The paradox of declining renewable costs and rising electricity prices:
Share to linkedinMost energy observers recognize that the cost of renewable energy has declined dramatically in the last decade. The investment firm Lazard produces a periodic report on the average cost of generation from different electric power sources – the “levelized cost of electricity” in energy geek parlance.
This would seem to be good news for those interested in making energy clean and cheap. Yet, a recent study suggests that policies that mandate renewable use have driven up the retail price of electricity and have been an expensive way to achieve greenhouse gas reductions – often an implicit reason for those mandates.
These dramatic renewable generation cost declines have been attributed to policies such as tax credits, preferential feed-in tariffs, and renewable portfolio standards , which directly target the use of renewables, expand demand and create cost-reducing economies of scale to meet that demand.
prices that electricity generators are paid. Because variable renewable energy resources wind and solar incur virtually all of their costs up front and incur no fuel costs to produce electricity, the average cost of VRE generation is much higher than the marginal cost, which is close to zero. Much electricity in the US is transacted in states with competitive wholesale electricity markets.
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