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Electricity Generation from Existing Sources is Cheapest, Report Says

August 22, 2016

A recent report published by the Institute for Energy Research (IER) concludes most existing electric power plants produce electricity with significantly lower costs than new-generation resources, such as wind and solar energy.

A recent report published by the Institute for Energy Research (IER) concludes most existing electric power plants produce electricity with significantly lower costs than new-generation resources, such as wind and solar energy.

The levelized cost of electricity is a way to compare different methods of electricity generation using the average total cost to build and operate a power-plant divided by its total lifetime energy output.

The IER study, titled “The Levelized Cost of Electricity from Existing Generation Resources,” found existing coal, hydroelectric, natural gas, and nuclear electric generation facilities produce much-less-expensive power than recent wind and solar power facilities.

“The lowest possible electricity rates will only be achieved by keeping existing generating resources in operation until their product becomes uneconomic,” the IER report states.

Renewables Replace Coal, Costs Rise

“Under current laws, rules, and regulations, large amounts of generating [coal] capacity are slated to retire and will be replaced with new generating capacity, which will produce electricity at a far higher average Levelized cost,” the report said.

The IER report’s authors say renewable-energy subsidies and the current regulatory push to promote wind and solar power have forced the premature retirement of coal-fired power plants and led to energy price increases.

For instance, the report notes electricity from new wind and solar power is 2.5–5 times more expensive than electricity from existing coal and nuclear power.

Existing Power Plants ‘Should Continue’

Thomas F. Stacy and George S. Taylor, the authors of the IER report, support continuing the operation of existing power plants until they become uneconomic.

“Our study suggests existing power plants should continue to operate until electricity from them is more expensive than power from new equivalent  replacements,” said Stacy. “For each major power plant technology, the average existing plants produce at a cost well below the cost from new power plants that might replace them.

“If a power plant works, don’t replace it with something new that will produce the same product at a higher cost or an inferior product at the same cost,” Stacy said. “If additional capacity isn’t needed, don’t permit the construction of new capacity—green or otherwise.

“Within limits, the more we use what we have already built, the cheaper electricity will stay,” Stacy said. “Don’t legislatively mandate people buy one kind of electricity over another kind. If a product requires a mandate to gain market share, that means it can’t gain market share by being cheaper or better.”

Taylor says continuing to operate existing facilities is the best way to keep prices down.

“In the absence of political intervention, the choice between maintaining existing facilities versus building new ones would be based on the anticipated cost of electricity from each choice,” Taylor said. “We were trying to make a simple point: Continuing to operate existing facilities is most likely the lowest-cost option in most places for the vast majority of the capacity.”

Michael McGrady (mmcgrady@uccs.eduwrites from Colorado Springs, Colorado