Cost of transmission grid

(Source)

Yes, so renewables are cheaper than coal, and soon gas.  But what about the need for power lines to connect the places where there is lots of wind or lots of sun with the places where there is demand for electricity?  Many studies have suggested that a well-connected grid reduces the need for storage, because while the air may be still at one place, at another the wind is blowing, and while it may be cloudy at point A it remains sunny at point B.

I have seen few studies showing what such lines add to the cost of renewables.  So let's make a rough and ready estimate using the new Plains and Eastern Clean Line (1) (2), which  will be an HVDC (High Voltage Direct Current) line running east-west from the Oklahoma panhandle across Oklahoma and Arkansas into Tennessee, where it will connect with the Eastern Interconnection.  It will have a capacity of 4000 MW and will cost $2.5 billion and will be 720 miles (1150 kms) long.

So what will it cost per MWh?

Assume current flow varies randomly between half and all of capacity, but averages 75%, then it will have a capital cost of $833,000 per MW (2.5 billion/3000).   Assume an interest charge of 5%, and that the capital cost is amortised over 25 years, and the annual cost is $75,000 per MW. But that's the cost of the capacity.  It will operate for 24 hours a day and  365 days per year.  So that $75,000 per MW per annum has to be divided by 24 (hours) * 365 (days) to get cost per MWhour.  That's about (on my back of the envelope estimates) $9.3 per MWh per 1000 kms.  Wind costs before tax credits average about $50 per MWh in the US though in the wind corridor running up from Texas through Oklahoma and Kansas to Minnesota and the Dakotas the cost is $30 or less.  The distance from South Dakota to NYC is about 2,400 kms, so the cost per MWh of transmission from the wind corridor to the eastern States would be about $22/MWh.  Or less; because you would still need only two transformers, one at each end.  The point is, even including a power line which reaches halfway across the continent, the cost of far away wind-generated electricity would still be lower than the cost of local coal which at its cheapest is $63/MWh, but averages around $100/MWh.

What about transmission and transformer (inverter) losses?  There is a transmission loss of 3.5% per 1000 km with an HVDC line.  There is also energy loss when AC is converted to HVDC and back again--but the grid is full of these losses.  At any rate, a power line running from South Dakota to New York would lose 7% in transmission and (say) 10-20% in conversion.  That would increase the cost from $22/MWh to $30.  At $30 for the power from the wind turbines, that's still cheaper than coal.

After I wrote this is discovered this source, which estimates median cost of transmission at $15/MWh, suggesting I've (by chance) got the calcs about right!  Interestingly, there seem to be significant economies of scale, with the cost of the larger projects at the lower end.

The cost of a bigger and better integrated grid is not an argument against renewables, even if the source of the energy is 2,400 kms away.  Wind and solar are still cheaper than coal.