Estimation of cost of utility scale wind and solar -notes
I assume that the renewable electricity developer requires a 12% return on investment in free market conditions. If there is a 20-year power purchase agreement (PPA), I assume that 8% is enough. The value of the farm after 20-years is assumed zero.
A crippling increase in the cost of wind or solar, is the increasing need for battery systems for time shifting. Both solar and wind are peaky. Solar has a predictable peak in the middle of the day when the sun shines squarely on the PV panels. The midday peak is 4 times larger than the average output assuming 25% capacity factor. Wind has peaks when the wind is particularly strong and output reaches nameplate. Those peaks are 2.5 times higher than the average output assuming a 40% capacity factor. Capacity factor multiplied by maximum output is the average output.
When either wind or solar become significant factors in the grid the peaks may overwhelm the ability of the grid to absorb the power. In that case, if there are not batteries to save the excess power, it must be curtailed, meaning that part of potential generation is lost and the average cost of the power will increase. The new Gemini Solar plant in Las Vegas is an example. That plant has a 690-megawatt solar array and 1416-megawatt hour battery system that is big enough to store 2 hours of nameplate output.
An additional problem that utility solar or wind requires batteries so that they can respond quickly to changes in demand. This allows the batteries to be used instead of a fossil fuel plant for grid regulation and allows the grid to accept more wind and solar than it could if fossil fuel plants have to remain online for regulation. Without batteries, wind or solar can’t respond to an uptick in demand and can respond to a down tick only by curtailing power.
I set wind capacity factor at 40% and solar at 25% in line with NREL (National Renewable Energy Laboratory) numbers.
It should be emphasized that batteries don’t reduce the requirement for sufficient traditional power plants to operate the grid without the wind or solar.
I use the NREL 2023-ATB-Data-Master_V9.0 as a starting point. This is a spreadsheet with estimates for all kinds of renewable energy data. For wind farms the ATB data base gives a capex, cost of construction per kW, of $1400 per kW for wind farms completed in 2023. This figure does not take into account the Biden inflation, that affected wind farms, of about 25%. Pricing for farms completed in 2023 was quoted 2 or 3 years previously. I changed the $1400 figure to $1800. Then I added 2 hours of storage at $400 per kWh, or $800 for 2 hours, bringing the capex to $2600 per kW.
I performed a similar analysis for solar, with a smaller inflation adjustment and 2 hours of storage, and can came up with capex of $2200 per kW.
In the spreadsheet below calculations are for either with or without the time shifting batteries.
I used $40 per kW for wind maintenance and $20 per kW for solar maintenance, in line with NREL numbers.
For residential solar I took capex at $4000 per kW. There is no need for batteries since net metering gives the homeowner a phantom battery at no charge.
Lithium battery storage systems are estimated to cost $400 per kWh for utility scale projects
An Excel spreadsheet with the computations can be downloaded below. If your browser brings up an image you may have to take additional steps to open it in Excel.
I assume that the renewable electricity developer requires a 12% return on investment in free market conditions. If there is a 20-year power purchase agreement (PPA), I assume that 8% is enough. The value of the farm after 20-years is assumed zero.
A crippling increase in the cost of wind or solar, is the increasing need for battery systems for time shifting. Both solar and wind are peaky. Solar has a predictable peak in the middle of the day when the sun shines squarely on the PV panels. The midday peak is 4 times larger than the average output assuming 25% capacity factor. Wind has peaks when the wind is particularly strong and output reaches nameplate. Those peaks are 2.5 times higher than the average output assuming a 40% capacity factor. Capacity factor multiplied by maximum output is the average output.
When either wind or solar become significant factors in the grid the peaks may overwhelm the ability of the grid to absorb the power. In that case, if there are not batteries to save the excess power, it must be curtailed, meaning that part of potential generation is lost and the average cost of the power will increase. The new Gemini Solar plant in Las Vegas is an example. That plant has a 690-megawatt solar array and 1416-megawatt hour battery system that is big enough to store 2 hours of nameplate output.
An additional problem that utility solar or wind requires batteries so that they can respond quickly to changes in demand. This allows the batteries to be used instead of a fossil fuel plant for grid regulation and allows the grid to accept more wind and solar than it could if fossil fuel plants have to remain online for regulation. Without batteries, wind or solar can’t respond to an uptick in demand and can respond to a down tick only by curtailing power.
I set wind capacity factor at 40% and solar at 25% in line with NREL (National Renewable Energy Laboratory) numbers.
It should be emphasized that batteries don’t reduce the requirement for sufficient traditional power plants to operate the grid without the wind or solar.
I use the NREL 2023-ATB-Data-Master_V9.0 as a starting point. This is a spreadsheet with estimates for all kinds of renewable energy data. For wind farms the ATB data base gives a capex, cost of construction per kW, of $1400 per kW for wind farms completed in 2023. This figure does not take into account the Biden inflation, that affected wind farms, of about 25%. Pricing for farms completed in 2023 was quoted 2 or 3 years previously. I changed the $1400 figure to $1800. Then I added 2 hours of storage at $400 per kWh, or $800 for 2 hours, bringing the capex to $2600 per kW.
I performed a similar analysis for solar, with a smaller inflation adjustment and 2 hours of storage, and can came up with capex of $2200 per kW.
In the spreadsheet below calculations are for either with or without the time shifting batteries.
I used $40 per kW for wind maintenance and $20 per kW for solar maintenance, in line with NREL numbers.
For residential solar I took capex at $4000 per kW. There is no need for batteries since net metering gives the homeowner a phantom battery at no charge.
Lithium battery storage systems are estimated to cost $400 per kWh for utility scale projects
An Excel spreadsheet with the computations can be downloaded below. If your browser brings up an image you may have to take additional steps to open it in Excel.
| prototype_calc.xlsx |