For decades, those advocating for a clean-energy revolution had to advocate for better analysis and calculations to demonstrate that going clean (solar, wind, efficiency) was the smart choice. Traditional financial structures and analysis favor dirty solutions: emphasizing upfront costs (rather than life-cycle costs), discounting future benefits and costs, stove-piping analysis without considering systems implications, ignoring ‘co-benefit’ streams, and leaving negative externalities out of the equation. Within those traditional approaches, the deck was stacked against choosing the clean solution.
Analysts in this arena, trying to find ways to fully capture the benefits of clean energy in the analysis, have developed a number of non-traditional approaches to assess energy investments. For instance, analysts may focus on life-cycle costs, rather than just initial purchase prices. Products purchased at an initial price come with associated longer-term costs that are frequently overall much higher than the purchase price. Focusing on sticker price can, often, lead to a less optimal longer-term cost structure. Rather than focusing on CtB (cost-to-buy), a more accurate measure is CtO (cost-to-own), whether this is in deciding whether to buy an electric taxi, ‘green’ a school, lighting in a condominium building, or purchase a desk lamp: understand not just the purchase price, but the full costs of owning/operating that ‘system’.
There are many other elements of clean energy that could, but are often not, included in project analysis. Co-benefits, like job creation, increased productivity, reduced maintenance costs, and improved health are all valid benefits of renewable technology that are not always considered by private firms. Many of these benefits are driven by reductions in pollution that is too high, in part, because private firms fail to price it in their investment models. This failure is exacerbated by the direct subsidies some energy companies receive that act as a negative price on pollution.
When doing such fully-burdened cost-benefit analyses, whether for an individual home (through accounting for “home performance and comfort” rather than simply “energy costs”), designing schools or climate action across an entire economy, the return-on-investment for ‘clean’ can easily be greater than for traditional, more polluting technology.
Whether for the individual looking at a light-bulb purchase price at the hardware store, the CFO deciding how to invest corporate resources, or the School Board making decisions on school construction, this sort of ‘comprehensive’ robust analysis was difficult. Some decision-makers are ready to think comprehensively, but most people don’t calculate and compare six options to understand the difference in energy costs over ten years for a new TV. Likewise, few CFOs think about (external) work force productivity when making energy-efficiency investment decisions.
Well, ‘the times, they are a changin ...’
Increasingly, across economies and across different levels of decision-makers, this environment is changing — quite radically. Complicated analyses are increasingly no longer required, as simple traditional financial calculations are often showing that the clean choice is the better financial choice.
For example, the Google calculation of RE<C (renewable energy costing less than coal) is increasingly becoming reality. When proposed a decade ago, this seemed a lofty objective — to drive down the price of new renewables (like solar and wind) to well below the price of new coal plants. In market after market, renewables, especially solar and wind, are blasting through that target: it isn’t just cheaper to install new wind and/or solar electricity than coal (and, often, natural gas), but building new wind and solar is cheaper than continuing to operate existing coal facilities. This new reality is why renewable electricity around the globe represents the vast majority of new electrical generation capacity, with new coal plants disappearing from planning and existing coal plant retirements (or conversions to natural gas) occurring on an almost daily basis.
Colorado’s recent bidding for electricity is making real news and providing (yet) another blunt signal that the renewable revolution is real and accelerating. As part of a long-term plan, XCEL Energy put out a request for proposals for new electricity generation. Released on about the slowest news moment, 29 December, solar and wind prices blew away polluting electricity options without requiring any form of the considerations above. And, including in storage still left, the wind and solar costs are far below coal costs — even existing coal generation costs.
Remarkable renewables and storage bids coming out of Colorado. Always amazed by how quickly coal power is losing its economic footing. More here: https://t.co/JtXZPHnvLH pic.twitter.com/daQnbUdAb5
— Matt Gray (@matthewcgray) January 8, 2018
With numbers like these, any fiscally sensible planner won’t just be buying clean energy for new generation but considering paths toward retiring out more expensive fossil fuel generation — as fast as possible. As Joe Romm put it, this is how coal dies — super cheap renewables plus battery storage.
The real world — the people doing green-eyed calculations — are stating that they can deliver not just RE<C, but renewable energy far less expensively than coal. That matters.
All that analytical effort for ‘fully-burdened costs’ isn’t irrelevant, even if it is less required to enable decision-makers to make cleaner choices, now that traditional analysis is increasingly pointing to those choices anyway. If that broader analysis is incorporated, as well, it will even further accelerate moves towards clean energy solutions.
Image courtesy of Flickr. Originally published by S&S on March 8, 2018.