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EV Revolution Could Cost Thousands Of Jobs

The electric car revolution could…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Renewables Are Closing In On Fossil Fuels

Coal has been getting the squeeze for years now, but the plunging cost of renewable energy is already starting to give natural gas a run for its money. The implications for the incumbent fossil fuel industry are dire.

“Coal and gas are facing a mounting threat to their position in the world’s electricity generation mix, as a result of the spectacular reductions in cost not just for wind and solar technologies, but also for batteries,” according to a report from Bloomberg New Energy Finance (BNEF).

The surprising finding from the report is that renewable energy is challenging gas and coal in several ways in electricity markets. BNEF says that fossil fuels are getting hit by renewables in bulk generation, dispatchable generation, and the “provision of ‘flexibility.’”

First, bulk generation. Wind and solar have become so cheap on a levelized cost of electricity (LCOE) basis, that they are increasingly representing the go-to source of new electricity generation projects.

More surprising, however, is the sudden challenge of batteries in the market for “dispatchable power,” where generators must respond to grid demands by ramping up or down power generation. For years, critics of renewable energy have fallen back on the argument that “the sun doesn’t always shine and the wind does not always blow.” That has long been the Achilles Heel of renewable energy – its intermittency, and therefore, its lack of reliability. Related: Europe’s Biggest Gas Field To Close Over Quake Risk

But BNEF says that wind and solar are increasingly being paired with energy storage technologies, which allows for “’variable’ sources to smooth output, and if necessary, shift the timing of supply.”

The third segment of the electricity market where renewable energy is threatening fossil fuels is for “flexibility,” or, as BNEF puts it, the “ability to switch on and off in response to grid electricity shortfalls and surpluses over periods of hours.” The falling cost of batteries means that they are “increasingly cost-effective and are starting to compete on price with open-cycle gas plants.”

Up until now, wind and solar costs looked competitive on paper, but the intermittency problem was cited as a reason why renewables would grab only a small slice of the market, a problem that was thought to persist for years to come. But the plunging cost of energy storage might mean that the energy transition unfolds faster than previously anticipated.

The writing on the wall for coal has been clear for some time. But the threat to natural gas was not thought to occur so soon. Natural gas has been billed as a “bridge fuel,” a bridge that could last for decades until the cost of renewable energy came down.

However, the economics are pretty dire for fossil fuels. The LCOE for onshore wind currently stands at about $55 per megawatt-hour (MWh), which is a global comprehensive average that incorporates equipment, construction, financing, operating and maintenance costs, and average run time. That cost is down 18 percent from the first six months of 2017, an impressive and significant decline.

Solar LCOE costs without tracking comes in at $70/MWh, which is also down 18 percent from the first half of 2017.

These averages obscure some truly low-cost wind and solar potential in certain parts of the world. BNEF says that onshore wind in India averages $39/MWh, down by nearly half from 2017. Solar PV in India only costs $41/MWh. That compares favorably to the $68/MWh for coal and $93/MWh for natural gas. In fact, clean energy is cheaper than coal and gas in both China and India.

To be sure, that doesn’t include energy storage. When adding in batteries to these projects, wind-plus-battery costs $34-$208/MWh and solar-plus-battery costs $47-$308/MWh. BNEF acknowledges this very wide cost range, but noted that “the center of those ranges is falling fast.” Related: EV Revolution Could Cost Thousands Of Jobs

Battery storage alone could soon begin to compete with gas. BNEF says that four-hour battery storage will be competitive with gas by 2025, even where natural gas is incredibly cheap, such as in the U.S.

“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing, as wind and solar penetration increase,” Elena Giannakopoulou, head of energy economics at BNEF, said in a statement. “But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants.”

Ultimately, this will undermine the case for coal and gas around the world, perhaps sooner than analysts previously thought. BNEF says that wind and solar will be cheaper than coal in most places in the world by 2023.

By Nick Cunningham of Oilprice.com

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  • John Brown on April 03 2018 said:
    Lots of talk, but for Wind & Solar to replace, coal and gas the price, without subsidies, including batter/storage costs has to drop below the cost of coal and gas. The estimate that wind and solar will drop below the cost of coal by 2023 is so what? By 2023 coal may have been replaced in most places by natural gas anyway.
    I'm thrilled with this article but it appears very if not wildly optimistic. The industry isn't betting on this coming true. OPEC/Russia are cutting production to push the price of oil up as U.S. production soars because clearly they think the oil and gas they are letting sit in the ground will fetch the same or higher price in the future than letting the price drop by selling it now.
    If this is right than the USA is doing exactly the right thing. Producing all it can at an artificially high price set by OPEC/Russia reductions. If Wind & Solar, and maybe some other renewables will be cheaper by 2023 than from that point on we can expect the demand for oil and gas to drop fast as anybody in their right mind converts all future electricity generation to cheaper wind and solar, and starts taking oil and gas offline the way coal is being taken offline now.
    Cars will also be switching a much faster pace to electric vehicles. However, if those trends are so clear OPEC/Russia and the entire oil and gas industry don't seem to have caught on to it. Of course it wouldn't be the first time they are blind sided. Nobody expected U.S. shale to do what its done either with oil and gas either.
    If this article is true than the Global Warmist need to take a break. Once wind and solar and any other renewables in the mix become cheaper than oil and gas which are fairly cheap historically right now the era of oil and gas as the dominant energy source will end faster than anyone thinks. Clean, cheap, non-pollution energy? Just get clean wind & Solar to a point where they are cheaper than oil and gas, and the rest will take care of itself fast. Just like coal is already moving to a thing of the past.
    If this article is true than
  • Oilracle on April 03 2018 said:
    Solar and wind power in America?
    If people do not care about the debt they pass over to their grandchildren, then - yes, Cunningham!
    Another way out - a nuclear war. Some elitist in power have been planning it...
  • James Trigg on April 03 2018 said:
    What would be the cost of electricity to power Amarillo TX with wind and solar and batteries?
    Or wind and solar and gas turbines? If I knew that even if it were high I would believe you.
    What is LCEO? How do you compute it. What about one small town totally off the grid. I want to believe you but you still sound like a used car salesman.
  • John on April 03 2018 said:
    Xcel Colorado recent bids for Wind + Battery came in at $21/MWh median bid, $18/MWh for just wind. Cheaper than the fuel and maintenance for existing coal generation.
  • Lee James on April 04 2018 said:
    Judging by reader comments to-date, it'd be helpful to include a little more detail about how relative energy cost of energy sources is calculated. First cost will be high for renewable energy; life-cycle cost is much more competitive, relative to fossil fuel, including NG.

    Regarding energy subsidies, these seem complicated. "Subsidy" is a broad term for a wide variety of tax reliefs and special-purpose incentives. I've noticed a general lack of meaningful communication in many publications about the net effect and equity of "subsidies."

    I'll appreciate anything OilPrice can do to help discussion about cost comparisons and subsidies that gets us beyond picking favorites.

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