Renewable energy is becoming a more popular form of energy to be used in the US. Some of the popular forms of energy include solar power, wind power, and hydroelectric power. All three of these have been decreasing in costs in a big way from different things including the increase in technology of all of these renewables to further the advancement of using other sources.
Overall diving into the costs of all three of these renewables can be a tricky process. The main thing is to look at the dollars per kilowatt per hour. This is a big indicator on the cost of different forms to look at how much energy can be produced at a certain price. The cost of all three have dropped in a big way to offer more options for consumers to where they are getting their energy from. The cost of solar is probably one of the most important differentiators in what is going to make the difference in cheaper energy. Solar is the biggest energy in convincing residential users to switch over to using the renewable.
When looking at solar energy, wind energy, and hydroelectric power. All three have a lot of savings associated with using them. The biggest thing to look at is the long term effects with using all three. A lot of the use is in the commercial sector, but this energy is then distributed through to a lot of residential communities to supply homes.
The future is looking bright for renewable energies and with the cost of all three of the main uses going down, that makes a big difference in whether or not more and more people will use renewable energy. We will see with the new president’s administration in place where the US will go, but the future looks bright for the world to develop and use more and more renewables.
Introduction and background
One of the biggest energy related issues in the renewable energy ecosystem is the cost of installation and usage of solar and wind renewables. The installation of solar panels, wind turbine, and hydroelectric dam systems is a big reason why some governments, businesses, and residents won’t make the switch to using a more renewable option and save a lot of money. The good thing is that the costs of these are coming down because technology is advancing in a crucial way. There are a lot of factors that go into the overall costs of using renewable energy.
The overall growth renewable energy has been skyrocketing over the past decades. According to the U.S. Energy Information Administration, in 2016, more than half of the roughly 24,000 megawatts of electricity generation capacity added to the United States grid came from renewable resources (Cusick). In 2015, renewable energy in the United States accounted for 13.44 percent of the domestically produced electricity and 11.1 percent of total generation. The largest producer of renewable power in the US is hydroelectric power at 6.14 percent of the nation’s renewable power. The United States is growing to become one of the largest producer’s in the world for renewable energy and is currently ranked number 2 behind China (US Energy Information Administration).
When looking into the overall costs of all of the renewables, currently fossil-based and nuclear does cost less because of large investments of technology required for renewable energies. Economists often used a levelized energy cost (LEC) when comparing different technologies, it represents cost to build and operate power plants over the life divided by equal payments. This number is then amortized over expected annual electricity generation. Renewables are going to advance, but low cost is crucial to the economy. The issue is how can these be so low in cost that they can replace non-renewables. That is the question and issue that will be discussed.
Discussion of the Issue
The use of solar, wind, and hydroelectric energy have been dropping in price ever since they have been invented and implemented. Renewable energy usage is an issue within the Finance sector because of the overall costs associated with each of the renewables. According the to the US EIA (Energy Information Administration) solar PV costs $0.125 $/kW-hr, solar thermal costs $0.24 $/kW-hr, hydroelectric costs $0.08 $/kW-hr, wind costs $0.07-0.20 $/kW-hr. These costs compare to coal, which is the leader of energy use costs $0.095-0.15 $/kW-hr. Overall currently overall costs of renewable energy are generally higher than fossil based energy and other sources of energy.
One of the current renewable energies that has been dropping in price in a significant way is solar. Solar prices are down 62 percent since 2009 because of the supply chain trimming costs and cut risk premiums on bank loans from the pushed manufacturing capacity to record levels (Martin and Shankleman). By 2025, solar may potentially be cheaper than coal on average globally. The key reason for this is the technology boost by using diamond-wire saws to cut wafers to better cells that provide more spark from same sunlight amounts. Jenny Chase of New Energy Finance explained that the average 1 megawatt will cost 73 cents by 2025 compared to $1.14 now, which is a 36% drop. The use of solar differs in many countries though, Europe and Brazil import coal will see crossovers compared to India and China that have large coal reserves will take longer so it takes time (Martin and Shankleman).
