Low Cost of Renewable Power

Sandy Levine | @CLFLevine

Whether you are looking to put solar panels on your roof or joining with neighbors for a new community solar project, you know that the cost of renewable energy has come down a lot in the past few years.

For many customers, using solar or wind guarantees stable or lower electric bills for years to come.

And it reduces pollution as we collectively rely less and less on dirty and polluting fossil fuels to keep our gadgets going and our homes comfortable.

On a larger scale, renewable energy is having the same effect on electricity prices in New England.  Apart from reducing pollution, a key benefit to most renewable energy, like wind and solar, is their low or zero fuel cost. When the sun shines or the wind blows, they produce power and no one is sending them a fuel bill.

Most power plants in the region need to pay for coal, oil, gas or uranium for fuel. The operating cost for these plants depends heavily on their cost of fuel. The cost of fuel gets passed on to customers and often dictates the price we pay for electricity. When fuel prices go up, the cost of electricity goes up.

As more and more renewable power becomes available in the region, low or zero fuel costs from the wind, sun or water are driving down the cost of electricity for everyone.

A recent report and activities by the ISO-New England, which is responsible for maintaining the reliability of our electric grid, confirms this.

This is good news for our pocket books and for the environment.

Our electric grid is a marvel of physics. Because electricity cannot be easily stored, the grid must balance the supply from large and small power generators with the demand caused by anything that we plug in. It is a bit like having a big dinner party and needing to keep everyone’s water glass filled without using a pitcher of water. You’ll have to keep the water from springs, wells and hoses available at just the right amount, and then keep the flow in the faucet to the exact amount needed, all the time.

To do this for electricity, the grid is managed in part by calling on generators to run when needed. The price for this wholesale power is set on an hourly basis by using auctions. The least expensive generators are called into service first and the last generator called into service to meet demand sets the price for all generators during that hour. That is why we pay a lot for electricity on hot summer days. Meeting demand when many air conditioners are running requires lots of electricity, including running some of the most expensive fossil-fuel plants.

Supplies that can operate at low cost, like wind and solar, can and do set the price we all pay during some hours. During the polar vortex in 2014, wind power reduced the wholesale price in New England by $26 million.  For a few hours last winter, renewable energy supplies actually set a negative price.

The value of their renewable energy credits, which they sell for every kilowatt hour they produce, mean that their operating cost is actually less than zero. The low cost of renewables drives down the wholesale price. If coal, gas or nuclear plants are operating in those hours, they not only don’t get paid for their energy, but they will have to pay the ISO. This puts further pressure on polluting plants to close down and not operate.

As renewable energy supply continues to grow to meet our region’s climate change mandates, our grid will have more and more of these lower cost power resources available. These will not only push aside fossil fuel plants that will be too expensive to run, it will also lower overall electricity prices for everyone.

One study in connection with the almost 500 megawatts of wind power expected from the Cape Wind project off the coast of Massachusetts estimated a price reduction benefit of about $185 million annually. That is not only a lot less money that we will all pay for electricity, but a lot less pollution as well.

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One Response to “Low Cost of Renewable Power”

  1. Grace Adams

    Considering the high externaslized costs of fossil fuel, both damage to agriculture of too much heat, too mild winters to thin out pests, and flood and drought AND higher health care costs from air and water pollution due to fossil fuel, it would almost pay government to invest in renewable energy including energy storage and even buy political feasibility by buying fossil fuel reserves as they are displaced by renewable energy, ending up with mostly just savings on healthcare from less pollution.

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