How to calculate the cost of renewable energy in your state
As the Green New Deal and ever-increasing mandates for wind and solar in California, Colorado, Minnesota, New Mexico, New York, Washington and other states propose to completely transform the American electricity sector, and thus the entire American economy, it has never been more important to have accurate and transparent information regarding the cost of renewable energy.
Government-approved monopoly utilities are also increasingly seeking to retire
reliable, affordable sources of electricity like coal and nuclear plants in favor of building wind, solar and natural gas, at a huge expense to American families and businesses.
Unfortunately, most literature examining the cost of renewable energy is at best incomplete, and at worst intentionally misleading. This report will teach readers about the basic factors that influence the cost of electricity, and then serve as a step-by-step blueprint for calculating the cost of different energy sources in their own states. It also allows readers to evaluate the cost impacts of resource plans proposed by monopoly utilities on different rate classes, such as residential, commercial and industrial customers.
This blueprint leans heavily on Center of the American Experiment’s 2019 report, “Doubling Down on Failure: How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion.” We encourage you to read our report to get a feel for how your study may read, and even to copy/paste sections of Doubling Down while changing portions of it when necessary to make them applicable to your state.
We compare the cost of renewable energy with three other potential energy scenarios: a Short-Term Nuclear, Long-Term Nuclear and an Affordable Clean Energy (ACE) scenario, which is the Trump Administration’s replacement for the Clean Power Plan. We encourage you to use the spreadsheets we have provided not only to calculate the cost of renewable energy in your state, but to offer
Part 1 of this blueprint is energy policy theory, which acts as an “Energy 101” course explaining much of the theory behind the cost of generating electricity. It identifies the basic tools used by various organizations throughout the country to estimate the cost of electricity.
This section begins with the terms used in the industry and provides an explanation of the very basic concepts of electricity — the units that are used to measure electricity — and discusses how electricity must be generated at the exact moment it is consumed.
After the basics are covered, the guide discusses the concepts you’ll need to know to calculate the true cost of renewable energy in your state. These concepts include: Levelized Cost of Energy (LCOE) estimates, capacity factors, useful lifespans of power plants, why some LCOE estimates are different than others (namely Lazard and the U.S. Energy Information Administration), overbuilding, idle capacity, and how the fixed costs for power plants influence electricity prices.
The blueprint also discusses how factors such as overbuilding, transmission expenses, property taxes, depreciation and utility profits significantly increase the cost of incorporating renewable energy sources to the grid, even though these additional expenses are seldom discussed by renewable energy advocates.
Part 2, Calculating Generation Costs, explains how to use the Microsoft Excel spreadsheets that accompany this report. The spreadsheets are optimized to reduce the amount of work you will have to do on the number-crunching side.
Part 3, Key Takeaways From the Report, discusses some of the more essential topics to take from the report. Mainly, it discusses why renewable energy mandates are so costly, such as the need to overbuild the grid, the existence of large amounts of idle capacity, and why fuel savings do not provide enough cost savings to offset the expenses resulting from renewable energy mandates.
Part 4, Humanizing the Rising Cost of Electricty, gives examples of how you can humanize the rising cost of electricity in your state. Cost estimates are best able to influence public policy if they are presented in a way that reflects the human cost of higher energy prices. This section gives suggested talking points and borrows heavily from Section II in American Experiment’s “Doubling Down on Failure: How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion.”
Limitations: Like all models, ours has limitations. According to the regional grid operator in the Midwest, the Midcontinent Independent Systems Operator (MISO), it becomes exponentially more difficult to incorporate wind and solar after a 30 percent market penetration. As a result, we caution readers against using our renewable model to calculate the cost of renewable energy beyond a 50 percent wind and solar energy mandate in their state.