For those seeking some good clean energy news to ring in the new year, look no further than Lazard’s annual report on the costs of electricity generation technologies. The investment firm’s recent analysis reaffirms energy expert and philanthropist Hal Harvey’s declaration that “a clean future now costs less than a dirty one”. Although the federal climate policy picture is murky, states and power companies across the country can and should continue to double down on their clean energy progress heading into 2017.
Lazard has tracked the all-in costs of building and operating new power projects for the past ten years in its Levelized Cost of Energy Analysis. The report compares the costs of building conventional power plants—natural gas combined cycle (NGCC) plants or new coal plants, for example—to the costs of building new renewable energy projects, and has recorded the noteworthy decline in the costs of wind and solar projects over the past several years. It’s one of the only reports out there that compares all generating technologies in a single, comprehensive analysis, and it has become a key benchmark for the industry. This year, the news for the economics of clean energy is better than ever—let’s take a look at some of the key findings from the report:
- The cost of large-scale solar projects continued its rapid decline, falling by 11% in 2016, resulting in a remarkable decline of 85% since 2009
- As a result of those cost declines, the cost of electricity from a new solar project is now competitive with a new gas (NGCC) power plant in the sunniest regions of the country, even before factoring in the federal investment tax credits
- And in many regions of the country, a new wind project is the lowest cost option across all technologies—again, even before factoring in the federal tax credits.
And perhaps the best news of all is that these aren’t just hypothetical numbers—these results are being borne out on the ground, as power companies across the country strengthen their investments in clean energy. When MidAmerican announced it would be building a huge 2,000 megawatt wind farm in Iowa earlier this year, the utility was able to do so without requesting any increase in customer rates. In Colorado, the utility commission recently approved Xcel’s request to build an additional 600 megawatt wind facility, not to comply with the state’s renewable portfolio standard (RPS) (they are already on track), but because of the net savings provided to customers—Xcel estimates the project will save its customers $400 million over 25 years. And just last week, Florida Power and Light (FPL) formally announced the retirement of the 250 megawatt Cedar Bay coal plant because it was uneconomical to operate; the company is replacing a large portion of the plant’s power with 225 megawatts of new solar projects.
States are also providing clean energy leadership at a time when it’s more important than ever. In the past few weeks, Illinois and Michigan both passed important legislation to boost their renewable standards, and yesterday Governor Kasich vetoed an attempt to delay implementation of Ohio’s successful clean energy standards. And along with D.C., five states—California, New York, Hawaii, Oregon, and Vermont—home to a full 20 percent of the American population, now intend to get at least 50 percent of their electricity from renewable sources. That’s great news for residents and business-owners in those states (and the rest of the country), because in addition to being low-cost, wind and solar projects result in significant economic, public health, and climate benefits. A recent study by Lawrence Berkeley National Laboratory found that in 2013 alone, renewable portfolio standards (RPSs) across the country saved customers $1.3 to $3.7 billion from lower natural gas prices (as a result of lower demand for natural gas across the power sector). The same study estimated that RPSs also supported nearly 200,000 renewable energy-related jobs, provided $5.2 billion worth of health benefits through improved air quality, and resulted in global climate benefits of $2.2 billion.
Lazard has also started a new annual report documenting the costs of different energy storage technologies. As we move to an urgently-needed low-carbon future, storage will play a key role in developing and bolstering a clean, affordable, advanced energy system. Importantly, we’ve now seen three states—California, Oregon, and most recently Massachusetts—implement policies that will boost energy storage (and several more such as New York, Rhode Island, and Maryland are actively exploring such policies to complement their growing clean energy programs). If the remarkable progress of wind and solar technologies is any indication, the winning combination of American innovation and policy support will enable storage to become an important and cost-effective part of our clean energy economy much sooner than anyone expects.
At a time when it’s more important than ever—in the face of uncertainty over federal climate action—it’s reassuring that many states and power companies across the country are doubling down on their transition to a low carbon future. Cheers to even more clean energy progress in 2017.