From this article from the New York Times:
According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kilowatt-hour on the low end and coal at 6.6 cents. Without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kilowatt-hour at the low end, with wind at 3.7 cents.
“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard, which has been comparing the economics of power generation technologies since 2008.
Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand. Alternately, conventional power sources produce pollution, like carbon emissions, which face increasing restrictions and costs.
But in a straight comparison of the costs of generating power, Mr. Mir said that the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”
Experts and executives caution that the low prices do not mean wind and solar farms can replace conventional power plants anytime soon.
“You can’t dispatch it when you want to,” said Khalil Shalabi, vice president for energy market operations and resource planning at Austin Energy, which is why the utility, like others, still sees value in combined-cycle gas plants, even though they may cost more. Nonetheless, he said, executives were surprised to see how far solar prices had fallen. “Renewables had two issues: One, they were too expensive, and they weren’t dispatchable. They’re not too expensive anymore.”
According to the Solar Energy Industries Association, the main trade group, the price of electricity sold to utilities under long-term contracts from large-scale solar projects has fallen by more than 70 percent since 2008, especially in the Southwest.
The average upfront price to install standard utility-scale projects dropped by more than a third since 2009, with higher levels of production.
The price drop extends to homeowners and small businesses as well; last year, the prices for residential and commercial projects fell by roughly 12 to 15 percent from the year before.
The wind industry largely tells the same story, with prices dropping by more than half in recent years. Emily Williams, manager of industry data and analytics at the American Wind Energy Association, a trade group, said that in 2013 utilities signed “a record number of power purchase agreements and what ended up being historically low prices.”
Especially in the interior region of the country, from North Dakota down to Texas, where wind energy is particularly robust, utilities were able to lock in long contracts at 2.1 cents a kilowatt-hour, on average, she said. That is down from prices closer to 5 cents five years ago.
“We’re finding that in certain regions with certain wind projects that these are competing or coming in below the cost of even existing generation sources,” she said.
Both industries have managed to bring down costs through a combination of new technologies and approaches to financing and operations.
Two key points:
- Wind and solar are competitive now even without subsidy
- What remains problematic is the variability of wind and solar generation, but battery costs are halving every 4 years, so this won't be a problem much longer.
I suspect that wind power will not go on cheapening at the rate of the last five years (i.e., halving) but I might be wrong. On the other hand, PV solar power seems to have its own version of Moore's law, and I expect it to continue getting cheaper at the same rate of the last few years, i.e., more than halving every 5 years.
[See also this article and this one]
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