NEW ENERGY: THE NUMBERS

This is an abridged version of an exhaustive 4000 word evaluation which you can study at its fullest by clicking on the title/link.

The New Math of Alternative Energy
Rebecca Smith (with Leila Abboud and Jeffrey Ball), 23 February 2007 (Wall Street Journal via Yale Global Online)

- …For years, the big criticism of alternative energy was cost: It was too expensive compared with energy based on traditional fuels like coal and natural gas.
- Even though the fuel was often free -- such as wind or the sun's rays -- alternative-energy producers had to plow lots of money into finding the best way to capture that energy and convert it into electricity. Fossil-fuel producers, on the other hand, could draw on billions of dollars in infrastructure investments and decades of know-how.
- Now the equation is showing significant signs of change. Costs are falling…driven by new technology and renewed development interest.
- Alternative energy still can't compete with fossil fuels on price. But the margins are narrowing…oil and gas prices have been rising. The math looks even more favorable if you consider the environmental cost of fossil fuels…
- Alternative energy still faces obstacles…projects need government or utility subsidies and incentives…Generating costs have risen…pushed by higher materials prices, labor costs and demand. Supply chains are prone to hiccups, and wind and solar-energy resources need backup sources of power…
- For all its promise, relatively little electricity currently comes from renewable sources, other than hydropower…2.3% of the U.S. electricity supply in 2005. Bio-mass was responsible for 1.5%, wind for 0.44%, geothermal for 0.36% and solar power for a scant 0.01%.
- In contrast, coal-fired generation produced 49.7% of U.S. electricity supplies in 2005, followed by nuclear power at 19.3%, natural gas at 19.1%, hydropower at 6.5% and oil-fired generation at 3%.
- But…Driven by concerns about global warming and energy security -- as well as the rising cost of electricity generated by fossil fuels -- regulators are forcing electric utilities to broaden their resource mix to include more "green" power…the federal government is requiring oil companies to blend more plant-based biofuels like ethanol with gasoline. Equipment makers are expanding their production lines, which should ease recent shortages of…the polysilicon used in solar panels…
Here's a look at the economics of the various alternative-energy sources…

- Wind power stands out…In 1980, wind-power electricity cost 80 cents per kilowatt hour; by 1991 it cost 10 cents…Today…as low as 3 cents to 4 cents per kilowatt hour…more typically 6 cents to 9 cents…getting closer to the cost of generating electricity from burning coal. In fact, costs are approaching the point where wind power may be able to prosper…currently 1.9 cents a kilowatt hour in the U.S. -- particularly if natural-gas prices stay high.
- The Department of Energy's Energy Information Administration has concluded that there isn't much difference between the cost of new power plants using wind and other traditional fuels, such as nuclear, coal and natural gas, if you take into account a broad array of expenses…
- Wind power faces hurdles…location, wind speeds and capital costs have a big impact on the cost…
- The turbine shortage, at least, could be easing soon…

- For decades, solar power has endured cycles of booms and busts…Solar power still accounts for less than 1% of the world's power generation…Solar power doesn't generate electricity at night, meaning backup energy sources are needed…
- …traditional solar panels aren't very efficient at converting sunlight to electricity. So most solar electricity is made and consumed at a single site -- and in many cases isn't even enough to meet the needs of a single house…$77,500 to install a 10 kilowatt-capacity system on a house. Without subsidies, it would take 50 years to pay for itself. With subsidies, it dropped to 9.6 years…the cost of generating electricity with solar panels is 35 cents to 45 cents per kilowatt hour…In the U.S….26 cents to 35 cents -- because there's better sun…
- Now, however, a new generation of solar plants is on the cusp of being able to produce electricity on an industrial scale at competitive rates. The new plants use a technology called concentrating solar power, or CSP, which is much more powerful than the classic photovoltaic panels, which use semiconductor chips to convert sunlight into electricity. CSP plants use huge arrays of mirrors or solar dishes to track the sun and collect its heat to make electricity…It costs 9 cents to 12 cents to generate one kilowatt hour of electricity by CSP…compared with about 3 cents to 5 cents to generate the same amount of electricity by burning coal…
- For now, CSP still needs government support to be viable, either in the form of tax breaks to builders of plants or subsidies to buyers of electricity…
- But the new technology has inspired a burst of development…
- Energy experts argue that as more CSP plants go into operation, the technology will improve and costs will come down. But with current costs high, few companies are willing to take the risk…

