How Affordable is Renewable Energy?

by Henry Kaplan | Jun 26, 2014 |


The price of solar power and other renewables is falling. But is renewable energy a good deal for the average ratepayer? A few recent reports from state agencies tried to answer this question.

Michigan regulators are trying to answer that question for consumers in their state, and they say that solar power doesn't have to mean higher prices. Earlier this month, they released a draft report describing how utilities could add more solar without increasing costs for customers. Each of their scenarios called for utilities to pay consumers with rooftop solar panels 15¢ per kilowatt-hour.

In Wisconsin, on the other hand, state regulators have tracked costs as renewable energy has been added. By comparing the changes in their energy market to changes in other energy markets, they estimated the how much of their pricing change was due to renewable energy. They concluded that over the past five years, renewables raised the cost of electricity by 1.6%, an amount that seems not too large, but at the same time not insignificant.

At a granular level, it’s very difficult to put a value on renewable energy that everyone can agree on. The prices are swayed by subsidies and political policies. And there are several different approaches to valuating energy sources. Do you consider replacement costs, the cost of replacing an energy source with another energy source in the same region? Do you consider avoided costs, like the environmental cleanup costs avoided by using clean energy?

But from a long view, it’s clear renewable energy has many non-monetary advantages over other energy sources, and that the price disparity is eroding.

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