Comparing Energy Costs from Natural Gas and Renewables

Here’s an article that provides some cheery news about the cost of energy in California: due to the early start we got in wind and solar in the 1980s, and the learning curve that we’ve applied over these decades, the cost of electricity from renewables and natural gas are very close to one another.

There are a great number of “apples and oranges” issues, here, however, many of which are unavoidable:

• The cost of natural gas changes; the cost of fuel from the sun and wind will always be zero.  This means that the power purchase agreements for electricity from gas are shorter than those from renewables.

• The ecological damage from extracting and burning natural gas is debatable; solar and wind have their own ecological issues, but are small in comparison.

• Combine-cycle gas plants also sell heat; this is not the case with renewables.

• The current cost figures for solar do not include the subsidies they receive under the Obama administration.

• The production of natural gas receives favorable tax pass-throughs (master limited partnerships) that aren’t available to renewable energy (yet).

• The price of renewables will continue to fall as the technology improves, and better economies of scale are achieved.

The bottom line is that this is complicated, but we’re talking about an extremely tight and competitive arena.

What might send this over the edge?  What about a nice, revenue-neutral carbon tax that recognizes and prices in the externalities of fossil fuels? Now there’s a light-bulb of an idea.