Katerina Swanson
The world is currently facing an urgent need to transition from fossil fuels to cleaner energy sources. While environmental sustainability is a key driver, the financial viability of renewable energy sources is also a critical factor. This paragraph introduces the topic of comparing the costs of hydro and geothermal energy with fossil fuels, exploring whether these renewable alternatives are more affordable and thus, attractive options for governments, corporations, and consumers seeking to reduce their environmental footprint without breaking the bank. With the cost of renewable energy being a potential barrier to wider adoption, understanding the economic landscape of these energy sources is essential for shaping future energy policies and investments.
| Characteristics | Values |
|---|---|
| Hydro and geothermal energy cheaper than fossil fuels? | Hydro energy has been providing cheaper electricity than fossil fuels. The global weighted-average levelized cost of hydropower electricity was equal to or below the cost of the cheapest fossil fuel alternative between 2010 and 2018. |
| Geothermal energy | Geothermal energy can be a productive and economically friendly source of round-the-clock power. However, it has high upfront costs and is expensive. In 2018, the global LCOE of new geothermal plants cost around $72 per megawatt-hour. |
| Geothermal energy cost in comparison to coal | Geothermal power plants are assumed to have a lifespan of less than 25 years, unlike coal-fired plants, which are assumed to last for upward of 50 years. This shorter lifespan results in higher costs per kilowatt-hour for geothermal energy. However, a tax on carbon emissions or state mandates for renewable energy sources could make geothermal energy more cost-competitive. |
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What You'll Learn
Hydropower has been cheaper than fossil fuels since 2010
Hydropower has been a source of clean, renewable electricity for over a century, and it has become an increasingly affordable energy source in recent years. Between 2010 and 2018, the global weighted-average levelized cost of hydropower electricity was equal to or below the cost of the cheapest fossil fuel-fired alternative, except for two years. This means that for the majority of this period, most hydropower was cheaper than the cheapest fossil fuel option.
Hydropower's affordability is a significant advantage in the transition to cleaner energy sources. While the environmental benefits of renewable energy are clear, the cost per kilowatt-hour has often been a barrier to its widespread adoption. However, with hydropower proving to be cost-competitive with fossil fuels, it becomes a more attractive option for governments, corporations, and industries looking to make the switch.
The affordability of hydropower is due in part to its relatively low levelized cost of electricity (LCOE). The LCOE takes into account the costs of financing, building, running, and maintaining a power plant, and expressing these values in dollars per megawatt-hour allows for a standardized comparison across different energy sources. Between 2010 and 2018, the global weighted-average LCOE of hydropower was competitive with fossil fuels, and in some cases, even lower.
Looking at more recent data, hydroelectric power remains the cheapest source of renewable energy, with an average cost of $0.05 per kilowatt-hour (kWh). This is significantly lower than the average cost range of developing new fossil fuel power plants, which typically ranges from $0.05/kWh to over $0.15/kWh. The affordability of hydropower, combined with its renewable nature, makes it an appealing option for reducing carbon footprints and promoting sustainability.
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Geothermal energy is more expensive than wind energy
Renewable energy sources like hydropower, wind energy, geothermal energy, and solar power are environmentally sustainable and attractive to the average consumer. However, they may not be initially cheap. While wind energy and solar power can now compete with fossil fuels, offering health and environmental benefits, they are still intermittent and inconsistent.
Geothermal energy, in particular, has been viewed as a costly renewable energy source. In 2018, the global LCOE (levelized cost of energy) of new geothermal plants was around $72 per megawatt-hour, significantly higher than wind energy. As the global geothermal power sector expands, upward pressures on installation costs are expected due to grid developments and regulations. For example, the construction of new power lines can make geothermal plants more expensive, as seen in Indonesia, where geothermal spots are scattered across islands and near mountainous regions.
Despite the higher costs, geothermal energy has advantages over wind and solar energy. Geothermal energy provides round-the-clock electricity, while wind and solar power are intermittent, depending on the availability of wind and sunlight. When compared to nuclear, gas, and coal generation, geothermal energy is more competitive. According to Lazard's LCOE research, the cost of geothermal energy per MWh ranges from $61 to $102, which is half the cost of nuclear power and cheaper than coal and gas.
While geothermal energy currently faces higher upfront costs compared to wind energy, there is optimism for the future. With innovations and support from organizations like Fervo and the Department of Energy (DOE), costs are expected to decline. The DOE aims to reduce geothermal costs by 95% by 2035 through research, development, and deployment. As renewable energy gains more attention and investment, geothermal energy may become more cost-effective relative to wind energy in the long run.
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Geothermal energy has high upfront costs
Geothermal energy has been regarded as a promising alternative to fossil fuels, but it faces the challenge of high upfront costs. The exploration, development, and management of geothermal resources are inherently complex and costly. Exploration activities, such as pre-drilling geotechnical studies, confirmation drilling, and development drilling, contribute significantly to the overall project expenses. These initial costs are crucial factors in the slow adoption of geothermal energy.
