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Plunging costs make solar, wind and battery storage cheaper than coal

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The plunging cost of storage, along with that of wind and solar power, appears to have crossed a new threshold after a tender conducted by a major US energy utility suggests “firm and dispatchable” renewables are now cheaper than existing coal plants.

The stunning revelation came from Xcel Energy in Colorado, and quietly released over the Christmas/New Year break, although some outlets like Vox and Carbon Tracker were quick to pick up on the significance.

Last year, XCel Energy put out a “request for proposals” (RFP) for how it could replace two coal-fired generators that it is considering shutting down – part of a plan that will take its share of renewables to more than 50 per cent.

The results were described by Vox’s David Roberts as “mind-blowing”. And he’s not wrong.

The median bid price for projects proposing a mix of wind plus battery storage was just $US21/MWh ($A25.80/MWh), while the median price for solar plus battery storage projects was just $US36/MWh ($A44.30/MWh).

(The graph above comes from the XCel documents. The areas blacked out were done by the utility for reasons of commercial in confidence).

And these prices do not represent just a few one-off, left field offers. All told, there were more than 100 bids combining wind and solar, or both, with battery storage, and 20 gigawatts of such capacity.

The “median” means that half the bids were cheaper than the median price cited above.

According to Carbon Tracker, these are the lowest renewables plus battery storage bids in the US to date, and most likely anywhere in the world.

“The median bid for wind plus storage appears to be lower than the operating cost of all coal plants currently in Colorado, while the median solar plus storage bid could be lower than 74 per cent of operating coal capacity,” it noted in a report earlier this month.

(See graph below. This shows that the operating cost of the cheapest coal plants in Colorado is just below $US40/MWh, rising to more than $40/MWh and then soaring beyond $100/MWh for the most expensive units)

The significance of the tender result is the small additional cost of storage – between $US3 and $US7/MWh. This is less than half the $US15/MWh priced in the previous lowest bid – $US45/MWh for solar and storage in a bid accepted by Tucson Energy easier last year.

The cost of wind without storage was $18/MWh, while the cost of solar without storage was $29/MWh – both prices benefit from federal tax incentives, and would likely be around $US25/MWh and $US40/MWh without them.

The significance for Australia is enormous. The battery storage sector has only just commenced, but the potential is clearly huge.

The success of the Tesla big battery in South Australia since its launch in early December has created great interest, and caused many to think how the operations of the electricity grid may be completely rethought and redesigned.

The Tesla big battery will be joined by numerous other battery storage installations in a relatively short time – smaller battery arrays in Alice Springs and near Cooktown in Queensland are due to come on soon, as will another battery at the Wattle Point wind farm in South Australia.

This will be followed by three new battery storage arrays in Victoria, another in the Northern Territory, at least two more in South Australia (Lincoln Gap and Whyalla) and numerous other potential projects in Queensland and NSW.

It was interesting that Franck Woitiez, the head of Neoen Australia which operates the Tesla big battery adjacent to its Hornsdale wind farm, last week spoke of the huge pipeline of solar projects in NSW – more than 2,000MW – that could readily adopt battery storage.

Woitiez noted how quickly the 150MW Coleambally solar project in western NSW will be delivered – less than two years after the project was first conceived – and said large scale solar and storage could be delivered in half the time, and at a much lower cost, than the massive Snowy 2.0 pumped hydro scheme.

The US tender bears that out. Wind, solar and storage costs in the US tend to be cheaper than in Australia, partly due to the lower cost of finance, the lower cost of labour, and the depth of the industry there.

The Xcel tender results are just part of story that illustrates the plunging cost of wind, solar, and battery storage. Bids of below $US20/MWh for solar projects have now been delivered in both Saudi Arabia and Mexico, and storage is matching predictions that its cost profile will be similar to solar.

The Xcel tender elicited bids for stand alone battery storage with a media price of $US11/MWh, with storage ranging from

As Vox’s Roberts notes, a company called ViZn Energy Systems, which uses flow batteries rather than lithium-ion, is promising $US27/MWh solar+storage by 2023.

That is lower than many predictions for solar alone. When the Tucson bid results were announced, it was considered to be a death knell for the market for new gas plants.

As Danny Kennedy, formerly on Sungevity and now head of the California Clean Energy Fund, has noted, both GE and Siemens have taken an axe to their once enormous gas generation units because of the massive slump in orders because renewables and storage are beating out gas plant in tenders.

Now that the cost of wind or solar plus storage is beating out existing coal, that takes the market transition to a whole new dimension.

  

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  • George Michaelson

    Great headline. Maybe it’s me, but the way the story is told here is confusing as hell.

