Wind and Solar Construction Costs Rose in 2022, Natural Gas Fell

Nat gas is about half the construction costs of wind and solar

According to the U.S. Energy Information Administration (EIA), average construction costs for utility-scale solar increased by 1.7% in 2022 compared with 2021 data, and increased by 1.6% for wind turbines, respectively. Meanwhile, in the realm of affordable and reliable energy, construction costs for natural gas generators decreased by 11% in 2022. The EIA’s analysis looks at only utility-scale projects and not residential ones. 

Not only did construction costs increase for wind and solar power, but wind and solar are more expensive than natural gas construction per kilowatt of capacity. Capacity refers to the maximum amount of electricity that can be produced by a particular power generator. However, what’s important is how much electricity is actually produced over a period of time. Solar and wind have low capacity factors (23% and 33%, respectively, in 2023) because the wind is not always blowing and the sun is not always shining.

Per kilowatt of capacity, natural gas construction costs averaged $820 in 2022, whereas average solar construction costs rose to $1,588 and average wind construction costs rose to $1,451. Natural gas construction is about half as expensive as either solar or wind. And that’s before considering that solar and wind are only running between a quarter and a third of the time. 

Increases in solar construction costs were driven by a 13% increase in crystalline silicon tracking panel costs, the kind of solar panel that follows the sun’s movement and the most common type of U.S. solar panel installation, which increased to $1,605 per kilowatt. Wind turbine construction costs were driven by wind farms with turbines larger than 100 megawatts of capacity and less than 200 megawatts, which grew by 10%. 

Natural gas construction costs decreased largely due to sharp decreases in the cost of combined-cycle facilities, which declined 42% in 2022 to $722 per kilowatt. Combined cycle is the most common type of natural gas-fired generator, is highly efficient, and is used for baseload consistent power generation. However, other types of natural gas plants, which can ramp up quickly and are used to meet spikes in demand, saw increases in construction costs. 

Construction costs are one thing. But building a grid out of wind and solar costs far more than the mere expense of building the panels and turbines. Because wind and solar must be able to meet peak electricity demand, there must be significant overbuilding of wind and solar resources that most of the time stand idle. Worse, there are costs associated with curtailing wind and solar resources when their electricity isn’t needed but is being generated. 

Despite new capacity additions, U.S. wind generation decreased by 2.1% in 2023, and the EIA noted then that “the 2023 decline in wind generation indicates that wind as a generation source is maturing after decades of rapid growth.” Recent years haven’t been kind to solar, either, as SunPower, the nation’s largest solar panel installer, filed for Chapter 11 bankruptcy in 2024. Under the Inflation Reduction Act of 2022, wind and solar projects that begin construction by 2032 are eligible for Investment Tax Credits of at least 30% and may be eligible for up to 60% of project costs based on other factors. The EIA’s data makes it clear that wind and solar would not be cost-competitive without subsidies.

This piece was originally published at Independent Women’s Forum on November 15, 2024.