Report: New clean energy beats coal (in cost)

Posted by Pete Danko, EarthTechling

Renewable energy is becoming more and more competitive, to the point now that new generation from wind costs less than conventional coal-fired generation – and can even give natural gas a run for its money. Solar PV, too, is emerging as a more economically viable energy source.

So say researchers writing in the Journal of Environmental Studies and Scienceswho folded the U.S. government’s fairly modest estimates for the environmental and health damage caused by burning fossil fuels into their estimates of the cost of the various types of generation.

Yale 360, natural gas, cap and trade

image via Shutterstock

It’s an analysis that makes perfect sense: Even conservative economists like Greg Mankiw acknowledge there are “externalities” that come with burning fossil fuels, and that they ought to be accounted for. Mankiw, a Harvard professor and former adviser to President George W. Bush, endorses a carbon tax as a means to price these costs into the market.

Absent that, when assessing the benefits of carbon emissions reductions that might come from proposed environmental standards, the government uses a tool called the “social cost of carbon.” The determination of this value is pretty wonky stuff, hinging greatly on the “discount rate” incorporated. With a higher discount rate, future damages are given a lower present-day value, lowering the total cost of generation. Alternatively, lower discount rates suggest that the harm from today’s emissions would be passed on to new generations, and thus price those emissions higher now.

Last year, the same authors of this new study had presented an analysis that used very low discount rates and estimated the social cost of carbon at between $55 and $266 per ton, figures that when added to the cost of production of fossil fuel-generated energy tended to make renewables the far better choice.

A year later, the researchers have plugged in the government’s estimates [PDF] – between $11 and $52 per ton, with a central value of $33 – and found that renewable energy still often wins out. The reason? Plunging renewable energy costs. Using the government’s central value of $33/ton of CO2, new coal generation costs 13.2 cents per kilowatt-hour, more expensive than new wind, at 8 cents/kWh. At the $52/ton pricing for CO2, coal jumps to 14.7 cents/kWh, and that makes even solar PV, at 13.3 cents/kWh, a better bargain.

These findings, the authors write, suggest stronger emissions standards from the Environmental Protection Agency are in order – and “justify replacing a significant portion of the current coal fleet with new cleaner generation.”