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How Renewable Energy Sources Can Compete with Fossil Fuels

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Renewable energy was once at a disadvantage against fossil fuels since it was held back by high prices. However, innovation has reduced the cost of renewable technologies, and they can now deliver electricity at a lower price than coal power plants. Fossil fuels still have the advantage of producing electricity on demand, while many renewable generation systems depend on variable inputs like sunshine and wind. However, energy storage may soon eliminate this issue.

Electricity Prices Achieved by Solar and Wind Farms

Most solar and wind farms can now achieve electricity prices below $0.06 per kilowatt-hour, and some projects have even achieved costs below $0.02/kWh. This is cheaper than coal power, the fossil fuel with the lowest generation cost, which rarely goes below $0.04/kWh.

When comparing the kilowatt-hour price of renewable sources and coal, the comparison is often unfair for clean power. Electricity prices from solar and wind farms normally include financing costs, since many of these projects are new. On the other hand, most coal power plants are decades old and their financing costs were recovered long ago. When a financial analysis is carried out for a new coal power plant, the electricity cost is much higher.

Also, read Grid Issues and Storage Concerns Plague Growth of the Indian Solar Market

nuclear power plant

Compared with fossil fuel power plants, clean generation systems are also exposed to less external risks:

  • Solar farms and wind turbines use energy inputs that are delivered for free, while fossil fuels must be extracted, processed and shipped.
  • The price and availability of fossil fuels may change depending on economic and geopolitical factors, while wind and sunshine are guaranteed to be available.

Using renewable energy can also bring a marketing advantage for corporations. A company that uses clean power can improve its corporate image, and clients who share their values are more likely to conduct business with them. On the other hand, a company that relies heavily on coal and other fossil fuels may be portrayed negatively by the media.

The Potential of Energy Storage in the Clean Power Industry

Renewable generation systems can now beat the kilowatt-hour price achieved by fossil fuels, but there is still one obstacle to overcome. Fossil fuels can be stored to produce electricity at any time, while most clean power sources rely on variable energy input.

  • Neither sunlight nor wind can be controlled, which causes solar panels and wind turbines to have a variable electricity output.
  • Hydroelectric power plants can store water to produce electricity at any time, just like conventional power plants can store fuel. However, hydropower is very demanding in terms of site conditions, and the environmental impact during construction is significant.

Energy storage is one of the most promising upgrades for solar and wind farms since it allows electric power delivery on demand. Lithium-ion batteries show potential since they have two of the attributes that have made solar power successful: a modular design that fits any project scale, and adaptability for a wide range of site conditions.

A 315-megawatt wind farm in South Australia was equipped with a large-scale battery, which has been operating since December 2017. The energy storage capacity is 129,000 kWh, and the rated power output is 100 MW. The project had a cost of around $66 million, and it saved around $28 million during its first year of operation.

Energy storage systems can also allow the development of “virtual power plants”. Instead of using the centralized design of conventional power plants, a virtual power plant combines the capacity of many smaller systems in homes and businesses. A smart platform monitors and manages all the connected energy systems, allowing them to operate as a single power plant.

This article is contributed by Michael Tobias, who is the founder and principal of Chicago Engineers, an Inc 5000 fastest growing company in America. He leads a team of 30+ engineers from the company headquarters in New York City; and has led over 1,000 projects in Chicago, New York, New Jersey, Pennsylvania, Connecticut, Florida, Maryland, and California, as well as Singapore and Malaysia.



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