Cost of Renewables in the Dec. 2015 AEP Settlement

Revised 01 & 18 Jan 2016


I have estimated the cost of the renewable part of the AEP/Sierra-Club agreement and believe that the amount is conservative. The result (details below) is that households should pay 34¢ per month. Note that I have used real prices. Many analyses use a quantity called levelized cost of energy (LCOE), which is hypothetical.


The key to costing the wind and solar premium is to estimate the excess cost over what the customer is paying for conventional power.


Wind production = 500 MW*730 (hours)/month*0.33(capacity factor) = 120,000 MWh/month. Since residences consume one-third of the electricity in  Ohio, their share of the renewables is 40,000 MWH per month. @ 1.5 million AEP customers, each customer’s share is 27 kWh per month.

The Michigan compliance report says price of wind is in the low 50’s per MWh. LRL survey says average price in our region (OH, IN, Il, MI, WI) is $34.

The lowest AEP generation price to households for conventional fuels is $51.90; it rises to $61.50 per MWh for the longest contract. So a wind premium of $5 per MWh (= 0.5 ¢ per kWh), assuming that Ohio pays the Michigan price, is used. The cost amounts to 14 ¢ per month for 27 kWh


Solar production = 400 MW* 730 hours per month* 0.15 (capacity factor) = 44,000 MWh/per month with 14,700 going to residences. @ 1.5 million AEP customers, each customer’s share is 10 kWh per month.

Price data for large solar, which AEP plans to build, is scarce. The solar industry reported a price of $61 per MWh for a facility in Alabama, which has only a bit more sunshine than Ohio, according to the solar map. To be conservative, I chose a solar cost for Ohio of $70 per MWh, which is a premium of $20 per MWh (= 2¢ per kWh) over the AEP conventional-power price. The solar cost amounts to 20 ¢ per month for 10 kWh.


AEP Customers: Wikipedia, American Electric Power, accessed 12 Dec. 2015

AEP Price:

LRL survey: Ryan Wiser, et al., 2014 Wind Technologies Market Report, Aug. 2015 (n. b. fig. 46)

MI Compliance Report: Michigan Public Service Commission, Report On The Implementation Of The P.A. 295 Renewable Energy Standard And The Cost-Effectiveness Of The Energy Standards, February 13, 2015 (n. b. p. 30)

Solar Map: NREL, PV Solar Radiation,

Solar Report: M. Makyhoun, et al. Utility Solar Market Snapshot, May 2015



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