Myth: "Renewable energy isn’t cost competitive with fossil fuels"
Myth: “Renewable energy isn’t cost competitive with fossil fuels”
One of the most common misconceptions impeding the energy transition in Alberta is the idea that renewable energy is not cost competitive with non-renewable energy. Simply put, proponents of this narrative argue that renewable energy is currently not cheap enough to be a feasible alternative to fossil fuels. However, many forms of renewable energy are becoming economically viable.
Solar energy is one form of renewable energy that is very quickly becoming financially viable. The cost of solar power has dropped dramatically over the past decades, more than 90 per cent from 1983 to 2015, according to the Pembina Institute. Many forms of solar power generation are now cost-competitive with conventional energy. According to the Lazard Levelized Cost of Energy Analysis, a paper that compares the unsubsidized cost of various types of power generation, the cost of electricity produced by a large-scale crystalline photovoltaic system now averages between 49$ and 61$ per megawatt-hour in the United States. With the cost of electricity from coal averaging between 60$ to 143$ per megawatt-hour, it would seem that solar energy is already economically viable. While there are still factors holding back the adoption of solar power, such as the electricity grids in the U.S. and Canada having been set up to work with fossil fuels, cost is increasingly not one of them.
The cost of wind energy has also dropped significantly over the past decades, although not quite as dramatically as with solar energy. According to the Pembina Institute, the cost of “wind has dropped 65 per cent [from 1983 to 2015] (1).” The cost of producing electricity from wind now averages between 32$ to 62$ per megawatt-hour in the United States, according to the Lazard Levelized Cost of Energy Analysis report, making it already cost-competitive with certain fossil fuels such as coal. In fact, wind energy already supplies about 5% of Alberta’s energy needs. One can only expect that percentage to increase in the coming years as the technology behind wind power continues to get cheaper.
Alongside solar and wind energy, other forms of renewable energy are becoming viable. Geothermal and biomass energy technologies are maturing as further investment and innovation is being put into them. As well, hydroelectric power has been a viable alternative to fossil fuels in Eastern Canada for some time now and Alberta already satisfies 4% of its power needs with hydroelectricity.
It is also important to note that governments around the world heavily subsidize their fossil fuel industries or provide other economic incentives that make electricity generated from fossil fuels more affordable. The federal and provincial governments provide 3.3 billion dollars in subsidies to Canadian fossil fuel companies every year, which is an enormous sum compared to the 1.4 billion over 14 years being provided to renewable energy companies through the federal government’s ecoAction for Renewable Power program. If the subsidies, tax breaks and other incentives were to be distributed more equally between fossil fuel and renewable energy companies, renewable energy would become more cost competitive.
Ultimately, renewable energy is becoming better able to compete economically with fossil fuels with every passing day. While the price of electricity generated from renewables isn’t quite competitive with all form of fossil fuels just yet, it is already cost competitive with some and the price is expected to only drop further. With further investment and innovation, renewable energy may even become cheaper than fossil fuels one day, especially given the rate at which the price of electricity generated from renewable sources has dropped over the past decades.
[Cover image taken from Pexel, a free photo stock website]