As renewable energy costs drop, investors sour on fossil fuels

For decades, the down time of solar and wind energy projects have kept renewable energy from gaining a larger share of the overall energy market. But now the growing adoption of renewable technologies is making for less downtime, giving investors a hint of the technologies’ potential to disrupt power production markets.

Renewable energy sources have suffered from their low “capacity factor,” based on the amount of power they produce over time, according to Bloomberg. The nighttime downtime for solar energy, for example, means that solar plants that can produce 100 megawatts of power during peak daylight may produce on average just 20 percent of that, making the plant’s capacity factor 20 percent.

But now solar and wind are competing with natural gas or coal plants, even though the latter have much higher capacity factors. That’s because once renewable plants are built, they have none of the input costs that come with fossil fuels that need to be constantly replenished.

Wind and solar energy plants are now outcompeting gas and coal plants, leading more power companies to cut back on their fossil fuel plants and build more renewable operations.

Wind and solar energy have remained at about 5 percent of all U.S. energy output for many years, but an analysis by Bloomberg New Energy Finance shows that the recent growth trends in renewables is having a greater impact on power companies’ decisions about when to keep their fossil fuel plants running.

As power operators look to renewable sources and use their fossil fuel plants less, the formerly advantageous capacity factors of fossil fuels decline, making renewables more attractive. The trend creates a self-reinforcing cycle that favors a transition to renewable energy. Coupled with new efficient batteries, renewable energy becomes even more competitive.

Last year, for the first time wind power became the cheapest electricity in the U.S., factoring in government subsidies.