The Cost Of Renewable Energy Sources

Renewable Energy Sources are all around us. And there are more and more investors developing renewable energy plants and facilities. But let’s look at the actual cost of several renewable and non renewable energy sources:

The cost of generate electricity using Coal is around $0.04/KW/h. To generate power from gas and oil is a little bit more but still in the range of $0.08KW/h.

Wind power cost is about $0.12KW/h (currently) but the trend is going down so with economies of scale and better materials it should be heading to just a few cents higher than coal.

Photovoltaics (PV’s) should be between $0.25 to 0.5KW/h even for solar concentrators and Sterlling engine (Solar Thermal) the price is in the order of $0.18 to 0.22kW/h.

Biomass energy cost is based on the raw material used. In Brasil this is sugar cane and its derivatives and this allows producing energy that is a bit lower than the cost of oil generated electricity. But if you are thinking in using corn or other crops to produce ethanol then the prices are just not competitive with fossil fuels.

Nuclear competes very well with coal, but the prices of Uranium has risen in the last several years so there is always the issue that demand may lead non-parity with coal.

Hydroelectrical power plants produce energy for about the same price of coal and in some instances like in the case of Hydro Quebec maybe lower than coal. But there is a limited supply of rivers capable to provide us with this resource.

Tidal Energy. There is a project off the coast of Portugal where the capacity will be 2.25MW of electricity and the price of the construction is about $15M. So if you compare the capital expenditures in setting a power plant using any of the technologies mentioned above you will find out that this is the least expensive.

In addition it does not have issues related with harmful emissions, also it does not have to deal with the disposal of dangerous waste materials e.g. nuclear, batteries (Lead and acids) or other problems.

But let’s face it again:

All energy sources have unique characteristics that make them advantageous in some situations and detrimental in others. Geography, climate and access to natural resources all play a role in their effectiveness. For example, Its just not feasible to build a nuclear power plant in the desert because there’s not water to cool it. For the most part, coal and nuclear plants generate power cheaply. and the manner in which they operate means that once you turn them on, you really don’t want to turn them off. Natural gas plants are more expensive to operate and are designed to come on and offline relatively quickly when compared to either Nuclear or Coal plants.

In terms of overall cost efficiency, the best bet is to have a portfolio of plants that use different fuel sources. This way, you can hedge against spikes in any one particular fuel.

Also, incorporate innovative techniques to improve efficiency. Wind power is deemed as insufficient by most due to its inherently unpredictable nature. By compressing air when the wind blows and power is not needed, and releasing the compressed air when electricity is needed, wind powers reliability is increased. Hydroelectric plants operate in a similar fashion.

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