It is difficult to compare the cost of renewable energy to energy derived from fossil fuels. Renewable energy is free! No one charges for using the wind or the sun to create electricity. The fuel cost for sun and wind power is free. Fossil fuels are not free. You have to pay for the coal, oil, and natural gas used to generate electricity.
The Cost to Build
There is however, the cost for building the solar collectors and the wind mills that capture this energy. There is also the cost for building the fossil fuel power plants. Financing costs for a new energy plant (renewable and non-renewable alike) is a big part of the cost when you assume that the cost of the plant will only be recovered over many years. It is less expensive to build a coal fired power plant per unit of energy produced than to build a solar collector.
Another factor in the cost of electricity is how much utilization an energy plan has. If you only use the plant one third of the time for peak demand, then the amortized cost for each unit of energy goes up.
To get the true cost of energy you have to amortize the cost of the plant and equipment over the amount of energy it will produce over its lifetime and add to that the cost of the fuel. Then you have the true cost to produce the energy.
Coal is still the cheapest way to produce electricity, but wind power is catching up and the cost of solar is coming down.
The Cost to Operate
All of the above relates to the build decision to add more power plants. Once the plants are built, then the cost to operate becomes the only decision on how power is produced. If you have already built a wind farm and a coal plant, then the cost to operate the wind farm will be much less than the cost to operate the coal plant. Free wind is always going to be cheaper than the cost of coal. When the wind farm is producing power, the utility will decrease the amount of power from the coal plant to save on the cost of fuel.
The decrease our use of fossil fuels, we only need to build more renewable energy power systems. These will displace the use of fossil fuels because the marginal cost to operate these systems will always be lower. Cap and trade does not automatically mean we will invest in more renewable energy systems. A better approach would be to target incentives to build more renewable energy systems. A small carbon tax on fossil fuels to help fund renewable systems would be a good way to displace fossil fuel plants while at the same time producing the energy we will need to grow our economy.
Comments
The primary feedstocks for the fossil and rebewables you mention are provided by mother nature (sun, wind, coal oil etc etc) the diffrence is that some can be traded as commodities while others cannot. One cannot sell wind or sunshine.
Energy agriculture finds it difficult to compete with established fossil commodities as it costs money to establish (grow) the feedstock. Biomass needs to be grown and/or collected and moved (only and economically sensible distance) to the refinery. In order to be economically competative out puts from biorefineries must disdiscover a market for products at the refinery gate. Complex biorefinery (One needs several systems working in sync to maximise output values) operations are expensive to design, build and operate however life time analysis may indicate that biorefineries have the best economic footprint of all in terms of GHG reductions, society and income generation.
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