So far, this week, we have been going strong discussing wind energy and the positive developments cycling around this budding industry. We might as well finish strong and look at some more positive outlooks to the future of wind energy costs, and why not, other renewable sources as well. Earlier this week, I covered improving affordability of wind energy and the rate at which industry experts believe that prices will continue to fall. Before we begin one more piece of background information to be aware of; back in October of 2020 the International Energy Agency (IEA) confirmed that solar was the cheapest source of electricity in history. With wind energy costs at an all-time low and solar energy already being the cheapest ever where are energy costs going to go in the future?
If the US Energy Information Administration (EIA) is to be believed, and I think they’re a pretty trustworthy source of facts and figures, energy prices are going to keep trending downwards until 2040. Specifically, prices of electricity produced through renewable means. Per the 2021 Annual Energy Outlook report, the EIA projects that through 2040 geothermal energy will cost $37 per MWh, wind energy will drop to $30.8 per MWh, and solar will remain as king of cheap electricity with at $29.7 per MWh. In the long run, this continuation of decreasing prices will be supported by continued investor confidence as the cost of capital decreases. Additionally, I believe that should the current administration pursue its green infrastructure spending proposal investments into renewables will be expedited as public investment will lead the way to new industries.
The EIA report provided total energy capacity projections based on several cases. The most optimistic case was performed under a “low-cost renewable” scenario in which by 2050 the EIA projects a 657 GW increase in solar capacity and a 237 GW increase in wind energy production. Even though these figures were projected in a “best case scenario” I think that they are highly attainable. Offshore wind projects alone through 2026 are projected to add 10.7 GW of energy capacity, and in 2020 the US exceeded all previous years in installing new wind energy capacity of 14 GW. At this rate I believe that the 237 GW number will be one that we exceed far before 2050. An additional positive note about this projection is that it also predicts the retirement of 120 GW of capacity from coal plants. In every scenario projected, coal capacity decreased.
Unfortunately, not everything in the Annual Energy Outlook was painted green. The EIA also predicts that in most cases the United States will continue to be a global leader in the production of crude oils and refined liquids. Natural gas production is expected to most likely to continue increasing. Should low oil prices persist through 2050 natural gas production is expected to dip but eventually exceed 2020 levels. The only situation forecasted in which natural gas production decreases would be a decrease in the oil and gas supply.
What are your predictions about which scenario is the most likely case?