Sunshine may be free, but solar power isn’t cheap

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By Isaac Orr for RealClearEnergy

Mississippi residents are consistently told that renewable energy sources, such as solar panels, are now the cheapest way to generate electricity, but these claims are based on creative accounting gimmicks that examine only a small fraction of the costs incurred to generate solar energy. into the power grid while excluding many others.

When these hidden expenses are factored in, it becomes clear that solar power is much more expensive than Mississippi’s existing coal, natural gas and nuclear power plants and that adding more solar power will raise electricity prices for the families and businesses that depend on it. One of the most common ways to estimate the cost of generating electricity from different types of power plants is a unit of measurement called the Levelized Cost of Energy, or LCOE.

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The LCOE is an estimate of the long-term average cost of generating electricity from a power plant. These values ​​are estimated by the costs of the plant, such as the money required to build and operate it, fuel costs, and the cost to borrow, take and divide money by the amount of electricity generated by the plant ( usually megawatt hours). during its useful life.

In other words, LCOE estimates are essentially the same as calculating the cost of your car per mile driven, after factoring in expenses such as initial capital investment, loan and insurance payments, fuel costs, and maintenance.

We can estimate the LCOE of new solar installations in Mississippi by using estimates of the cost of capital from the US Energy Information Administration (EIA) Electricity Market Module and other state-specific factors. We can then compare the cost of solar energy with the actual cost data for the coal and natural gas generators in the Victor J. Daniel Jr. Generating Plant and the Grand Gulf Nuclear Power Plant using the Federal Energy Regulatory Commission (FERC) form. 1 database.

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The chart below shows that electricity generated by new solar panels would cost $50.67 per megawatt hour if one takes into account that monopoly utilities are allowed to raise electricity prices to cover the cost of building new solar plants that have been approved by the Mississippi Public Service Commission, plus a ten percent return, shown below as “utility gains.”

These cost estimates are, I should say, for the unsubsidized cost of solar energy — what you might call the actual or underlying cost of production. This matters because the massive $370 billion of the Biden administration’s so-called “Inflation Reduction Act” offers massive subsidies for solar energy, which on the surface appear to lower the cost of solar energy. In reality, what the IRA grants do is reduce the costs paid by some by passing the costs on to the taxpayer. In other words, subsidy doesn’t change the underlying cost of solar energy, which remains unattractive no matter how much incentive the federal government offers us to start using solar energy.

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The most affordable electricity in the state was generated by the combined cycle (CC) natural gas units at the Victor J. Daniel Generating Plant at a cost of $30.31 per MWh, based on the delivered cost of natural gas in 2021, which is $3. 90 per million British amounted to thermal units (MMBtu) and electricity generation. Natural gas prices may have recently increased, but even at these higher prices, natural gas gives Mississippians more value than solar. The same applies to nuclear energy.

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The next most affordable power plant was the Grand Gulf Nuclear Power Plant, which generated electricity at $32.10 per MWh, based on 2021 output. Finally, the coal units of the Victor J. Daniel Generating Plant produced electricity at $43.83 per MWh, based on 2021 delivered coal prices of $2.55 per MMBtu and electricity generation.

But wait, there’s more.

Not only are solar panels more expensive than the existing natural gas, coal and nuclear power plants on Mississippi’s power grid, they also offer less value because they don’t provide electricity when the sun isn’t shining, which is usually the case. .

Statistics from EIA show that Mississippi solar installations generated only about 22 percent of their potential output in 2021, meaning utilities would need to install an average of 450 megawatts (MW) of solar energy to generate an average of 100 MW of electricity over the course of of a year, requiring a massive overbuild of capacity to get the same annual energy output.

Creating a power grid that can integrate all these extra solar panels will require thousands more acres of land, building more transmission lines to connect these panels to the grid, and moving the power to where it is needed. These costs, including property taxes associated with the land, pipes and other equipment, will be passed on to customers through their electricity rates.

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According to the Midcontinent Independent Systems Operator (MISO), these transmission lines routinely cost between $2.5 million and $3.1 million per mile. Despite their huge price tag, solar proponents usually don’t include these transmission costs in their LCOE calculations because they’re inconvenient.

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Finally, it’s important to remember that no matter how many solar panels are installed in Mississippi, the state’s electricity needs will still require the use of natural gas plants or expensive new battery storage facilities to provide electricity when the sun isn’t shining. shines, which happens every night. As a result, Mississippi families and businesses are forced to pay for two electrical systems: one that works when the sun is shining and one that works when it doesn’t.

The data is clear: when all these costs are added up, we see that solar energy is much more expensive than running Mississippi’s existing natural gas, coal or nuclear power plants. That’s why Mississippi Public Service Commissioners must protect taxpayers from the unnecessary cost increases that will inevitably result from building more solar plants in the Magnolia state.

Isaac Orr is a policy officer specializing in energy and environmental policy at Center of the American Experiment.

Syndicated with permission from RealClearWire.

The opinions of contributors and/or content partners are their own and do not necessarily reflect the views of TBEN.

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