Think the plummeting costs of solar and wind are transforming the energy landscape? Then you should be betting on ways to warehouse that power.
To understand why, consider: Unlike almost all their rivals in the energy-generation space, solar panels and wind turbines are mass-produced goods. That means they’re subject to the rules of continual improvement and falling costs that we see with semiconductors, household products and clothing as production volumes rise and factories undercut each other. Traditional power plants are essentially large-scale construction projects, which rarely achieve the same sorts of efficiency dividends.
As a result, the cost of new-build renewables has been sinking. The highest-cost solar and wind projects in the U.S. will now produce electricity at least as cheaply as as the lowest-cost coal plants, according to a report last year by Lazard Inc.
In Australia, that price differential means one of the world’s largest coal exporters is unlikely ever to build another generator powered by the stuff, Catherine Tanna, managing director of EnergyAustralia Pty, told a Bloomberg Invest conference in Sydney Wednesday. By the early 2020s, renewables will have gotten so cheap that it will be more cost effective to build them than to operate even an existing coal or nuclear plant, Jim Robo, CEO of Florida-based NextEra Energy Inc., said during an investor call in January.
Negative Charge
The price premium for new solar generation over coal in Asia has slumped, and gone negative in India.
Coal miners hope to see a final leg of demand over the coming decade as incomes in emerging Asia rise — but even there, the rapidly falling cost of renewables means solid fuel is close to being priced out of the market, data from Bloomberg New Energy Finance show.
The trouble with things that get extremely cheap, however, is that you often end up with too much of them. That situation is exacerbated by the no-off-switch nature of wind and solar power. Take California’s recent mandate to put solar panels on the roofs of all new buildings. As my colleague Liam Denning wrote last week, one likely effect will be to push more electrons into a mid-afternoon electricity market that’s already glutted with supply.
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