Solar and Wind Energy are Finally Cheaper than Fossil Fuels in the USA

Solar and Wind Energy are Finally Cheaper than Fossil Fuels in the USA

Solar and wind energy have long struggled to compete with conventional energy sources on two fronts: dispatch and cost. However, new U.S. industry data outlined in the New York Times reveals the cost of these renewable energy sources has fallen dramatically in the last five years, making them competitive with — and sometimes even undercutting — fossil fuel-sourced energy.

The New York Times reports the closing of the gap in costs has particularly accelerated in 2014, according to utility executives. In the Great Plains and Southwest regions, companies are signing power purchase agreements for renewables at rates below that of natural gas. While subsidies are still contributing to reduced prices for renewables, in September, 2014, financial advisory firm Lazard released figures demonstrating that wind and commercial solar PVs could still be competitive with gas and coal without the subsidies. Lazard has been issuing comparisons of levelized costs of various energy sources since 2008. Jonathon Mir, a managing director at the firm told the NYT, “It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these [renewable] technologies.”

Meanwhile, in Texas in 2014, Austin Energy signed a 20-year contract with a solar farm to purchase energy at less than 5 cents per kWh. In Oklahoma, American Electric Power (AEP) put out a call for supply tenders in 2013 and wound up tripling its intended wind power purchases once it saw how low the bids were. Managing director of renewable energy for AEP Jay Godfrey commented: “Wind was on sale — it was a Blue Light Special.” Since Oklahoma utility companies aren’t required by law to purchase energy from renewable sources, he noted: “We were doing it because it made sense for our ratepayers.”

Emily Williams of the American Wind Energy Association confirmed that in 2013 utilities signed “a record number of power purchase agreements and what ended up being historically low prices.” Long-term contracts are being signed at average rates of 2.1 cents per kWh, less than half the 2009 figure. Williams added, “We’re finding that in certain regions with certain wind projects that these are competing or coming in below the cost of even existing generation sources.” With the future of subsidies for U.S. renewable energy generation uncertain after the Republicans take control of both the Senate and the House in January, it’s heartening to know the industry has advanced to the point where it stands to be competitive without them.

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