The ongoing shale gas boom and the advent of low natural gas prices has pushed back the goal posts for clean energy technologies like wind, solar, and nuclear power, according to a new fact sheet released by the Breakthrough Institute. While significant progress has been made in low-carbon technologies in recent years, continued innovation and cost declines will be necessary for clean tech to become broadly competitive with natural gas on an unsubsidized basis.
As documented in a new and widely acclaimed report co-authored by experts at the Breakthrough Institute, the Brookings Institution, and the World Resources Institute, the impending collapse of federal support policies for clean tech present fierce challenges to the sector going forward. The report, "Beyond Boom and Bust," offers a platform for policy reform that would accelerate innovation and cost declines, pushing clean tech to broad competitiveness with conventional fossil energy technologies.
As we show in the new fact sheet, the challenges now posed by low-cost natural gas are particularly daunting for low-carbon power technologies. Efforts to reform federal clean tech subsidies must engage these challenges by supporting clean energy innovation and making unsubsidized cost parity for clean tech the top priority.
Click here to download the fact sheet "Gas Boom Poses Challenges for Renewables and Nuclear."
From a recent high of over $13 per mmBTU in 2008, natural gas prices have plummeted to under $2.50 per mmBTU. These cost declines have been paralleled by similar drops in prices for wind- and solar-generated electricity, but the improvements for clean tech have not yet achieved full cost-parity with natural gas.
While gas prices are not expected to remain at these markedly low levels, experts project them to hover in the $4-6 per mmBTU range for at least the medium-term, still very low by historical standards. By our calculations, natural gas prices at these levels yield a levelized cost of energy (LCOE) of between $52-72 per megawatt-hour (MWh) for a combined cycle gas plant. Wind power, which competes directly with combined cycle peaking gas plants, ranges between $60 and $90 per MWh in the best wind sites. The federal Production Tax Credit (PTC) brings wind's LCOE down to $33-65 per MWh, but this credit is scheduled to expire at the end of this year.
Solar power doesn't compete directly with combined cycle gas plants. Utility-scale solar plants instead compete with combustion turbine gas plants, which have an LCOE range between $72 and $104 per MWh. We estimate levelized costs for utility-scale central-station solar photovoltaic range from $111 to $289 per MWh. The federal Investment Tax Credit (ITC) brings this range down to an estimated $81 to $131 per MWh, helping solar compete in select markets. But the ITC, like the PTC, is temporary, and even with its support the broad market for utility electricity generation favors combustion turbine-generated electricity from natural gas.
Residential and commercial rooftop solar have to contend with a broad range of retail electricity prices, from $80 to $193 per MWh. Residential rooftop solar, in comparison, ranges between $213 to $345 per MWh. The ITC brings this range down to $153 to $248, making rooftop solar competitive in some markets with high local electricity prices and high solar irradiance, including California, New Jersey, and Arizona. Residential rooftop solar is already competitive without subsidy in Hawaii, which has the nation's highest residential electricity prices and bountiful solar resource.
There are line-of-sight cost reductions ahead for wind and solar. Analysts project the cost of wind turbines to decline between 10 and 30 percent over the next three years, pushing wind into wider cost parity with combined cycle gas. Solar too can achieve significant cost declines, with $1.00 per watt total installed costs possible by 2020, compared to over $3.50 per watt today. But these improvements will require sustained commitments to technological innovation, as well as improvements in transmission, balance-of-systems, and financing costs.
Nuclear power faces perhaps the biggest challenges of all low-carbon power. Although nuclear has proven itself the most scalable source of zero-carbon baseload power, providing 20 percent of America's electricity generation, high capital and financing costs combine with high public risk perception and regulatory burdens that make new nuclear power comparatively expensive. Projected levelized costs for new nuclear power going online between 2016 and 2020 range between $112 and $130 per MWh. A federal Production Tax Credit for nuclear brings this down to $94 to 102 per MWh. With gas prices expected to remain well below these levels for the foreseeable future, the outlook for new nuclear power in the United States remains challenging.
Zero-carbon power sources require continued improvements in technology costs and performance to achieve full market competitiveness. These challenges are amplified by astonishingly low natural gas prices in the wake of the ongoing shale gas revolution. However, lessons for zero-carbon power advocates can be found in the history of shale gas itself: just as the sustained public and private research and commercialization efforts drove breakthrough innovations in hydraulic fracturing and microseismic mapping technologies that enabled the shale revolution, so must the nation initiate smart and strategic public-private partnerships to drive technical improvements and cost declines in solar, wind, nuclear, and other zero-carbon energy technologies.
For more, download our fact sheet, "Gas Boom Poses Challenges for Renewables and Nuclear."