Can Renewable Energy Be Economically Viable for a Country as Large as The U.S.?

In the U.S., the lights burn brighter, and the demand for electricity has reached epic proportion. With major economic centers like New York, which is known as “the city that never sleeps” and Los Angeles, “known as the city of lights”, can the U.S. turn to renewal energy sources to keep up with the enormous demand, while not becoming a burden on our economic viability.

For years we have heard that renewable energy will have a hard time competing with fossil fuels as a source of generation due to the cost involved in producing it. However, according to Bloomberg New Energy Finance, since 2010, solar power prices, as well as wind-power prices are down 57%.

Wind energy costs an average of $29 a megawatt-hour to produce, while solar-power prices are coming in at $57 a megawatt-hour. The Department of Energy estimates that coal, and natural gas-fired power averaged roughly $35.07 a megawatt-hour in 2015.

That means that as of today, the cheapest form of power available anywhere in the United States is from wind generation, primarily that which is located in the Midwest. Solar energy that is produced in the Nevada desert is not far behind.

So How Will That Translate to Consumers Who are beholden to get their power from their local utility

In many states, customers do not have the luxury of choosing where their power comes from. That is reserved for the lucky few who are in deregulated energy markets. However, recent trends show that utilities are beginning to fall in line, and are beginning to incorporate more and more renewable strategies in their plans for the future.

Utilities have been forced to pay higher prices for wind and solar power because more states are mandating that a certain percentage of energy placed on their grid come from renewable sources. The EPA has mandated rulings as of last year that require power plants to cut carbon dioxide emissions by 32% from 2005 levels by 2030.

Despite the Supreme Court issuing a temporarily suspension to these regulations until they are able to resolve the multitude of lawsuits filed by more than 20 states with the goal of overturning these mandates, many utilities are planning to diversify their energy sources anyway.

The facts are, that clean energy is expensive to initially install, but once the build out is complete, they have almost no continuing expenses once the plant is up and running. This means that utilities can retire coal fired generation plants and replace them with renewable generation, which results in a lower cost to deliver electricity to their customers. The immediate effects of this are shown by the fact that while 12 gigawatts of coal power were retired, the United States followed up by installing roughly 16 gigawatts of clean energy generation units.

One megawatt of solar power can provide the electricity needed for about 164 average U.S. homes, while one megawatt of wind power can serve about 273 homes, according to industry organizations.

Wait A Minute…. Not So Fast

Now the whole process is not as simple as I have just explained. There is much more that goes into this massive shift in the way we produce, and ultimately deliver electricity to end users.

There will have to be an investment of billions of dollars into our flailing infrastructure to support these dramatic changes to our countries electric grid. There will have to be backup generation in the form of natural gas fired generation plants, along with batteries storage units like a massive version of Tesla’s “Powerwall” that will be needed at times when wind and solar are not readily available.

Our energy grid will also need more interconnected transmission to transfer power from other areas in the United States that have produced an excess power supply. The infrastructure will have to be equipped to handle the changing of directions in electric flows as more electricity is generated from consumer rooftop solar panels, as well as small scale wind farms.

Large Utility Conglomerates Are Leading the Charge

In anticipation of further regulations that will clamp down on carbon emissions, many of the larger U.S. utilities are taking advantage of the multitude of government subsidies that are provided to buy and produce more renewable energy.

Companies such as Duke Energy Corp., and Southern Co. are among the utilities that are leading the charge by investing in more sustainable options such as solar and wind.

Now let’s not start handing out humanitarian awards just yet. Duke, among others are simply being proactive based on the numerous renewable-energy mandates that are popping up in more than half of the U.S. states. This goes hand in hand with the expectation that there will continue to be more federal limits on greenhouse-gas emissions.

Now these utilities are still currently burning coal and natural gas which still provides the majority of the power they distribute. However, these power producers are making investments wind and solar farms, primarily because they know they can sell renewable energy to outside utilities at much higher prices than that of fossil fuel plants. With federal renewable-energy tax credits helping to subsidize the expense of building new wind or solar power facilities, this also helps these energy giants to offset corporate taxes.

Duke plans to nearly double its production and purchases of renewable power to 8,000 megawatts by 2020. Berkshire Hathaway’s energy unit (Yes Warren Buffett) plans to invest $2.1 billion in new wind and solar farms this year, with plans for another $2 billion in investments through 2020. Berkshire Hathaway Energy currently generates 28% of its power from wind and sun, and has no plans to invest in any new generation that isn’t renewable.

Can a Country as Large as The U.S. Really Move to Renewable Without Suffering Substantial Economic Strife?

I have previously written about countries like Costa Rica going 100 renewables for their countries energy demand. Although this was a major achievement, Costa Rica only uses about as much energy as New York City. One of the main arguments critics bring up is that a country the size of the U.S. would suffer greatly by turning their focus on renewable energy, as it would have a major impact on our economy. However, Germany is currently the fourth-largest economy on the planet. I bring up Germany because last week, the renewable power output in Germany climbed to 90 percent of the country’s total electricity demand. Although it was for a short period of time, it shows that a major country can indeed rely heavily on renewables successfully. It’s notable that, on solar, Germany is outpacing the United States, a country that has more than four times as many people. What’s more remarkable is that Germany sees about as much sunshine as Alaska.

Now Germany still has a way to go. Their infrastructure has not been properly built up to make such an enormous shift in such a short period of time. The gas power plants were taken offline over the period, but nuclear and coal plants are not able to cycle down as quickly, so they continued to run and actually had to pay to sell the national grid power for several hours.

Yes, you read that correctly. Because the power generated that day was so much, it forced electricity prices into a free fall for several hours, resulting in commercial customers actually being paid to consume electricity.

With Germany’s economic output exceeding that of any other country in Europe or, for that matter, any individual U.S. state, last week’s renewable output shows that wind and solar can keep pace with the demands of a country with a burgeoning economy. In fact, the growth of Germany’s clean energy has mirrored the growth of the country’s overall economy.

The map below, provided by the International Energy Information Agency, shows where Germany ranks versus the U.S. in solar resources.

(Map Courtesy of the International Energy Information Agency)

It is also not the first time such an incident has occurred – in July 2015, unusually high winds in Denmark aided Danish wind farms to generate a historic 140% of all power being consumed in the country. Unlike Germany, Denmark’s national electricity grid featured the interconnectors necessary, to share 80% of the excess power with its neighboring countries of Norway, Germany and Sweden.

So What Does This Mean to The U.S. Push Towards Renewables?

This shows that renewable energy could one day replace traditional power suppliers. This points to the fact that a path to reduce greenhouse gas emissions is possible.

So while pundits argue about the economic impact renewable energy will have on our overall economy, siting the vast amounts of capital that must be spent to build out renewable generation, as well as improve our antiquated transmission system, there are success stories popping up around the globe.

With technology continuing to propel us towards cheaper means to produce renewable energy, our country need only to remain steadfast on the commitment to continue down the path towards a sustainable future.

We project ourselves as the trailblazers of the world in so many areas. We have the technology and resources to be pioneers in the push for renewable energy alternatives. We simply need to stay vigilant to the cause. This will not only become a cleaner, more earth friendly way to produce energy, but now…..a cheaper one.

To find out more information on renewable options in your area, please visit us at naea.wpengine.com.

Call us today at: 1-888-407-3152

Matt Helland
SVP Customer Relations
North American Energy Advisory

Sources:
http://www.thestreet.com/
http://thinkprogress.org/
http://www.ibtimes.co.uk/