If you haven’t been watching the price per megawatt of renewables, you should be. A decade ago the price of power from renewables was still considered above the reasonable cost threshold in comparison to conventional power generation, so few companies sought out power off-take agreements from renewable sources. Price of power from wind farms was the first to see dramatic drops in price largely lead by the fact natural gas production was bringing the price of electricity down across all grids. Manufacturers of wind turbines had to build ever more efficient wind turbines of higher production efficiencies to compete in a declining forward wholesale power curve. Prices of power from wind farms has dropped from around $50mWh in 2009 to now under $15mWh in most parts of the upper Midwest in the US.
If your company is a significant consumer of electricity, you need to be looking hard at entering into a renewable energy power off-taker agreement to keep your business competitive in line with your peers. If you think renewable energy is something you would only consider because of “branding” it’s bigger than that, in this case, has everything to do with cost and your ability to compete against an industry peer who bought cheaper power than you. No longer is buying renewable a solely ideological decision, in fact now it’s become so common place many companies don’t spend much time marketing that fact instead it’s about the competitive arms race every CEO, CFO, and Boards of companies deal with in the bottom line.
If you think your company isn’t big enough to warrant a look into the competitive bidding processes which are going on every day in the wholesale power markets, then you need to consider engaging in an aggregated RFP with other companies to leverage collective volume of usage to get access to requests for proposals directly from wind farms.
As the western desert states move toward a standardized power grid and wholesale power market that region will open up wonderful opportunities for large scale solar farms to thrive. While the price of production of electricity from commercial solar farms isn’t as cheap as electricity from wind farms you as a reader need to understand that’s not a 1:1 comparison. Wind farms are larger producers of wholesale power in off-peak night time hours conversely solar delivers the vast majority of its production during peak day time hours when the wholesale traded price of power is highest. This means there are several ways solar can be just as cheap net to net of what you are currently paying and if solar is paired up with wind farms it makes for a remarkably cost-effective strategy.
Of course, there is always the push back of what happens when the wind doesn’t blow, or the sun doesn’t shine talking point to which is why we have a power grid. Power grids are dynamic and highly flexible systems designed to accommodate these fluctuations. Texas wholesale power grid has demonstrated that over and over again successfully managing over 20,000 MW of renewable power in its system. Also the Southwest Power Pool, the grid in the middle of the US where some of the fastest buildups of wind farms has occurred has seen days where over 50% of the power delivered to the grid was from wind farms, and consumers enjoyed that cheap resource of electricity and didn’t see any deviation in service.
The old saying “you snooze you lose” still applies and couldn’t be any more accurate in explaining why you as a wholesale consumer of electricity need to be smart and proactive in getting on board the renewable energy wagon.
Author : Gary Aksamit LinkedIn : Gary Aksamit Expertise Areas : Energy & Capital Markets