    Firstly you don’t actually cite the cost of coal per unit, to compare to. You just say “look at these super low bids” which are below coal. but, I think you should show the headline coal cost, which is being compared to, as a citeable link. Is it coal? coal plus mitigation? old coal? new build coal? You refer to a cost basis 74% higher by a cite to a graph, but I think you need a tabular reference to the cost of coal for the comparison.

    Secondly, the eye is drawn in both your and vox’s blacked out columns. Whats the mystery underneath these items? Irrelevant or NDA?

    • Mike Shackleton

      Read the article – commercial in confidence.

      • George Michaelson

        missed that. so .. noting I fixed that.. what about the other point?

        • nakedChimp

          the blacked out parts attracted low number of bids, thus one could reverse engineer which company did bid under that tech. For reasons unknown they don’t want the audience to be able to do that..

          • GregS

            n/m

    • Daniel K

      Turns out the black “redacted” info is very easy to access when you have the original PDF. Check out US-based tech site ArsTechnica’s article and refer to the first comment at the bottom.

      https://arstechnica.com/information-technology/2018/01/colorado-could-get-some-of-the-cheapest-wind-and-solar-in-the-us-with-caveats/

  • john

    With these prices going lower month by month it must be getting hard for the RWRNJ’s to keep saying that FF’s will always be the cheapest.
    Undoubtedly storage is the issue.
    Snowy 2 just may be the means to build a whole range of Solar and Wind with backup smoothing by both battery and Snowy 2

    • Jon

      I agree John
      Chemical battery storage and pumped hydro compliment each other rather than compete.

    • Joe

      The right winger nutcases like the Kelly and the Abbott will keep saying FF is always cheaper than RE. The Kelly is still banging on about EV’s being ‘dirtier’ than ICE vehicles. The right winger nutcases, they just lie and know that Rupert’s rags will print the lies and the punters in voter land just go along with with a second thought.

      • Hettie

        Hi, Joe.
        Remember that the RWNJS are virtually all double R, religious.
        Their operating manual was written 5,000 to 2,000 years ago. So they have no problems with the notion that in a rapidly changing world, stats from several years ago should still be current. Sorry, relevant. It was unintentional, but too good to edit out.
        Anyway, if old figures, long since superceded, suit their luddite purpose, those are the figures they will quote.

        • Joe

          Young Hettie, i love your work in these very fine pages of RE. You are spot on again.

          • Hettie

            Heh heh.

      • MaxG

        Yes, the world we are living in… supported by the majority of Australians… even if the next election means a change; there will be still close to 50% supporting these nutters.

    • Hettie

      Snowy 2 will push prices UP, not down. It’s a classic Turnbull brainfart.
      Ridiculous to drill through tat volume of super hard rock.
      By the time it is ready for commissioning, so many little PHES systems in old clapped out mines will be up and running that no one will want to use Snowy 2.
      It’s too far away from major usage centres. Too everything.
      Lots of little installations, widely distributed, associated with combined wind and solar installations, and set up to cover the supply gaps of those systems. What could be more elegant?.

  • Clinton Neal

    The energy sector is undergoing a major revolution. If we look 100 years into the future it’s highly likely the grid will be 100% renewable but I’m still not sure the grid is sustainable. Any time costs could go down I’m sure the governments are spending on poles and wires instead. So that even when we do achieve a 100% renewable grid it still won’t be free because all the costs will be shifted from generation to poles & wires etc. As demand increases poles and wires will just continue increasing. The tipping point for consumers is the rate of disconnection which has been sky rocketing. A bigger and bigger grid is not sustainable nor cheap. As batteries get cheaper (lithium-ion) people are just going to cancel their meter and buy batteries. Over 500,000 homes in Queensland already have panels on the roof they last over 25 years lifespan. Within a decade I can see the cost of power on the grid becoming unsustainable. It’s a ponzi scheme at this point. Blackouts or wars will only increase the rate at which people install batteries.

    • Chris Fraser

      Australia has a slight disadvantage in that its grid is too “thin”. Meaning that despite being sparsely populated, the grid at one time tried to connect everybody. This design goal doesn’t provide grid value.

      Newer technologies are enabling those with enough square metres to provide some, or all, of their own energy. We have to convince governments that recent grid investments are the thing that’s not sustainable.

      The grid may not support spending like we have seen, but it will stabilise, and in some areas it may even retract. It will retract because the normal network provider is in some cases choosing alternative energy supplies and micro grids rather than connection to a national grid. The grid is likely not to collapse, but be repurposed more for industrial consumers and those in densely populated areas. Provided we don’t vote in bull-headed governments with adverse grid ideas, it should occur organically.

