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Renewables Start to Win Price War

Kiran Jutti
by Kiran Jutti November 25, 2014
Renewables Start to Win Price War

Research by the New York Times has suggested a new era in energy has started to dawn for energy in the United States as renewables are finally equaling conventional fossil fuels in price.

Following a trend over the last five years, the last twelve months have seen the cost of providing electricity from wind and solar plummet – so much so that in some markets renewables are now cheaper than more conventional sources such as oil or gas.

The harbinger of these lower costs has been new power purchase agreements being signed arose the country, but particularly in central and southwestern states like Texas and Oklahoma. This April saw a deal for 20 years of output from a solar farm at less than 5 cents a kilowatt-hour in Austin, whilst the Grand River Dam Authority in Oklahoma saw a similarly competitive deal arranged with a wind farm due online next year.

Early critics of the findings suggested that these prices on renewable energy are only possible through heavy subsidies from the government, and might not be possible should any of these allowances for solar and wind be repealed – something that could be likely with the oil-favouring Republicans controlling both the House of Representatives and the House of Senate from January.

But experts say that even if all subsidies disappeared quickly, renewables in many areas of the US could still compete with fossil fuels.

Investment banking firm Lazard said that the cost of commercial energy from solar sources is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents with subsidies – significantly lower than the 6.1 cents a kilowatt-hour and 6.6 cents of oil and coal, respectively.

With all subsidies stripped off, Lazard say that climbs to 7.2 cents a kilowatt-hour for solar and 3.7 cents for wind.

“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.

Mir also made sure to highlight the hidden pitfalls of both renewable and sources of commercial energy in the latest batch of data – for example, the intermittent nature of both solar and wind power (something that could soon be negated by nano-batteries).

New technologies and the smart deployment of projects across the middle of the US seem to have brought the cost of commercial energy down significantly in the US – but as oil prices drop for their most significant sum in half a decade, there certainly seems to be some competition brewing in the industry.