Onshore wind and solar with battery storage will be the lowest-cost US electricity generation sources in the late 2020s, but offshore wind is set to be the second most expensive behind only small modular nuclear reactors, according to estimates by NextEra Energy.
NextEra, which owned 28.6GW of renewables capacity at the start of this year, forecasts the cost of near-firm onshore wind will be $14-21/MWh and near-firm solar PV at $17-24/MWh.
For “near-firm” renewables, it assumes a four-hour battery to achieve roughly equivalent reliability during peak hours for comparison with dispatchable generation resources.
The renewables industry pacesetter believes that attractive economics for onshore wind and solar will continue driving a transformation of America’s generation fleet this decade. They provided 13% of US electricity in 2021.
The Inflation Reduction Act, the nation’s new landmark climate law, has further improved the competitive position of onshore wind and solar and will drive renewables growth through the next two decades, according to a company presentation at a recent investor conference.
Tax incentives will be the main motor for that “unparalleled” growth both to stoke supply and demand for renewables, but also for supporting technologies such as standalone storage, said NextEra.
The unprecedented $369bn of federal funding over 10 years for clean technologies also provides generous manufacturing fiscal incentives for development of domestic supply chains that could potentially support far greater US onshore wind and solar expansion.
There is more urgency for solar than onshore wind where the OEMs with blade and nacelle factories here – GE, Siemens Gamesa, and Vestas – have excess capacity. All three use certain components sourced globally.
Solar is particularly vulnerable to supply chain disruptions as 80% of US-installed modules are sourced from Southeast Asia. The US lacks domestic solar ingot, wafer and cell manufacturing capacity and has only modest ability to produce solar modules of about 7GW on a direct-current basis, inverters (about 1GW), and trackers.
Even though onshore wind is better placed from a domestic supply standpoint, it is more dependent than utility solar for long-haul transmission availability from a development perspective.
That’s because much of the best, low-cost wind resource is in distant or remote interior regions with no, or minimal, electric infrastructure. By contrast, the highest quality solar resource is in the Desert Southwest or West Texas, closer to both existing power line corridors and major industrial and urban demand centres.
Unless this situation changes – the climate law did not address the multiple permitting hurdles impeding long-haul power line construction – future onshore wind development will largely focus in areas already facing grid congestion –and this will raise costs.
At decade’s end, NextEra expects that existing natural gas and nuclear will be the next cheapest generation resources at $35-47/MWh and $34-49/MWh with existing coal following at $43-74/MWh.
Those estimates represent all-in cash operating costs per MWh including fuel and operating capital expenditures. Existing natural gas also assumes $4-5/MMBtu gas prices.
The same parametres apply for new natural gas combined cycle plants that would cost $56-69/MWh in the late 2020s.
Offshore wind faces longer wait on costs
At that juncture, NextEra estimates the generation cost of new offshore wind at $85-114/MWh. It did not differentiate costs for fixed foundation and floating technologies.
President Joe Biden’s administration has set an ambitious 30GW by 2030 target for offshore wind. The NextEra numbers suggest that the sector may be unable to become as cost competitive this decade as its proponents now assert.
That isn’t stopping most Atlantic and Pacific coastal states and Louisiana in the Gulf of Mexico from either fully embracing offshore wind or viewing it as part of their energy mix going forward. Collectively, they have set 77GW in procurement targets, according to advocacy group Business Network for Offshore Wind.
Offshore wind supporters argue that cost is not the only factor that each state must consider when deciding their future electricity generation portfolio. Onshore wind and solar will remain cheaper but states such as Connecticut, Massachusetts, New Jersey, and Rhode Island lack the land and resources for development.
They add that New England and the mid-Atlantic will benefit from offshore wind through carbon reduction, cleaner air, industrial and port development, job creation, and power prices that are competitive, and likely lower, than those now.
Lastly, NextEra estimates that new small modular nuclear, an emerging technology whose development Congress is helping fund through the Department of Energy, will be the most expensive generation resource later this decade at $105-135/MWh.
