Utilities Debate the Already High Cost of Renewable Energy

Without a doubt, renewable energy is the future.
It’s cleaner, more sustainable, and can create thousands of job opportunities compared to fossil fuel.
However, despite the many benefits renewable energy offers, the battle of energy is heating up.
Utilities are complaining about the high cost of generating power from wind and solar and want to charge customers more for these types of power sources, while environmentalists say that renewable energy is much cheaper in the long run.
So why is renewable energy more expensive?
Well, that’s exactly what we will cover in this article.
In this article, we will go through some of the key factors that contribute to the high cost of renewable energy.
So without further ado, let’s jump right into the first one.

1. Capital
While renewable energy will be cheaper in the long run, building a renewable power station isn’t particularly cheap. In fact, it costs $0.812 per watt to construct a natural gas power plant while it costs around $1.75 and $1.03 per watt for wind and solar farms construction respectively.
 

 

Many argue that renewable generators require no fuel, which makes them actually cheaper to run and maintain compared to fossil power plants that around 40-70% of their total cost is for operation and maintenance.

However, the problem with constructing solar or wind farms is that almost 75% of the cost has to be paid upfront, which makes them very vulnerable to changes in the cost of capital and harder to invest.

Overall, what all investors look for is the best ROI in the shortest period of time, and with the amount of upfront capital required, it becomes harder to attract new investors.

2. Land
Renewable energy plants require a huge amount of land to create very little energy.

Coal and gas-fired power plants, on the other hand, need very little space, especially when compared to the unbelievable amount of land required to build renewable generators.

For instance, to build a 1-megawatt solar farm, you need around 7.5 acres of land and for the same capacity wind farm, you need about 85.25 acres!

Yes, you can argue that the windmills themselves only take a small part of the total land and you can use the rest to grow plants and most solar farms are built in deserts, where there are huge amounts of uninhabited lands.

However, because of the amount of land required, you must locate your renewable generators away from the population centers, which brings us to the third reason for the high cost of renewable energy, transmission.
 

3. Transmission
To build a solar farm or a windmill, you need a large area of land that gets a lot of sun/wind.

The best sites are often not close to cities where users locate, thus, more transmission is required to connect those power plants to the grid.

Further, the grid needs to be upgraded, old lines need to be maintained and modernized to handle the renewable capacity, in addition to building new step up and step down transformers.
 

4. Reliability
One of the biggest drawbacks of renewable power plants is that they only produce power intermittently.

Utilities need power when the sun isn’t shining and/or the wind isn’t blowing, which means they require a backup ramping source of energy to meet the demand and maintain stable voltage and frequency.

These backup generators are typically natural gas-fired plants because these facilities can quickly be turned on or off in response
to fluctuating supply and demand for electricity.

This doesn’t only add an extra cost for maintaining the traditional power stations, but also the energy from these stations becomes more expensive, as they don’t run at full blast.

One solution to this problem is investing in battery storage systems.
However, although innovation in storage has begun popping up recently, the battery technology is still in its infancy and won’t be able to provide a grid strength supply.

5. Experience
Another important factor that contributed to the high cost of renewable energy is experience.

The renewable market is still relatively new and has a limited number of companies that can facilitate the building, installation, and maintenance of large-scale renewable energy plants.

Further, renewable projects need a lot of equipment and material.

For instance, to construct a solar farm you need hundreds of thousands of solar panels, which can be held down by the supply chain.

Some argue that all the countries should be more like Germany where they have nearly half of their power generation from renewables.

However, it’s important to keep in mind that they have a very stable supply chain and equipment suppliers as well as an established renewable energy sector with years of experience building these generators.
 

Conclusion
There are a few challenges that prevent the world from going 100% renewable energy, and at the top of that is the upfront cost.

Overall, the cost of renewable power is high in the short term, but if you compare it to the hidden costs - such as pollution and environmental damage
from traditional generators- renewables are definitely a better option.

The renewable market is relatively new, and we can only assume that with enough research and development, the cost of building sustainable energy generators will be significantly reduced.

References:

- Kami Turky, Founder, Solar Energy Hackers