Guest Op-Ed: Solar, the Most Expensive Power
by Robert Hargraves
Renewables consultancy Lazard claims that unsubsidized solar-generated electricity costs as little as 4 cents/kWh at utility scale. However, the Iowa Utilities Board just provided us with numbers we can use to compute the real costs consumers will pay. Utility Dive reports that the replacement for the Duane Arnold nuclear power plant will be solar generation projects of 50 MW and 150 MW along with a 300 MWh battery storage unit capable of generating 75 MW of power.
The NextEra utility aims to build a future additional 200 MW project, so instead of a fixed price cap, the cap was agreed to be proportionate to generated power, at $1,934 per kW, including battery power capacity. The approved, first stage price cap is thus (50 MW + 150 MW + 75 MW) x $1,934,000/MW = $531,850,000. NextEra will receive an 11.4% return on this investment.
What will the generated electricity cost the consumer?
Here’s some simple math you can use to convince yourself the cost is much more than Lazard’s 4 cents/kWh. Assume a 20-year solar panel plant lifetime, 19% capacity factor in not-so-sunny Iowa, and zero operating cost (because we don’t know it). Let's estimate the cost in three ways, simplest first, most accurate last.
1. Energy cost divided by lifetime energy production. This is a rough approximation you can do on the back of an envelope.Solar energy production is 200 MW (power) x 0.19 (capacity factor) x 20 years (lifetime) x 365 (days/year) x 24 (hours/day) = 6,657,600 MWh. The agreed cost cap is $531,850,000. Cost per unit energy is $531,850,000 / 6,657,600 MWh = $79.9 /MWh = $0.08 per kWh.This underestimates costs because it doesn’t account for the cost of money, which NextEra tells the Iowa Utilities Board is 11.4%.
2. Interest only. This approximation only accounts for the cost of money.One year’s interest at 11.4% costs $60,630,900 (0.114 x the $531,850,000). One year’s energy production is 332,880 MWh (200 MW x 0.19 x 365 x 24h).Cost per unit energy is $60,630,900 / 332,880 MWh = $182.91/MWh = $0.18 per kWh.This approach underestimates costs because the capital investment is never repaid; infinite life is presumed.
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3. Home mortgage approach. A homeowner makes fixed monthly payments that pay for the cost of interest on the outstanding debt and also an amount to reduce the outstanding balance, which goes to zero after the last payment. Forbes calculates a $531,850 home loan repaid over 20 years at 11.4% costs $5,635/month. Iowa's solar farm costs 1000 times more, so requires payments of $5,635,000 per month. One month’s energy production is 200 MW x 0.19 x 30 (days/month) x 24h = 27,360 MWh.Cost per unit energy is $5,635,000 / 27,360 MWh = $205.96/MWh = $0.21 per kWh.
This correct approach accounts for the cost of money and also the repayment of the capital investment over the lifetime of the solar generation plant. This calculation ignores the cost of operation of the solar power plant and the reduction of power output as the solar panels age. The fuel (sunlight) cost is indeed zero.
In addition to transmission and distribution costs, Iowa consumers must pay at least $0.21/kWh which is more than three times the 2016 $0.06/kWh cost of power from the replaced Duane Arnold nuclear power plant formerly running at the site. The shuttered Duane Arnold nuclear power plant produced 615 MW of reliable power as needed. The new solar power source will produce 200 MW only when the sun shines brightly, supplemented by 75 MW for up to 3 hours from batteries during dimness and darkness.
Solar-nuclear power comparison summary
- Three times the cost.
- One third the power.
- One quarter of the time
Iowa-Lazard solar power cost comparison
$0.04 / kWh (Lazard)$0.21 / kWh (Iowa Utilities Board agreement with NextEra)
Robert Hargraves teaches at Dartmouth’s Osher Lifelong Learning Institute, giving courses on energy policy, Internet money, Wikipedia, and the conflict between science and politics. Hargraves wrote THORIUM: energy cheaper than coal and ElectrifyingOurWorld.com. He is a co-founder of the fission energy company ThorCon.