Wind, solar narrowing the price gap with coal and gas

November 25, 2014 | By Doug Peeples

Most industry professionals have agreed for some time that the cost of wind and solar power will be lower than coal and gas prices. The question stirring up the most argument is when. Many observers say that day is years away, but utilities have been increasingly willing to sign long-term power purchase agreements for renewable energy now.

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Granted, how fast wind and solar energy prices are dropping and how utilities respond varies at least in part on where they are located. The regions in the U.S. where wind and solar resources are plentiful offer prices lower than natural gas in many instances -- for example, in the Southwest and Great Plains.

The New York Times recently reported that wind and solar can frequently be cheaper than traditional fuel sources without existing subsidies and incentives established to help them develop and mature.

In 2013, utilities signed about 60 power purchase agreements for a total of 8,000 megawatts in 18 states, according to the Wind Energy Foundation. Improvements in wind and solar technologies have made them more cost effective to install. The cost of installing a large-scale solar facility has fallen by a third in the past five years, the Solar Energy Industry Association has reported -- a figure that has been supported in other research.

Compared to the volatility of natural gas prices, wind and solar prices are relatively stable and utilities are inclined to lock in prices for extended periods of time. Austin Energy signed a 20-year agreement earlier this year for solar production at a rate less than five cents per kilowatt-hour. Other utilities have followed suit, even though they realize straight cost comparisons do not reflect the hidden costs that can arise from the intermittent availability of wind and solar. They still need to have other sources of power at the ready when wind farms and solar installation productivity falls off.

Khalil Shalabi, Austin Energy vice president for energy market operations, was quoted in the Times article as saying that earlier renewable energy had two problems: it cost too much and it couldn't always be delivered when needed. But he acknowledged that cost is no longer an issue.

The consensus among several authorities and utility leaders is that while wind and solar are becoming more and more competitive, they will not replace traditional fuels in the near future.

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