Catherine Wood Wrong: Solar is Competitive

Craig Morris just posted about an opinion by Catherine Wood on the AllianceBernstein website. According to Wikipedia, AllianceBernstein is a major asset management firm with over $400 billion in assets controlled.

Wood thinks that solar will never beat electricity from gas, since it would take too long and cost too much to achieve the necessary scale.

There are several errors in her analysis, starting with the price of solar right now. She doesn’t get that right at all. There is also no discussion of capital cost and useful life of the installation, which are of course important factors for determining the levelized cost of electricity.

If you look only at Germany, there will be over 30 GW of fully paid for solar capacity already in 2032 (much of that will be paid back earlier). From that point on, all electricity from those solar panels will cost basically nothing.

I leave it as an exercise for the reader to figure out if electricity from gas might be able to compete with “close to nothing” in 2032.

Also, right now gas plants in Germany are driven out of the market by all the cheap renewable energy. That is partly because gas is much more expensive in Germany right now than in the United States, which leads to generation from coal winning over gas. But it is also due to the fact that almost all of the cost of solar PV is the fixed cost of the investment in the capacity, so PV will always win out against gas in the auction of the merit order determining which plants get to deliver on the wholesale market.

The gas power plant Irsching 5 commissioned only three years ago has seen only about 1,600 hours a year of running time, a fact that is not without influence on the levelized cost of electricity. See this article at Manager Magazin (in German) for details. In other words, while it is true that gas plants could technically run around the clock all year, they don’t get to do that in a market with a larger renewable penetration.

The owners of Irsching 5 are Eon, and they are losing money on their gas power plants because solar and wind are eating the lunch of fossil fuel.

Of course, in a couple of decades burning gas for generating electricity on the planet will be illegal everywhere on the planet, and long before that the American trial lawyers will have a lot of fun suing the fossil fuel industry into oblivion. The price tag from hurricane Sandy alone was over $50 billion. There is a lot more of that to come.

And long before that solar will be so cheap that no one would want to burn gas anyway.

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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