How Green Was My Bankruptcy?

My apologies to the memories of the late Richard Llewellyn and late John Ford; but I just had to borrow their title for this post. This paragraph from a 2010 Telegraph article really says it all…

Its 500,000 photovoltaic panels will generate 30 megawatts of electricity, enough, in the popular measurement, to power 9,000 homes. It is costing about $250 million to build, significantly less than a gas, coal or nuclear power station, which can easily exceed $1 billion. And it represents a sea-change in America’s energy business.

America has been notoriously devoted to hydrocarbon fuels. Big Oil, Big Coal and big Texan hats in the White House were seen by the rest of the world to be keeping it so, whatever the global interest. Oil barons funnelled money to scientists ready to pour doubt on the science of climate change, and conservative Republicans led the charge to pour scorn on those such as the former Democrat vice-president Al Gore who were urging Americans to rethink where their energy was coming from.

The power plant described in the preceding passage is the Cimarron Solar Facility, built on Ted Turner’s 590,823 acre ranch in northern New Mexico.  It is indeed true that most natural gas- and coal-fired power plants cost a lot more than $250 million to build.  However, it’s also true that most natural gas- and coal-fired power plants have nameplate generating capacities a bit larger than 30 MW…

 TVA to build natural gas power plant
By DUNCAN MANSFIELD, Associated Press
Posted June 4, 2009

KNOXVILLE — The Tennessee Valley Authority on Thursday decided to build an $820 million natural gas power plant in northeastern Tennessee to comply with a North Carolina lawsuit over air quality.

The 880-megawatt combined-cycle gas plant would be as large as the 1950s-era, coal-fired John Sevier plant in Rogersville that a federal judge has targeted for new pollution controls on North Carolina’s behalf.

[…]

LINK

  • $820 million divided by 880 MW works out to $931,818 per MW.
  • $250 million divided by 30 MW works out to $8,333,333 per MW.

Assuming that the gas-fired plant managed an 85% capacity factor and a 30-yr plant lifetime, the initial capital expenditure would work out to $0.004/kWh… A bit less than half-a-cent per kilowatt-hour.   Assuming a 25% capacity factor and a 30-yr plant lifetime for the Cimarron Solar Facility, the initial capital expenditure works out to $0.127/kWh… Almost 13 cents per kilowatt-hour!  The average residential electricity rate in the US is currently around 12 cents per kWh… That’s the retail price.   As a consumer of electricity, I know which plan I would pick.   I’m currently paying about 9 cents per kWh.   I sure as heck wouldn’t seek out a provider who would have to raise my current rate by about 50% just to cover their plant construction costs.

Solar photovoltaic electricity is bankruptcy the green way writ large.  Here in Texas, Austin Energy has agreed to a long-term purchase agreement to pay $10 million a year for 25 years, for the electricitygenerated by the Webberville Solar Farm.  That works out to more than 15 cents per kWh.

Figure 1. Levelized Cost of New Electricity Generating Sources

In concert with his efforts to drive up the cost of coal- and natural gas-fired power plants, President Obama has aggressively pursued an agenda of financing expensive power plants with taxpayer dollars. Many of these taxpayer-guaranteed loans have gone to financially strapped companies, lacking the means to repay those loans. In most cases local utilities were coerced or enticed into signing long-term purchase agreements to buy electricity at nearly double the cost of coal- and natural gas-generated electricity. The sole justification for this “green” centralized industrial policy is the Lysenko-like junk science of catastrophic anthropogenic global warming.

The economics of this “green” centralized industrial policy are mind numbingly horrible.

Figure 2. The economics of solar photovoltaic poer plants are simply awful.

The capex for solar power plants averages between $6- and $7-million per MW of installed capacity. Coal-fired plants generally run less than $2-million per MW and natural gas plants currently run less than $1-million per MW. The average retail residential electricity rate in the U.S. is currently less than 12¢ per kWh. The levelized generation cost for the plants being financed by the Obama administration is more than 20¢ per kWh. His “green” centralized  industrial policy will drive the wholesale cost of electricity to nearly double the current retail rate.

