Steep Cost of Renewables

by Paul Chesser, Heartland Institute Correspondent on June 4, 2009

On Tuesday Duke Energy filed a request with the North Carolina Utilities Commission to raise its electricity rates by 13.5 percent. The Charlotte Observer reports:

Duke said growing capital expenses make the increases necessary. Those include the costs of installing pollution controls at two plants and financing its Cliffside plant (an upgraded coal-fired plant west of Charlotte that environmental groups are trying to halt).

Duke also cited the coming expense of modernizing its system and meeting an expected cap on greenhouse gas emissions.

How much of the additional costs are attributable to the GHG cap, much of which is in the form of a state-mandated renewable portfolio standard and other “green” energy initiatives? I am awaiting an answer on that from a state industry group that studies these things, but in the meantime we might find some clues in a story about a solar energy program administered by Progress Energy, the other major investor-owned utility in North Carolina:

Progress Energy plans to offer up to $20,000 to customers who install rooftop solar panels, helping cut the total cost of one of the most expensive forms of green energy by 75 percent.

The Raleigh power company announced the solar incentives Wednesday as part of a broader solar program that will help businesses and schools defray the cost of installing solar energy. Progress is introducing the programs to comply with a 2007 state law requiring a greater reliance on renewables and conservation to meet the state’s energy demand….

The Progress rebate will amount to $2 per watt of solar energy, topping out at 10 kilowatts, or $20,000. That will cover about 25 percent of the cost of the panels. Combined with available federal and state incentives for solar energy, a homeowner’s savings would come to about three-quarters of the total cost.

A typical household solar rooftop array produces 2.5 kilowatts to 5 kilowatts, which would qualify for $5,000 to $10,000 from Progress.

Still, even with the Progress sweetener, it will take as long as a decade to recoup the cost of the investment, said Bob Kingery, co-founder of Southern Energy Management, a Cary solar panel installer.

Duke Energy has a program that will likely look very similar. That such a heavy subsidy — paid by the utilities’ regular ratepayers — still does not come close to covering the costs of alternative energy speaks volumes about the stupid, nonsensical economic reports about green jobs and economic growth  by groups like the Center for Climate Strategies.

Dr. James H. Rust June 6, 2009 at 1:22 pm

When looking at solar panels, the rating is the output on a panel pointed directly at the sun at noon on June 20 when the maximum solar output is available(roughly 1 kw/sq-m in the Atlanta area). The rest of the time the sun's output is less; being zero at night. Capacity is the fractional output of a solar panel over a one-year period compared to the panel's output. For solar panels located in perfect locations like Arizona or California deserts, the capacity for operating plants in 2007 was 14 percent. Because of a lot cloudiness in the Atlanta and Charlotte areas, I suspect the capacity would be less than ten percent. This means the ouput of a one kilowatt solar panel would be about 900 kw-hr/year.

If as stated in the article, a $2000 subsidy per kilowatt solar plant covers about 25 percent of the cost, the actual cost of the plant is $8000 per kilowatt. If one takes five percent of that cost for an annual cost of equipement, the cost of electricity is about 45 cents/kw-hr. This cost is ridiculously low because the annual charge is too low, no allowance is made for insurance for the equipement, and no allowance is made for continuous cleaning of the solar panels because they degrade daily from pollen and other air pollutants. Thus the real cost of electricity from residential solar panels in Atlanta or Charlotte would most likely be around 90 cents/kw-hr. With subsidies from local utilities and federal and state governments, these costs may be reduced by two thirds. This is still far more than conventional electricity costs.

There is no such thing as a free ride. Subsidies cost the rate payers and tax payers. Solar panels are not practical for the Piedmont Region and any attempt to use them will be a total waste of money.

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