Is Renewable Energy Getting Much More Expensive? New Mexico Case Study -- April 7, 2015

From an August 25, 2014, post, this is 30-second sound bite for "cost of renewable megawatt":

• Solar: $3 million / MW
• Wind: $2.5 million / MW
• Natural gas: $865,000 / MW

A reader sent me the link to this article:

A Colorado-based company plans to build a 750 megawatt natural gas and photovoltaic power plant in San Juan County that will cost close to $1 billion, according to a company spokesman.

Officials with Western Energy Partners, LLC, the Colorado company, expect to finish building the plant in the middle of 2019 and employ 30 full-time employees once it is operational, according to a press release. They anticipate creating approximately 800 temporary jobs while building the plant, according to the release. 

Natural gas will provide 680 megawatts of the electricity produced by the plant, and solar panels will generate the other 70 megawatts, according to the press release.

Let's do the math.

The plant: $1 billion / 750 MW = $1.33 million / MW
70 / 750 =  0.093

At the "usual price":
70 MW x $3 million/MW (solar) = $210 million
680 MW x $865,000/MW (ng) = $588 million
total = $798 million
$1 billion = x *$798 million
x = 1.25

For solar: 1.25 x $3 million / MW (solar) = $3.75 million / MW (solar)
For natural gas: 1.25 x $865 thousand (natural gas) = $1.08 million / MW (natural gas)

At the "usual prices" for solar and natural gas, $1.33 million / MW is about twice what a natural gas project would have cost or about half what a solar plant would have cost. So, the natural gas plant is subsidizing the solar portion of the plant by a significant amount. But the developers grease the political wheels/regulators AND get the tax breaks for going solar to help "sell" the entire plant. In addition, it probably helps meet various state mandates requiring a certain amount of electricity from solar or wind energy.

This is most interesting: using the "usual" prices for natural gas and/or solar, this plant is costing 1.25 times what one would expect a power plant to cost. As noted above, using the "usual" prices, this plant should have come in at around $800 million. Instead it comes in at $1 billion (and most projects of this size come in over budget).

My hunch is the natural gas portion of the plant is coming in at about $1 million /MW and the solar portion is coming in at about $4.7 million / MW.

Checking the math:

• 680 x $1 million / MW = $680 million
• 70 x $4.6 million / MW = $320 million
• Total = $1 billion (rounding)

You can do your own math. If you think the $4.6 million / MW for solar is outrageous, then make it a smaller number, but then you have to increase the cost of natural gas which makes no sense considering the current glut of natural gas. If you think $1 million/WM for a natural gas project is outrageous, then you have raise the cost of solar.

Perhaps the real question is, where is the "0.25" hiding in the fine print of the business plan for this project.

(A huge "thank you" to a reader for noting a simple arithmetic error in the original post. That has been corrected. There may be more errors.)