One need not literally seize the assets of businesses and install gov’t bureaucrats into management position to effectively nationalize those businesses. All it takes is to make them dependent on gov’t and/or direct their activities through regulatory constraints.

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One Response to “How Green Was My Bankruptcy?”

  1. David Middleton Says:

    @Mattew R Marler,

    You totally missed the point.  No one would drill an uneconomic well today because they thought the cost of drilling was going to decline in the near future.  The concept is idiotic. A future reduction in the cost of solar panels doesn’t improve the economics of comercial solar power plants built in the present.

    Obama’s war against fossil fuels may soon force the shut-in of “30 to 50 gigawatts of coal-fired generation” capacity.

    What will it cost to replace that capacity?

    If solar PV actually worked, the cost would be as much as $7 million per MW installed capacity… That’s $7 billion per GW… A total cost of $210 to $350 billion. Of course, solar PV plants only operate at an average of 25% of their name plate capacity – Because they don’t work when the Sun don’t shine.

    Research and development of alternative energy sources is a wise use of capital allocated to R&D. However, Obama’s attempt to force a widespread build out of alternative energy infrastructure is proving to be disasterous in terms of increasing the costs and decreasing the relaibility of the nation’s energy supply. Govt mandated widespread and immediate build out of alternative energy infrastructure would be comparable to a gov’t mandated installation of a UNIVAC I in every American household in the 1950’s because gov’t officials foresaw the need for home computers by the 1990’s. On technological and economic scales, from UNIVAC I to modern PC’s & Mac’s, current solar and other “green” energy sources are the UNIVAC I. You wouldn’t have the money to upgrade if you had been forced to spend trillions of dollars installing UNIVAC’s in every American household in the 1950’s.

    Forty-six UNIVAC’s were installed in the United States from 1951-1954. The initial unit cost was supposed to be $159,000. By the end of the production run, the unit cost was as much as $1.5 million.

    There were about 50 million US households in the 1950’s. Even if the unit cost was held at $159,000… The cost to install a UNIVAC in every household would have been $7.5 trillion. The total US GDP from 1951-1960 was less than $4.3 trillion.

    The handful of UNIVAC’s that were installed, were purchased by gov’t agencies and businesses that needed them at the time. The work on UNIVAC did lead to the development of better mainframes and eventually personal computers… But a gov’t-mandated nationwide build out of UNIVACs in the 1950’s would have deprived the private sector and the gov’t of the financial means to upgrade anything.

    A gov’t mandated, nationwide build out of “green” energy infrastructure over the next few decades would have a similar effect on our financial means to conduct the R&D needed to actually build economically sound “green” energy infrastructure. In its present state “green” energy, particularly solar, is not economically viable. Tidal, wind and solar power sources are intermittent… And the initial real investment ($) is far higher than fossil fuels.

    It would cost more than $6 trillion to replace the nation’s current coal and natural gas power plants with solar power plants… Which would leave you with no capital to expand generation capacity and 6-8 hours of electricity per day.

    Building commercial solar plants now is exactly like building UNIVAC’s 60 years ago, with two big differences: There was no alternative to the UNIVAC back then and solar power plants will lose money and/or double or triple the consumers’ and/or taxpayers’ cost for decades.

    The few companies that purchased UNIVAC’s back then, did so because it improved the profitability of their business.  They didn’t invest in them because of gov’t coercion or taxpayer-funded bribes. When better technology came along, the UNIVAC’s were scrapped in favor of more cost-effective main frames.  Today, some leading (or bleeding) edge companies replace their computer hardware almost annually.

    You can’t scrap and/or replace power plants on less than a multi-decadal scale.  A gov’t mandated full-scale build-out of solar infrastructure today would be exactly like a gov’t mandated home version of the UNIVAC in the 1950’s.

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