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By Michael Kanellos

San Francisco-Renewable energy isn't as cheap as it used to be.

Prices for wind and solar power have crept up in recent years with the growth of the market, said PG&E (NYSE:PCG) CEO Peter Darbee during a talk at Reinventing Fire, a three-day conference hosted by the Rocky Mountain Institute (RMI) in San Francisco.

PG&E used to get wind power from independent providers for 6 to 8 cents per kilowatt hour. Then it rose to 8 to 10 cents, said Darbee. "Now it is it north of 10 to 12 cents," he said.

Power from solar panels now runs around 15 to 20 cents a kilowatt hour, he added. G&E, though, buys power from several sources and prices vary in contract and spot deals. In the future, utilities will build their own solar power plants, which could ameliorate price fluctuations.

Meanwhile, nuclear power from the Diablo Canyon nuclear power plant costs around 3 to 4 cents a kilowatt hour. That's a levelized cost, Darbee added, meaning that the cost of building the decades-old plant is embedded in that price.

PG&E is not turning against alternatives. Far from it. The utility remains perhaps the most aggressive and strongest supporter of renewables in the U.S. The prices, though, reflect the challenges associated with renewables.

Government agencies are a major headache, Darbee said, which indirectly can drive up prices. He pulled up an example of a renewable developer that had been working on a project for approximately seven years. Although the project was moving toward the final stages of approval, some members of a state agency asked for an appeal, effectively postponing it further. The reason? The official explained that they had been trying to look into the project for two years and hadn't had a chance to get around to it yet.

"That is the grossly irresponsible behavior of agencies today," Darbee said.

PG& E would also like the State of California to adjust how the state issues credits for solar power generated on rooftops. Right now, when consumers provide solar power to the grid, PG&E effectively gets charged the maximum retail rate, or 45 cents a kilowatt hour, by the regulatory agencies. While the price drops as volumes increase, it's still somewhat unattractive for utilities.

"The time has come to revisit the economic structure," he said. Some independent power providers have also tried to renegotiate and raise their prices with PG&E due to the credit crisis.

Amory Lovins, chairman and chief scientist of RMI, noted that the surge in demand has been a factor in pushing up prices for wind and solar. Wind power from large wind farms has risen from 4.5 cents per kilowatt hour to 5.15 cents a kilowatt hour. (Lovins's price estimates are based on national averages. Darbee spoke about what PG&E pays). When supply catches up with demand, price pressure diminished. PV panels, for instance, have dropped by 25 percent in the past year with the surfeit of silicon.

Lovins also noted that Diablo Canyon was built decades ago. Current labor and steel costs would cause the price of nuclear power to zoom. In fact, the estimated cost of building nuclear power plants has risen from $2.3 billion to $6 billion since 2003, according to various industry estimates.

Nuclear, he added, costs more than most renewables, reduces two to 20 times less carbon, and takes 20 to 40 times longer to go from construction to providing power, said Lovins.

Either way, further nuclear isn't in the cards for PG&E now anyway, said Darbee. Politicians and customers are skeptical and shareholders may not benefit. Besides that, the weather outlook is good.

"We are in an excellent territory when it comes to renewables," he added.

Source: PG&E Says Renewable Power Prices in an Upswing