Considering the abundance of influences, it’s difficult to start unraveling which sources cost less. Prices are tied to fuel costs, which are tied to demand and import costs (particularly in the case of petroleum), refining costs, and transportation. Except when the prices aren’t tied to fuel costs, because some sources have free fuel, like wind, solar, and geothermal. However, in the case of free fuel sources, other components of their costs more than overwhelm the benefits of free fuel.
The United States gets almost half its electricity from coal; it’s the cheapest source. Coal comes from inside the United States and there’s a lot of it. Coal’s affordability comes at hidden costs, like environmental degradation from mountain top removal, mercury-polluted water, acid rain, coal mining deaths, and so forth. If those factors are considered, coal starts to look costlier, but today, coal plant owners mostly only pay for equipment to reduce acid rain. They don’t have to pay for past pollution, or emitted airborne particulate matter, a difficult-to-measure but real contributor of lung cancer, chronic obstructive pulmonary disease, and asthma. Additionally, it’s unclear how to add in the cost of climate change from carbon dioxide emissions, a substantial amount of which come from coal power worldwide. In 2009, natural gas gained some ground on coal as an inexpensive source of energy because natural gas prices dropped, coal prices increased, and environmental compliance is becoming more expensive for coal plants.
What about sources that don’t emit greenhouse gas? Fuels for wind, solar, ocean, and geothermal power are free. However, partly because the technology isn’t built in bulk, and partly because wind and solar don’t work when it’s dark or not windy, these are expensive. Wind and solar both require a lot of land. If you factor in the cost to buy land and build the plants and run them, nuclear is far cheaper for the amount of energy it can generate. Nuclear fuel (uranium and plutonium) is also extremely cheap relative to its energy potential, but operating and maintaining nuclear power plants is costly, perhaps three times the fuel cost. Also, it is nearly impossible to build a new nuclear plant because there is considerable political opposition, so in that way nuclear begins to look much more expensive. Then there’s the cost of disposing of the spent radioactive fuel, a highly political issue.
Geothermal has cheap fuel and doesn’t require any special equipment. However, this form of energy is only possible in regions that have unprotected (not in national parks, for example) geothermal resources.
Transmission costs can’t be ignored. Another cost of renewable energy like solar and wind is that the source of power is located far away from where most people live, in the desert, the mountains, or off-shore. That ties new energy capacity with building new transmission lines, and new transmission lines are not only expensive, but people who live near the proposed location — understandably — oppose new lines, as do environmental groups who worry about the potential effects on local wildlife. Whether or not the oppositions’ concerns outweigh the need for the transmission lines, the process of working it out adds cost, on top of the significant cost to build the lines.
Tax breaks are making wind competitive. Nonetheless, even though solar and wind have always been considered far more expensive, some computer models suggest that, combined with the current, substantial tax breaks and stricter rules on fossil fuel power plants, some types of wind farms may be cheaper (over the plant lifetime) than the new technologies for coal and natural gas. However, wind has to be combined with other sources of energy as the fuel isn’t consistently available throughout the day.
Another factor in energy cost is running power plant. The price varies with how often a power plant is turned on and ramped up to its minimum operating level. Imagine if a power plant owner builds a plant that can provide 200 megawatts, but the region only needs 75 megawatts at its most electricity-hungry time. The owner isn’t able to sell as much power as expected and will have to charge more or be unable to recoup the cost of building the plant.
Be wary of side-by-side cost estimates. When it comes down to looking at the cost of energy by type, estimates vary widely. Just looking at a single source, say natural gas, requires experts to lump ten or twenty different plant configurations, of various ages, together. It requires estimating the cost of materials and construction, which is going up quickly because of demand in other countries like China. Estimating costs requires guessing what the price of natural gas will be in ten and twenty years; geologists can’t even completely agree on how much natural gas is available — no one knows how much gas will cost, experts can only guess. Government incentives are constantly changing, and they vary by state, but they can be critical to whether a plant is built or isn’t.