The Sun Shines in Nevada, and the Wind Blows in Nebraska: Renewable Energy Has Become an Attractive Investment

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I still find it hard to believe. A friend of mine told me a year ago that he had just built a 350 MW solar farm in Nevada that is 2 miles by 3 miles in extent. I was even more surprised when he told me that the investment cost $1.5/watt, not the $6-10/watt that I was familiar with, that he would get his equity investment back in six months and be able to sell electricity at $0.06/kWh. The 1 million solar panels in Nevada produce electricity 27% of the time; not 14% that is the climate limit along the US East Coast.This year he told me that he was now investing in wind farms and had just finished building one in Nebraska which has 75 MW of capacity using 49 wind turbines on 5500 acres that provides power 52% of the time.  He also said that, like solar panels, the cost of wind turbines has progressively declined. This investment, too, will return his equity investment in less than nine months. Collectively he is investing $1.5 billion per annum for his large utility parent and, of course, because the investment is returned so quickly he is under the gun to continue making the same investments each year. The investment climate is driven by state and federal governments that provide incentives to encourage forms of power that reduce greenhouse gases. The impact worldwide is impressive. In 2014, solar power grew worldwide by about 40 Gigawatts with the major growth taking place in China and the US. Solar PV Capacity Graphs And wind power grew by 370 Gigawatts in 2014, almost 10x more than solar, with the largest growth, by far, taking place in China.

Wind Capacity Graphs

So long as government policies continue to provide investment incentives, my friend and many others like him worldwide will continue to invest in renewables. Natural gas, a less costly but environmentally attractive alternative, will continue to be the preferred “security of supply” power generation fuel. But if the capital cost of renewables continues to decline, the incentives may soon not be needed. This would further erode the demand for hydrocarbons, which is why Saudi Aramco reduced the cost of oil in 2014 – a concern that “peak demand” would occur sooner than expected and long before “peak supply.”

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David Donohue

Dr. David A. T. Donohue is the Founder and President of both IHRDC and Arlington Storage Corporation. Dr. Donohue is a technical specialist, businessman, attorney, and lecturer who is highly regarded for the teaching of management programs devoted to the business of oil and gas. He has successfully designed and taught these “business game” programs to more than 10,000 members of the international oil and gas industry on both in-house and public bases. He was the developer of an innovative video-based learning system for the upstream petroleum industry, which has now been converted to IPIMS, a widely licensed e-Learning system. Dr. Donohue is also the developer and owner of independent underground gas storage facilities in New York State. In his early career he held various positions in engineering and research for Exxon and, for four years, served on the faculty of Pennsylvania State University. Dr. Donohue holds a Ph.D. in Petroleum and Natural Gas Engineering from Pennsylvania State University and a J.D. from Boston College Law School. He is active in public affairs in his hometown, a Distinguished Member of the SPE, and Alumni Fellow of Pennsylvania State University.

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3 comments on “The Sun Shines in Nevada, and the Wind Blows in Nebraska: Renewable Energy Has Become an Attractive Investment
  1. Dick Plumb says:

    David,

    Thank you for your informative article. These are impressive statistics. It is reassuring that China is such a strong player in the use of renewables given their heavy reliance on coal-at the moment.

    Dick

  2. Roe Goddard says:

    Thoroughly enjoyed reading your blog on renewables. I am also very pleased to read and enjoy your objective look at energy sources as we enter a period in which the impact on climate change of fossil fuels seems to be compounding and accelerating. At least, from this intermediately-informed observer’s perspective, the doubters seem more and more marginalized, and the absurdity of their denial of the obvious is undermining their standing and legitimacy to participate in the forming of a new energy policy under the global climate change talks soon to begin.

    Having traveled to China more than 75 times, and lived, taught, and consulted there, it makes perfect sense that the Chinese would be aggressively pursuing renewables and particularly solar energy. With approximately 65% of its landmass being arid and desert, maximizing the number of non-cloudy days, China is a prime sight for maximizing solar power generation. Moreover, Xi Jinping and fellow members of the CCP are well aware of the smoke-filled streets in Beijing and many other industrial cities, as well as the rising respiratory illness and popular discontent over pollution of its populace. Mid and upper-level communist party officials, referred in China derogatorily as “naked officials,” have led a wave of Chinese quietly purchasing residential real estate in much more environmentally-friendly countries (Australia, Canada, UK, US) and moved their families there purely out of concerns for their personal health.

    Beijing has become quite a dingy place, with rarely a day of blue sky, 365 days a year. Personally, I have found it difficult to ride in a taxi around any of the major perimeter/ring roads encircling Beijing without developing a headache and becoming nauseous, just because of the constant inhalation of heavily polluted air. This is repeated in virtually every first, second, and third-tier city in China, with these cities now numbering over 100! If you combine the pollution of waterways and groundsoil and examine the statistics, it is alarming and many companies are now reporting having difficulty recruiting expats to work there, let alone take their families and relocate.

    So, from my perspective, I really appreciated your no-nonsense, reality check, blog on renewables. Just wish I had a billion dollars to purchase some acreage surrounding my home and install a solar array. I live in Arizona!

    Roe

  3. WWICS Review says:

    The solar power is the perfect solution for the future.The use of solar power can control the level of pollution, as the process of generating electricity from sunlight cause no pollutants.

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