Monday, January 16, 2017

Solar Prepares to Dislodge Coal as Cheapest Source of Energy

Some 60 million years ago, a fantastic forest in what is now Eastern Wyoming and Montana was capturing solar energy in the leaves and trunks of trees. Those trees accumulated in vast mats of peat, and were eventually transformed into coal beds that are frequently over 100’ thick. The energy those plants accumulated now accounts for 40% of the Coal burned in the United States.

Coal has long been a very inexpensive form of Energy. The hard work of transforming Solar Energy into a transportable, chemical form was done by the trees, and the concentration of that Energy was done by the ministrations of deep time. Nowhere is it cheaper to mine than in the thick beds of Wyoming’s Powder River Basin. Which is why the largest mines in the world are located there.

On the other hand, Direct Solar Energy has long been much more expensive. In essence, it requires building the tree. Just seven years ago, even Commercial scale Solar was six times more costly for producing Electricity than Coal, excepting, of course, the external costs which the Coal industry gets to cheerfully ignore. However, that has been rapidly changing.

Since 2009, Solar prices are down 62%, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, Solar may be cheaper than using Coal on average globally, according to Bloomberg New Energy Finance.

And we’re getting very close to something that, only a few years ago, many skeptics predicted would never happen.

Solar power is now cheaper than Coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.

Increasing volumes are now driving down the cost of Solar through the simple economics of bulk manufacturing, and some of the projects launched in the last year come with a jaw-dropping reduction.

In 2016, Countries from Chile to the United Arab Emirates broke records with deals to generate Electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of Coal power. Now, Saudi Arabia, Jordan, and Mexico are planning auctions and tenders for this year, aiming to drop prices even further.

Not surprisingly, all these Nations are ones where sunshine is available in abundance, but even in much gloomier locations, Solar has moved to parity with other Energy sources. Germany increasingly gets its Energy from a combination of Solar and Wind, which at times in 2015 accounted for 90% of the Nation’s production. And prices just keep improving.

The International Energy Agency expects utility-scale generation costs to fall by another 25% on average in the next five years.

Coal in the United States has been losing out to Natural Gas over the last decade, even though the pure cost-per-kilowatt of Coal has often been cheaper. Coal plants are more costly to build and operate, and managing a stockpile of Coal as well as impoundments for Coal Ash, add costs and complexity. There’s also the fact that burning Coal produces twice the Carbon of burning Natural Gas, as well putting out Sulfur, Mercury, Uranium and other pollutants. The widespread availability of Natural Gas, enabled by Fracking, has put Coal into steep decline.

While the Coal industry continues to argue that their product offers low cost and round-the-clock production regardless of local conditions, the rapidly dropping cost of Solar means that solar, and the already inexpensive wind, will increasingly take a position at the center of the Energy portfolio, with Natural Gas providing a “fill in” role.

For Coal, it’s time to let Sleeping Trees lie.

NYC Wins When Everyone Can Vote! Michael H. Drucker
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