    • Marcus Whitley

      I think you find that we will start moving away from large country scale grids, and start looking towards more City/ Urban Centre sized systems. Which will be far more maintainable in the long run.

      It definitely costs alot more to get electricity per kWh to places on the fringe of the grid than it does to someone in the middle of Newcastle. The difference in price is subsidies by everyone paying an average amount.

      As the amount of distributed generation increases we can start removing these high network charges and prices should come down significantly.

    • solarguy

      Where is your evidence for sky rocketing disconnections from the grid old son?

      • Clinton Neal

        It’s not so much for me to provide evidence for what I’m saying, on the Internet the burden is more on yourself as someone who doesn’t believe me to look it up. There’s multiple news reports citing very high disconnection rates NSW, WA and increasing virtually every state. – Is it really that hard to believe when prices went up 40% in one year in some places?

        • Greg Hudson

          My retailer (Red Energy / Snowy Hydro) bumped my power by 19.3% Jan 2017. They have outdone themselves this year (Jan 2018) with a 25.34% increase (now paying 30c/kWh). I’m moving to a new house in a couple of months, so it’s not worth the hassle to change providers at the moment. For my new property, I’ve just signed with Alinta, who is offering me 18.4c/kWh + GST. Red can get stuffed. Greed gets you nowhere Mr Red…

        • solarguy

          High disconnection rates due to the fact the punters have such high bills that can’t afford to pay them. Not because they have the funds to buy batteries.

  • DJR96

    Note that NONE of the bids were for coal. There simply won’t be any new coal-fired generation built ever again.

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        • sunburnt

          fiat 500 is way nicer. i want an electric one, but i’m too tall.

  • Albery Moray

    what is a kW-mo? http://www.usourceenergy.com/energy-market-info/resources/energy-terms-explained/ says it is a “Capacity Charge” expressed in $/kW-month but what exactly does that mean?

    • Steve_Ohr

      Standby power, paid by the month to be ready when needed.

  • Brunel

    We should have subsidised large scale solar instead of rooftop solar. Why subsidise a more expensive solution!

    • Chris Fraser

      We have subsidised them , with LGCs.

      • Brunel

        Instead of

    • Barri Mundee

      Why couldn’t we have subsidised both? We seem to have money for military spending and no talk of budget issues.

      • Brunel

        Because ground-based solar is cheaper.

        • Mike Dill

          Solar can fit on your roof, and will not normally fall down. A wind turbine needs an acre. Different animals.

          • Brunel

            Fuel cells can fit in houses too and avoid transmission losses but were never subsidised for home use.

          • vielepunkte

            rooftop solar can make you energy independent

    • itdoesntaddup

      If you want cheap power, it needs to be unsubsidised. Subsidy is deluding yourself.

      • Ken Fabian

        As long as the amnesty on climate and other externalised costs of fossil fuels continues, they enjoy the biggest subsidy of all.

        The subsidies, like most of the costs on wind and solar, are mostly up front. The subsidies on fossil fuels are mostly hidden, being added quietly onto the credit card, on one of those no payments down till year X type deals. The sort where interest accumulates and compounds whilst you aren’t paying attention. Defaulting? There is no defaulting in this; if we don’t pay then the kids and grandkids – tens of generations of grandkids – will bear a burden of costs that no clever accounting, not even with shell companies in tax havens, can make go away.

        When the Big Fossil Fuel subsidy ends, then come back and talk about subsidies on Renewable Energy and I might listen.

        • itdoesntaddup

          You’re handwaving about unquantifiable future externalities without even conceding that mitigation for any that do occur is likely to be a far superior solution.

          • Ken Fabian

            Sure, mitigation – prevention – is a far superior solution but I think you are actually talking about adaptation, ie when something bad results, we fix something, but maybe not the underlying cause. eg when we get more heatwaves from global warming, we encourage the installation of air conditioners and further delay the ending that amnesty on fossil fuel externalities to continue subsidising the cost of running them and not concern ourselves with the “unquantifiable” – but still predictable and accumulating – burden of costs of that choice.

            I would rather we subsidise PV that is used in conjunction with air conditioners and encourage running them on a timer from mid morning to mid afternoon. If my PV is any guide it will run that air con the whole time and still export enough excess power to run another one or even two air conditioners used by my neighbours.

            When those externalised costs are taken seriously, then we will get the transition to low emissions that our understanding of climate consequences of emissions demands of us – sooner and more efficiently.