Solar has been one of the most important uses of energy when it comes to usage and growth. There has been a lot of mass solar panel areas being used also with solar having multiple ways to use the sun with different technology including photovoltaics (PV) and indirectly concentrated solar power. After taking a deep dive into solar power I found out a lot of interesting facts around solar panel installations. According to Energy Sage, homeowners are paying between $2.87 and $3.85 per watt for the installation of solar panels, the total comes out to $16,800 on average. These figures are 9 percent lower than it was a year ago. One of the biggest draws to purchasing solar is the tax credits that are received to save money because the investment in clean energy roughly a 5kW system would cost $11,760 after tax credits, which reduces the solar system cost by 30 percent (Energy Sage).
The factors that go into the cost of solar panel installation include the equipment, permits and labor, and characteristics of your home. The main portion is the equipment cost with more efficient solar being at a higher price tag. Another is the permits and labor that go along with a fee to get solar connect to the grid and the labor to get all the equipment originally installed. Another factor is the characteristics of the home, which can be a huge factor to whether or not it is a good idea to get solar panels installed. Solar can save homeowners a lot of money, it is a long term savings investment. All of these numbers depend where people live. For example, homeowners in Boston save $38,000 on average, Los Angeles is $22,000 on average, and Portland is $43,000 of savings over 20 years of having solar power.
Another important renewable energy sector that is going down in price is wind energy. According to the American Wind Energy Association (AWEA), over the past six years the cost of wind-generated electricity in the US has dropped by 66%. Similar to solar, wind power is cheaper because of Americans ingenuity and manufacturing. The growth of wind energy has also created a lot of jobs; they have passed 1 million jobs in the wind industry across the globe (Hill). The growth also has spiked the US economy to boost in $110 billion just from the wind industry alone. A factor that drives down the cost of wind is the sharper learning curve that comes along with the rapid growth of the wind energy market, this also includes economies of scale and supply chain improvements (Casey).
When looking at wind energy it is important to look into the cost of what it is used for. Wind energy typically isn’t a residential use like solar is. Wind energy is on a larger commercial scale and then used by companies to provide energy to power different commercial or residential areas. According to Leanna Garfield of Business Insider, Iowa approved the largest wind energy project in US history called Wind XI. The cost is a $3.6 billion project that includes 1,000 turbines that will be completed by 2019. The wind farm will generate around 2,000 MW of electricity, enough to power 800,000 homes in the state (Garfield).
The last renewable energy that has been saving money is hydroelectric power. Hydropower is the most efficient way to generate electricity. The average modern hydro turbines convert around 90% of available energy into electricity (Wisconsin Valley Improvement Company). The US alone has an average of 0.85 cents per kilowatt-hour (kwh). The issue is the cost of installing hydropower sites, the US has only contributed $10 million on hydropower. Hydropower is the leading source of renewable energy with 97% of all electricity by renewable sources.
Future Predictions
After examining all of the technologies and the cost of each associated with solar, wind, and hydroelectric, there is still a lot of research and development needed in order to make the cost low enough to compete with coal and natural gas. One of the hopes for renewable energy to take off is the fossil fuel energy to go up. In my opinion, fossil fuels will not be as welcomed in the years to come and we will need to turn to renewables because of global warming being on the rise.
The overall cost of solar, wind, hydroelectric and other renewables will keep going down in cost. Wind energy is a good example of this, according to Berkeley Lab press release, wind energy is anticipated to take 24 to 30 percent reductions in levelized cost of energy by 2030 and 35 to 41 percent reductions by 2050 across the tree wind applications studied.
One of the biggest things that has effected the overall use of renewables is Donald Trump’s new policies set in place and certain comments being made about what is being done to renewables. These could be detrimental to the effect of what can happen to the funding. According to Justin Worland of Time Magazine, he speculated that a former top aide of President Trump speculated that the administration is planning to cut research funding for wind and solar power to redirect money to fossil fuels. The Department of Energy currently spends billions of dollars on research each year. In 2016, they spent $2 billion on renewable energy, $1 billion on nuclear and $600 million on fossil energy. My opinion is that renewables should be the focus because they are important to the future of where we get our energy from. Fossil fuels are a very important energy because that is where we get most of energy from, but we need to keep developing more effective ways to increase our environment and gain a larger energy capacity as well.
In conclusion, I learned a lot about the different cost of solar, wind, and hydroelectric power and what is currently in place for all three of these to be successful in the future. I hope one day we can see renewables take over coal to become the number one in energy use, but for now the best thing to do is keep researching.
Bibliography
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