- …biomass is the biggest source of renewable electricity in the U.S. today -- producing more electricity than wind, solar and geothermal sources combined.
- Biomass refers to the conversion of plant matter into a transportation fuel (biofuel) or electricity (biopower), usually by incinerating waste material or creating combustible gas through chemical processes. A significant amount of electricity also is made by gathering and burning landfill gas.
- It's a growing area of interest because methane, created by decaying organic material, is a more potent greenhouse gas than carbon dioxide -- so people are anxious to put it to use and keep it out of the atmosphere. Many cities also burn solid waste to cut down the volume destined for landfill sites, and they're eager to convert the garbage to something useful.
- The biggest biomass power generators in the U.S. aren't utilities. They're forest-products companies with big sawmill and pulp operations…
- Because biomass plants typically are small -- usually less than 50 megwatts in capacity, or one-tenth the size of a conventional fossil-fuel power plant -- equipment costs are high relative to the amount of power produced. That, in turn, makes generating costs somewhat high -- currently, about 5 cents to 10 cents a kilowatt hour…Power costs are also related to the cost of fuel and the amount of heat embedded in it…
- Costs are expected to come down as technology improves and as more waste material gets redirected to electricity production, providing a cheap fuel stream. Many experts believe biomass will expand dramatically…

Geothermal energy -- tapping heat deep in the Earth to generate power -- may have more potential, at less impact to society, than any of the other alternative resources. A new study on geothermal energy, produced by an interdisciplinary team at the Massachusetts Institute of Technology, found that geothermal energy could produce 10% of the nation's electricity by 2050 at prices that would be competitive with fossil fuels.
- Geothermal heat is turned into electricity through a number of methods. In general, producers drill into the ground to release steam and water that have been naturally heated and, until then, trapped. These are used to power a turbine and generator, making electricity. Liquids are reinjected into the ground to keep the process running.
Currently, geothermal energy costs about 6 cents to 10 cents a kilowatt hour…
- The amount of electricity produced depends on many things, including the size of the geothermal field, water pressure and temperature and how quickly the field can heat and release water.
- Geothermal energy is especially valuable because it makes electricity around the clock... Advancements in equipment are making it possible to generate electricity with lower-temperature geothermal resources, and new drilling techniques let producers plumb greater depths…
- The MIT study found that far more geothermal electricity could be generated if companies -- especially oil companies -- leveraged their knowledge of drilling techniques, geology and hydrology to tackle the problem. An investment of $800 million to $1 billion in research and development would be required, equivalent to the expense of a single coal-fired plant.
- The initial units would make electricity for 10 cents or so a kilowatt hour but later plants would see costs fall to 5 cents a kilowatt hour, probably within a decade…
- Still, geothermal energy does come with a caveat: Heat sources can be depleted if not carefully managed…

- Interest in alternative transportation fuels -- mostly ethanol -- soared following President Bush's declaration a year ago that the U.S. is "addicted to oil." Many potential fuels are being discussed, from biodiesel to hydrogen. Most of the buzz is around…ethanol made from corn.
- There's lots of talk about the possibility of using ethanol as a standalone fuel to power cars. But virtually all the ethanol consumed in the U.S. today is…blended into normal gasoline…adding ethanol to gasoline reduces smog-causing emissions…
- The cost of producing ethanol depends largely on the cost of corn…It also depends on the cost of the energy -- typically natural gas -- used to power the process that turns the corn into ethanol…about $1.60 to produce a gallon of ethanol…
- The price of ethanol typically rises and falls with that of gasoline…Last summer, ethanol prices soared, due to increases in both gasoline prices and ethanol demand…Ethanol's per-gallon price premium over gasoline widened to more than $1…Yet by late last year, the ethanol boom was cooling. The sudden profitability…sparked a rush of investment in new ethanol plants…Meanwhile, gasoline prices, and thus ethanol prices, were falling…The production costs for ethanol were also rising, largely because the rush to produce more ethanol had driven up the price of the fuel's main feedstock, corn…
- Where ethanol prices will go from here is a matter of debate…