The high upfront costs of geothermal energy projects can be attributed to several factors. Firstly, geothermal energy, as a subsurface resource, presents unique challenges in exploration and development. The complexity of accessing and harnessing energy from deep within the Earth's surface incurs significant expenses. Additionally, geothermal projects often encounter barriers related to land access, permitting, and project financing, further increasing upfront costs.
Moreover, the costs of building a geothermal power plant are heavily weighted towards early expenses rather than fuel costs. Unlike coal-fired power plants, which have assumed lifespans of 50 years or more, geothermal plants are expected to last for a shorter period. As a result, the costs of constructing and operating a geothermal plant cannot be spread out over as many years, leading to higher upfront financial burdens.
Despite the high upfront costs, geothermal energy offers distinct advantages that make it a worthwhile investment in the long run. Geothermal power plants can operate with a high-capacity factor, producing electricity more than 90% of the time. This high availability means that the initial costs can be recouped more quickly, as there is minimal downtime once the plant becomes operational. Additionally, geothermal energy is a sustainable and inexhaustible source of power, providing an attractive alternative to finite fossil fuel resources.
To address the challenge of high upfront costs, policies and subsidies are being implemented to support the development of geothermal energy. Government initiatives, such as direct subsidies and funding for research and development, aim to reduce the financial barriers associated with geothermal projects. These efforts are crucial in making geothermal energy more accessible and competitive with other energy sources. With continued advancements and support, geothermal energy has the potential to become a more widely adopted and cost-effective solution in the future.
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Geothermal energy has a high capacity factor
Renewable energy sources like hydropower and geothermal energy have been providing electricity at a cheaper rate than fossil fuels in recent years. The global weighted-average levelized cost of hydropower electricity was equal to or below the cost of the cheapest fossil fuel alternative between 2010 and 2018.
Geothermal energy, which uses the Earth's internal heat to generate power, has a high capacity factor. This means that it can produce electricity 90% of the time or more, according to the US Department of Energy. Geothermal power plants have a high and relatively flat capacity factor throughout the year because they are not dependent on seasonal factors such as precipitation, wind resources, or exposure to the sun. This is in contrast to other renewable energy sources such as wind and solar power, which are intermittent and inconsistent.
The capacity factor of geothermal power plants in the United States stood at an average of 69.4% in 2023, up from 76% in 2018, and it is the highest capacity factor among renewable energy sources. This high capacity factor means that the costs of building a geothermal power plant can be recouped more quickly, as there is very little downtime once a plant is operational.
However, the costs of building a geothermal power plant are high, especially in the early stages of the project. Exploration activities, such as pre-drilling geotechnical studies and development drilling, can increase overall project costs. Additionally, geothermal power plants are assumed to have a shorter lifespan than coal-fired plants, which affects the spread of construction costs over time. Despite these high upfront costs, geothermal energy may be a worthwhile long-term investment due to its high capacity factor and the potential for government subsidies and incentives for renewable energy sources.
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Geothermal energy may be cheaper than coal
The cost of energy is a complex issue that depends on various factors, and the cheapest option can vary over time and by location. However, there is evidence to suggest that geothermal energy may indeed be cheaper than coal in certain contexts.
Firstly, it is important to understand the environmental benefits of renewable energy sources such as geothermal power. By burning less fossil fuel, we can reduce our environmental footprint and mitigate the serious roadblock that has hindered the adoption of renewable sources: the cost per kilowatt-hour. Recent reports indicate that geothermal energy may be more cost-effective than previously thought, possibly even cheaper than coal.
Geothermal power plants work by pumping hot water from deep beneath the Earth's surface, which can then be used to turn steam turbines directly or heat another liquid that turns the turbine. This technology has been available for years, but high upfront costs have made companies more likely to invest in cheaper options like natural gas-powered plants. However, geothermal energy has advantages over natural gas as, although it may be more expensive to build the infrastructure, the cost of fuel needed to run the plants is much lower.
Additionally, government incentives and subsidies for renewable energy sources can further reduce the cost of geothermal energy. For example, the US government has included $28 billion in direct subsidies for renewable energy in a recent stimulus package. This support, combined with technological innovations, can make geothermal energy more affordable and accessible.
While coal-fired plants have traditionally been assumed to have a longer lifespan than geothermal plants, spreading their construction costs over a more extended period, the recent shift in market dynamics has made affordability a priority. This new focus on cost, coupled with the potential for geothermal energy to be produced cheaply using existing resources and technology, makes it a competitive alternative to coal.
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Frequently asked questions
Yes, hydropower has been providing cheaper electricity than fossil fuels. Between 2010 and 2018, the global weighted-average levelized cost of hydropower electricity was equal to or below the cost of the cheapest fossil fuel–fired alternative.
Geothermal energy is more expensive than fossil fuels like coal due to high upfront costs. However, geothermal energy is cheaper in the long run because it does not require fuel storage, transportation, or combustion. Recent reports suggest that geothermal energy may be cheaper than every other source, including coal, due to its high-capacity factor and ability to produce electricity 90% of the time.
Renewable energy sources like hydropower and geothermal energy have clear environmental benefits, such as reduced CO2 emissions, compared to burning fossil fuels. Additionally, they can provide productive, economically-friendly sources of round-the-clock power where there are reliable, high-temperature resources.
