By Isaac Orr for Real Clear Energy
Mississippi residents are told that renewable energy sources like solar panels are now the lowest-cost way to generate electricity, but these claims are based on creative accounting gimmicks that verify only a small fraction of the costs incurred to integrate solar into the grid. Apart from many others.
When these hidden costs are calculated, it becomes clear that solar is more expensive than Mississippi’s existing coal, natural gas and nuclear power plants, and that adding more solar will increase electricity prices for households and businesses. A common way to estimate the cost of generating electricity from different types of power plants is a metric called Levelized Cost of Energy or LCOE.
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LCOE is an estimate of the long-run average cost of generating electricity from a power plant. These values are estimated by taking the costs required to build and operate the plant, such as fuel costs and the cost of borrowing money, and dividing them by the amount of electricity (usually megawatt hours) produced by the plant. during its useful life.
In other words, LCOE estimates are essentially like calculating the cost of your car on a per-mile-driven basis after accounting for expenses such as initial capital investment, loan and insurance payments, fuel costs, and maintenance.
We can estimate the LCOE of new solar facilities in Mississippi using overnight capital cost estimates from the US Energy Information Administration (EIA) Electricity Market Module and other state-specific factors. Then we look at the cost of solar energy by Victor J. Compare real-world cost data for coal and natural gas generators at the Daniel Jr. Generating Plant and the Grand Gulf Nuclear Power Plant using a Federal Energy Regulatory Commission (FERC) form. 1 database.
The graph below shows that electricity generated by new solar panels would cost $50.67 per megawatt hour when monopoly utilities are allowed to raise electricity prices to cover the cost of building any new solar facilities approved by the Mississippi Public Service Commission. , plus a ten percent rate of return are shown below as “Useful Profits”.
I should point out that these cost estimates are for the unsubsidized cost of solar energy – what you might call the real or underlying cost of generating it. This is important because the Biden administration’s enormous $370 billion “Inflation Reduction Act” offers massive subsidies for solar, which will reduce the cost of solar power on the surface. In reality, IRA subsidies reduce the cost of paying by shifting the cost to taxpayers. The subsidy, in other words, doesn’t change the underlying cost of solar energy, which makes it unattractive no matter how many incentives the federal government gives us to go solar.
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Victor J. The most affordable electricity in the state was produced by combined cycle (CC) natural gas units at the Daniel Generating Plant at a cost of $30.31 per MWh, based on 2021 natural gas delivery costs of $3.90 per million British thermal units (MMBtu), and electricity generation. Natural gas prices may have risen recently, but even at these increased prices, natural gas offers Mississippians a better value than solar. So, too, does the atom.
The next most affordable power plant was the Grand Gulf nuclear facility, which produced electricity at $32.10 per MWh based on 2021 production. Finally, Victor J. Coal units at the Daniel Generating Plant generated electricity at $43.83 per MWh, based on 2021 coal prices of $2.55 per MMBtu delivered and power generation.
But wait, there’s more.
Solar panels are more expensive than existing natural gas, coal and nuclear plants on Mississippi’s electric grid, but they offer little value because they don’t provide electricity if the sun isn’t shining, which is most of the time. .
The EIA’s figures show that solar facilities in Mississippi will produce only about 22 percent of their potential output in 2021, meaning that utility companies would need to install 450 megawatts (MW) of solar power to generate 100 MW of electricity, on average, over a period of a year, requiring massive overcapacity to achieve the same annual energy output.
Creating an electric grid capable of integrating all these additional solar panels would require taking up thousands of acres of land, building more transmission lines to connect these panels to the grid and move the power to where it is needed. These costs, including property taxes related to land, lines and other equipment, are passed on to customers through their electricity rates.
According to Midcontinent Independent Systems Operator (MISO), these transmission lines typically cost between $2.5 million and $3.1 million per mile. Despite their enormous price, solar advocates typically do not include these transmission costs in their LCOE calculations because they are 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 power plants or expensive new battery storage facilities to provide electricity during periods of no sun. Shining, it happens every night. As a result, Mississippi families and businesses are forced to pay for two power systems: one that works when the sun is out and one that works when it’s not.
The data is clear: When all these costs are added up, we see that solar is more expensive than using Mississippi’s existing natural gas, coal or nuclear power plants. Therefore, Mississippi Public Service Commissioners must protect ratepayers from unnecessary cost increases that will inevitably result from building more solar facilities in the Magnolia State.
Isaac Orr is a policy fellow specializing in energy and environmental policy at the Center for American Experimentation.
Syndicated with permission from RealClearWire.
The views expressed by contributors and/or content partners are their own and do not necessarily reflect the views of political insiders.