distribution side of the electricity system) depends on costs being competitive with retail electricity prices. Many residential and commercial systems are unlikely to have high capacity factors, given that such systems would be installed on roofs that are not currently designed to maximize sun exposure. Additionally, the full electricity distribution system and centralized power sources are still required for periods when electricity generation from distributed sources is not available. However, if electricity prices continue to increase and more utilities adopt time-of-day pricing (which charges the highest rate during the middle of the day), solar PV could become more widely competitive.
Nearly all of the costs associated with renewable energy are in the manufacture and installation of the equipment; fuel costs during operation—except for biomass—are zero. Economies of scale occur primarily during equipment manufacturing for nonhydropower renewable technologies and much less so with respect to plant size. The plants, however, can be built quickly and incrementally compared to conventional coal and nuclear electricity plants, allowing utilities and developers to begin recouping costs much more quickly. Thus, technological innovations will play a major role in how costs for renewables evolve in the future.
One estimate of the costs of obtaining 20 percent of electricity from renewables is provided by the DOE 20 percent wind energy study (DOE, 2008) referred to earlier and discussed in greater detail in Chapter 6 of this report and in NAS-NAE-NRC (2009a). Though this is a single study on the costs, it was developed with contributions from a wide array of stakeholders in the electric utility industry, wind power developers, engineering consultants, and environmental organizations. The study, which was externally peer reviewed (as mandated by the U.S. Office of Management and Budget), considered the direct costs both of installing the generating capacity and of integrating this power into the electricity system. Overall, it projects that increases in wind power generation costs (capital, operation, and maintenance expenses) in net present value would be approximately $300 billion—covering the installation of approximately 300 GW of new wind power capacity, of which about 250 GW would be installed onshore and 50 GW installed offshore. The total number of wind turbines required is estimated to be about 100,000. Estimates of the transmission costs range widely, from the $23 billion estimated within the DOE (2008) study to American Electric Power’s $60 billion estimate (AEP, 2007) to the recent estimate of $80 billion by the Eastern Wind Integration and Transmission Study/Joint Coordinated System Planning Study (JCSP, 2009) for integrating 20 percent in the eastern part of the United States.