          • TheCalifornian

            Yes, mitigation, in the form of building efficient and affordable renewable energy production, is a very good strategy.

          • Ralph Buttigieg

            I tend to agree with you but remember in NSW anyway, the big subsidy was the high feed in tariffs which are gone. The installation subsidy is being phased out too.

      • daw

        I’m with you 100% ítdoesntaddup

    • nakedChimp

      Big industry/money wasn’t interested and wanted to run BAU.
      Individuals on the other hand didn’t.
      Now that most of the heavy lifting has been done (by individuals), the BAU people come around.
      It wouldn’t have worked the other way around.
      Claiming otherwise is idiotic.

      And this all is also a clear sign of monopolistic/oligopolistic structures, which do withstand change for as long as possible.
      Any free market would have changed to the cheaper option ages ago.

      • Brunel

        I was too poor to afford solar panels in 2008 – nor did I know how long solar panels last. Look at the worth of taxi licences – they have crashed in price. So how was anyone to know that feed in tariffs will not suffer the same fate?

        Solar panels were installed on the roof of Queen Victoria Market, Vic in 2003 or earlier.

        Solar panels could have been installed at military bases, schools, universities, and remote communities that burn diesel for electricity.

        It was unfair to get poor voters to subsidise solar panels on mansions.

        “It wouldn’t have worked the other way around.
        Claiming otherwise is idiotic.”

        I am not sure that India, Chile, Dubai subsidised rooftop solar – they certainly had solar power auctions and the market decided where the panels will be installed.

        Ground-based solar has tracking while rooftop solar does not.

  • itdoesntaddup

    I’d have to guess that the battery storage is pretty limited in these projects. You also have to ask what its purpose is. What we have seen so far from the HPR is average power delivery of about 4MW on a 100MW facility next to a wind farm that produces on average about 120MW, but whose output peaks at over 300MW, but drops to being even a drain on the grid. The battery operation seems pretty much detached from the output of the wind farm.

    I seriously doubt that these batteries turn the wind farms into dispatchable generation. They may be more about increasing the fault ride through capability of wind farms in renewables dominated areas of the grid, but even that is not clear.

    • ja_1410

      Battery is not an energy producing source. It is a storage device of energy produced by other means. Equally well you could build hydro storage – technology used for decades where electric pumps move water from lower lake to upper lake during low demand hours and get that energy back to the grid by allowing water to flow down during peak demand hours. Mixing “battery” only clouds the comparison of costs, not helps it.

      • itdoesntaddup

        Storage consumes energy, but it can help to provide it when needed. Nevertheless, you have to wonder what the idea of these small scale batteries really is. Gee, whiz! factor I guess.

        • Steve159

          I guess you missed the bit about the Tesla battery earning a lazy million over a couple of days in January.

          At that rate it’ll have paid back the investment in a few short years, and thereafter prove to be a nice little earner.

          If nothing else it’s a sound commercial investment, irrespective of your opinions as to whether it is useful or not.

          • itdoesntaddup

            One swallow doesn’t make a summer. I’ve been analysing the value of the battery’s discharging and cost of charging and own use going back to November. That includes the period with $14,200 prices, without which its earnings for purchase and resale of power can only be described as paltry. Besides, it didn’t make $1m – at least not from charging and discharging.

            Cash generation
            30/11-7/12/17… $4,597
            8/12-15/12/17…$12,393
            16/12-30/12/17….$25,634
            31/12/17-14/1/18…$60,685
            15/1-21/1/18…$722,647

            How many times a year do you think they will get the chance to gouge on that sort of scale? It’s very much an open question as to how commercial it turns out to be.

          • remoteone

            Thanks for your figures, they really show the earning capacity of the battery system! A total of just over $800k in under two months ‘work’. And we know that the real energy disasters are in February and March. I wouldn’t mind that kind of income!

          • itdoesntaddup

            The point is that the overall number is very dependent on one short period. Outside the summer risk period, the earnings are not going to be very spectacular for a $100m asset that is depreciating at say $8m a year being generous with assumptions about battery life.

          • remoteone

            Yes, it’s a pretty brave investment. I wonder if the economics of it will shift should the market rules shift to one second contracts? To my mind, there will forever be transients across the network and there’s money to be made being the first in on a recovery.

          • itdoesntaddup

            It is always easy to make a “brave” investment when you can simply require taxpayers to fund it, particularly if it proves not to be successful. if it works, there’s probably a nice sinecure as a board director waiting on retirement from politics.

          • daw

            on an $50m investment thats 1.6% so far

  • GregS

    Another site (maybe Ars) had managed to remove the redacted portions. I’ll see if I can dig it up