In this post I present “back of envelope” style calculations on the capital costs of renewables globally since 1998 and deduce that roughly $1.3 trillion has been spent installing wind turbines and solar panels. Is this a lot of money? Is it a wise investment? What else may we have we got for our money?
There are different ways to view this. For example UK annual GDP is roughly double this sum and in that perspective it is not a huge amount for the world to spend over 15 years. Some would argue that we should be spending a lot more. Another perspective is that the same money would buy 50 Hinkley Point style pressurised water reactors. That would add 163 GW to global generating capacity, roughly three times the UK total generating needs.
We hear a lot about the plummeting cost of renewables and escalating costs of nuclear power. Looking just at capacity installation costs, nuclear comes in at $8000 / kW and wind at around $2000 / kW. But these figures need to be adjusted for load capacity factors (nuclear 0.9, wind 0.17) and for the longevity of the installations (nuclear 50 years, wind 20 years). Applying these adjustments wind works out at 3 times and solar at 10 times the cost of installing nuclear power.
Figure 1 The binge in renewables investments began in 2008, the year of record high energy prices, the biggest financial crash in living memory and passing of the Climate Change Act in the UK. Global investment in solar now exceeds wind and combined they amount to $1.3 trillion.
Getting a precise handle on global renewables investments is a huge task. There are large variations in costs from project to project within and between countries. Here I use median cost estimates for wind published by the US National Renewable Energy Laboratory and for solar by the US Department of Energy (Figure 2). These are costs applicable to the USA and applying these globally will add bias.
Figure 2 Capacity installation cost curves for wind and solar in the USA. Solar has declined rapidly, perhaps with a penalty to the quality of panels produced, but is still almost double the cost of wind where costs have been stable / slowly rising. A move offshore will push the future cost of wind upwards.
For annual capacity additions I have used BP 2014 data. BP publishes annual installed capacity figures and hence additions are calculated by the difference in installed capacity from one year to the next.
Wind Capacity Growth and Investment
Figure 3 Note that each of the stacked column charts uses the same colour three times, so care is required reading the key. Global wind capacity is dominated by China and the USA with Germany coming a poor third. The plunge in wind capacity additions in 2013 is down exclusively to the USA where a change in tax subsidy “killed” the industry over night.
Figure 4 Global investment in wind power began to gather pace in 2005 and took off in 2008 with a near term peak of $90 billion in 2012. It remains to be seen if the wind binge is past or whether we will see resumed growth.
Solar Capacity Growth and Investment
Figure 5 Global solar capacity is dominated by Germany, China, Italy, Japan and the USA. Note how there is an erratic pattern of capacity growth. Some countries show large single year growth: Spain in 2008; The Czech Republic 2010; Italy in 2011; China and Japan in 2013. German growth slowing in 2013, perhaps down to competition for panels from China and Japan. This erratic behaviour perhaps correlates with the coming and going of subsidies.
Figure 6 The exponential rise in solar capacity (Figure 5) has been spurred by the fall in costs to the extent that investment levels have dropped. The peak investment year was 2011 with over $160 billion spent, a significant part of that in Italy.
The proposed Hinkley Point nuclear power station to be built in England has the ridiculous price tag of $26 billon struck in a deal that is doubtfully in the best interests of UK citizens. The plant is rated at 3.26 GW that it will likely churn out electricity 24/7 for 90% of the time, providing power on demand whenever it is needed for 50 years or more. The $1.3 trillion spent on solar wind so far would have bought 50 Hinkleys. What would have been the better deal?
Figure 7 The power rating normalised cost of building a nuclear power station is much higher than the cost of installing wind and solar power. But wind and solar power only operate at small fractions of their rated capacity and have much lower life expectancy than nuclear power stations. Factoring these variables in shows that installation costs of solar is more than 10 times nuclear and wind is more than 3 times the nuclear cost. Of course there are a host of other considerations to take into account, but these pros and cons are weighted for and against the various technologies. Capacity factors for wind and solar are based on Germany in 2013.
Looking just at capital costs of installation is of course a gross simplification of the overall cost of power delivery. Nuclear needs to carry the additional cost of fuel, fuel enrichment, decommissioning and waste storage. Renewables, especially off shore wind, will also have high decommissioning costs and must also carry the significant costs of load balancing, which are simply being ignored in most calculations today, and the building of new power lines and inter connectors. There is also a cost linked to dependability. I believe we may soon discover that a lack of dependability in our electricity supplies, that results in blackouts, will carry a very high cost for society and the economy.
by Euan Mearns