The New York Times reported recently on the work of a group of Stanford researchers, who published a piece in the journal Energy Policy claiming that the main issues with 100% renewables are neither economic nor technical but rather social and political will. Jesse Berst of Smart Grid News countered with a title that included the phrase, “Get real, Stanford.” As experts in the economics of renewable energy, HOMER Energy would like to explain why we think that the promise of 100% renewable energy as a purely political problem detracts from getting where we need to be – which is at much higher levels of renewables than currently. Ignoring the very real economic issues (and opportunities) that exist with renewables will not get us there.
The HOMER software models the lifetime costs of power systems that include combinations of energy sources – from purely conventional generation to 100% renewable. HOMER is an accepted standard for optimizing economics of hybrid systems that has been used throughout the world.
We used HOMER to model the Levelized Cost of Energy for renewable penetrations from 0-100%, on an island with a diesel-powered grid, representative of hundreds of power systems that we have modeled at HOMER Energy. Levelized cost of energy (LCOE) is a way of creating an “apples to apples” comparison of energy from renewables, which is often front-loaded with capital costs, to energy from diesel generation, which has low capital costs but high operating costs.
The renewable penetration is represented on the horizontal axis of the graph as a percentage, and LCOE is represented on vertical axis, in dollars per kilowatt-hour. 0% renewable penetration means the island is completely dependent upon diesel generation for its electricity.
The first thing to notice is that at low levels of renewable contribution, renewable generation reduces the cost of power. This cost reduction results from displacing expensive diesel fuel with low-cost intermittent renewable energy, such as wind and solar (solar photovoltaics reached price parity with diesel fuel in 2011).
Adding more renewables beyond about 40% requires investments in integration controls. This cost, combined with the occasional need to curtail some of the renewable generation, reduces the economic attractiveness of additional renewable generation, but still allows very substantial levels of renewable contribution, with their additional environmental benefits, with only modest cost impacts.
When renewable penetration exceeds about 80%, however, the cost of meeting the electrical load goes up substantially. This results in the “hockey stick” price increase and makes it prohibitive to achieve 100% renewable contribution without some form of liquid (i.e. easily storable) renewable fuel.
- At low penetrations (0% to 30%), simple substitution of diesel energy with renewable energy yields cost reductions.
- In the middle region (30% to 80%), the cost of integration technologies flattens the curve.
- At the high end (80%+), the requirements for excess renewable energy capacity coupled with very large storage requirements drive up the cost of energy very steeply.
The implications of this shape are enormous. One the one hand, it establishes an economic case for integrating not just low-contributions of renewable energy into these grids, but medium, and even high, contributions – up to around 80%. On the other hand, it also demonstrates the prohibitive cost of exceeding the 80% threshold with current technologies.
Many systems could be brought to 70-80% renewable for the cost of taking one system to 100%.
Political or social will are important, but they can be undermined by promoting excessively expensive solutions when much greater benefits can be achieved more quickly and broadly by promoting more cost-effective solutions.
Dr. Peter Lilienthal, CEO, HOMER Energy
John Glassmire, Senior Energy Engineer, HOMER Energy
Dr. Marilyn Walker, COO, HOMER Energy