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| Source: NextEra (1) Excludes subsidies |
From RenewEconomy:
The head of NextEra Energy, the biggest and most successful utility in the United States says the energy industry is in the grip of massive change, with the cost of renewables and battery storage – without subsidies – beating gas, as well as existing coal and nuclear on costs.
“We see renewables plus battery storage without incentives being cheaper than natural gas, and cheaper than existing coal and existing nuclear,” Jim Robo, the CEO, president and chairman of NextEra, told analysts last week at the Wolfe Utilities & Energy Conference.
“And that is game changing,” Robo said. So much so, that renewables would likely replace coal generation in the US within a decade.
Robo noted that the US government’s Energy Information Administration expects that the world’s biggest electricity market could reach 35 per cent renewables by 2030. Robo says it could be as high as 50 per cent by 2030, and could ultimately be 70-75 per cent by 2050.
“I think that’s very doable, and that would take out an enormous amount of carbon out of the United States. And at the same time bring rates down across the country.
“And that’s the thing that I think people still haven’t grasped – that you can be green and low cost at the same time and that it’s terrific for customers, it’s terrific for the environment and it’s great for shareholders as well.
“It really is good all around. And we’re leading the charge on disruption there, and I’m very excited about the growth prospects.”
Robo’s comments are significant for a number of obvious reasons. Close watchers of the US energy market will already be aware that the cost of wind and solar has fallen dramatically, and recent auctions for “dispatchable” energy has seen renewables and battery storage projects beating out gas, which is significantly cheaper in the US than in Australia.
And the fact that renewables and storage, without further incentives, can beat out existing coal and nuclear plants, most of which have been fully depreciated, is just as significant. As is Robo’s point that “you can be green and low cost” at the same time. And, as he also notes, can deliver reliable power as well.
“You still have coal being roughly 35 per cent of the energy generated last year and effectively, we think renewables can replace almost all of that by 2030,” Robo said in response to a question.
“When you look at wind and solar paired with a battery, new construction is cheaper than the operating cost of existing coal.
“So there’s very little reason from an economic standpoint to continue to run those units and there’s very little reason from a reliability standpoint to run those units and there’s certainly no reason from an environmental standpoint to run them.
“So we see a massive shift there in terms of much of the coal in the country being phased out by 2030.”
NextEra’s Robo said battery storage cots are continuing to come down, and the amount of storage needed is often misunderstood. “For the first 1,000MW of battery storage, you probably only need 2 hours to really shape the peak,” he said.
“So I don’t think you need like giant step changes to get to 70% or 75% (renewables), honestly, with the existing grid.
“I mean, you see areas with — they have days in Texas and SPP (South-west Power Pool) where the penetration — the renewable penetration is well over 50%, right?
“So we know that we can run the grid on days with very high wind and very good resources. So you can run the system on that, and that’s with very little storage on those systems, right? So 4 hours of storage, we think, is the sweet spot for most systems that we’ve modeled. And you don’t really need a step change to be able to do that.”
Robo pointed out that while getting to 75% was easy, reaching 100% would be harder, because the need for storage rises sharply after 75%. I've pointed this out before. One solution is power to gas, where surplus renewable electricity is used to produce green hydrogen and green methane, which can then later be burnt to provide electricity when both wind and solar are low. With this, existing gas plants will continue to be used. The carbon dioxide from their flues will be used, together with green hydrogen, to produce methane which will be stored in the existing gas grid for later use. This option will be much cheaper than new nuclear, and until storage costs fall substantially, much cheaper than the 24 hours plus of storage which will be needed to reach 100% renewables.
The interesting point about Robo's presentation is that in 2 years' time, despite the removal of government subsidies in the USA, what he calls "near-firm" wind and solar will be competitive with operating costs (i.e., excluding depreciation and debt repayment) of fossil fuel and nuclear, and that getting to 75% penetration won't just be easy but inevitable. By "near firm" wind and solar, Robo means wind and solar with 4 hours of storage. Battery costs are falling by 20%+ each year, which means they're halving every 3 years. So by 2026, having 8 hours of storage will cost roughly the same as 4 hours in 2023. That will allow us to get to 90% renewables penetration.
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