Don’t believe the renewables myth. Wind and solar are not cheap
By Paul Homewood
h/t Philip Bratby
Required reading for AEP, methinks!
From The Telegraph:
Politicians everywhere are repeating the mantra that renewable energy is cheap, and we need to use it instead of gas (currently expensive in and near Europe) to bring down energy costs for households.
As US President Joe Biden said of clean energy before signing the poetically named Executive Actions on Tackling Climate Change, Creating Jobs, and Restoring Scientific Integrity “it’s affordable; because it’s clean; because, in many cases, it’s cheaper… [clean technologies] will ultimately become cheaper than any other kind of energy, helping us dramatically expand our economy and create more jobs with a cleaner, cleaner environment”.
The Inflation Reduction Act has been designed to make this a reality. Lots of investment in lovely green energy and green jobs. This sounds wonderful.
Unfortunately, renewables are not cheap.
To demonstrate, let’s carry out a thought experiment…
Imagine you build a machine. It’s very expensive to build, but once it’s done, it makes Things. These Things are identical in every way to Things made by other people. Making Things is very cheap: the machine runs on wind/sun/water and has no fuel costs, and no raw materials are required. Making Things is essentially free once you have built the machine. What will you charge to sell your Things?
Normally you would want to recover the cost of building the machine and make some profit. Ten years is reasonable to recover capital costs, so you work out how many Things you will make over ten years and spread the cost plus some profit between them. After ten years, you’re happy to more or less give the Things away, selling them for a minimal amount.
But here’s the rub. Down the road is another Thing factory that was built eleven years ago, whose upfront costs have already been recovered. Those Things are being sold for next to nothing. Who is going to buy your Things now unless you also charge next to nothing? But if you do that, you can’t pay back the money invested in building your machine. That means that unless you can earn money from something other than selling Things, you will never build your factory in the first place.
In the electricity market, we get round that problem with subsidies. Originally, subsidies were paid because the technology for producing renewable electricity was immature meaning upfront costs were exceptionally high, but after more than 20 years of subsidies, this is no longer the case. Today, electricity prices are still determined for the most part by the cost of fossil fuels, so renewable electricity can be sold at much higher prices than the short term cost of production (which is next to nothing). But even then, renewables still require subsidies.
In fact, subsidies are growing. According to the Energy Information Administration, renewable subsidies in the US jumped to $15.6 billion in fiscal year 2022 from $7.4 billion in fiscal year 2016. In Britain, last year’s subsidy round was hailed as the cheapest and best, but the projects which bid have for the most part stalled as developers ask for more money, despite the high market price of electricity. Only two projects have confirmed they will go ahead and begun construction, while Vattenfall cancelled its Boreas project in the North Sea and Ørsted has warned that Hornsea 3 could be at risk without Government action “to maintain the attractiveness of the investment environment”, saying it is working “very hard” to make the project financially viable but that the electricity prices offered by the Government are not high enough to compensate for surging development costs.
If projects are not economic when electricity prices are at record highs, how will they work if a time comes when electricity prices are very low?
That’s the dirty little secret of the renewables game. The very high upfront costs mean developers have to be paid lots of money, and if the money from selling electricity isn’t enough then it has to come from elsewhere. But ultimately it comes out of consumers’ pockets, whether directly through higher bills, or indirectly through higher taxes.
That’s not all. Developed countries built their electricity grids decades ago when electricity came from a few large power stations. Renewable generation is built where it’s windy/sunny or has good access to water at height or moving fast (for hydro). These places tend to be not where old power stations used to be or where consumers are. This means lots of new infrastructure is needed to connect it all up. Guess who has to pay for that?
Next is the issue of intermittency: wind and sun vary from moment to moment. Individual clouds make a measurable difference to generation, as do gusts of wind. This creates two additional challenges – one is that if there’s no wind or sun, renewable output falls – the famous California “duck curve” measures the way solar output changes through the day with a major drop at sunset, when gas power stations need to take over.
Other sources of generation (there is no at-scale energy storage solution) have to be on standby to run when renewable output falls. But no-one builds standby anything unless it’s worth their while – and that’s another big chunk of change consumers have to cough up.
The other problem with intermittency is that electricity grids need supply and demand to be finely balanced in real time. Grid equipment can be damaged if this balance is not maintained within narrow tolerances. If clouds and gusts of wind change supply from moment to moment, grid operators have to use a range of techniques such as discharging batteries, getting conventional power stations to vary output, or large users to vary consumption, over short timeframes. Unsurprisingly, nobody does any of this for free. Another cost to consumers.
The final sting in the tail is that the grid infrastructure, despite expansion to cope with renewables, often can’t use all the renewable electricity generated. This electricity is wasted, and the renewable generators have to be compensated through “curtailment” or “congestion” fees, again paid for by consumers. According to consulting firm Grid Strategies, costs to consumers from congestion on the US power grid jumped 56 per cent in 2022 to an estimated $20.8 billion from $13.3 billion the year before. In Britain, data from the UK Wind Curtailment Monitor show that consumers paid £125 million in 2022 to turn windfarms off and £717 million to buy replacement gas-fired generation.
Even if the wholesale price of electricity fell to zero to reflect the short-run marginal cost of producing renewable electricity, the price paid by consumers would simply be more disconnected from the wholesale price than it is today. Consumers pay the wholesale price, plus a network cost (including congestion costs), plus a balancing cost, plus a subsidy cost, plus the retailer/supplier operating costs, plus some profits for everyone in the chain from the generator to the network owner to the network operator to the retailer. And then some taxes on top.
And to hit net zero the whole electrical system – expanded renewables, expanded grid, backup fossil, balancing, subsidies, curtailment payments and all – will have to be expanded to multiple times its current size, as fossil fuels used directly in such things as heating and transport are replaced with electricity.
Anyone who thinks all this is going to mean cheaper energy is dreaming. With respect, Mr President.
https://www.telegraph.co.uk/news/2023/08/25/renewables-wind-solar-energy-cheap/
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
AEP is generally competent on economic and financial matters, but he has a complete blind spot about renewables. He was gushing recently about how soon electricity is going to be virtually free. It is difficult to understand how he can be so oblivious to the economics of renewables (unless he receives a financial incentive reward from the renewables industry).
Just finished reading that and dropped in to see if you had picked it up.
Well worth saving the link.
According to RAIL magazine GB Cargo knows all about this and they have sidelined 35 of their electric locomotives because of high electricity costs. Class 66 2480 h.p. American diesels have replaced 7860 h.p. Class 90 British electrics.
” sidelined 35 of their electric locomotives because of high electricity costs. ”
Class 37 English Electric diesels are still doing useful work (constructed 1960 – 1965)
https://www.class37.co.uk/2023/2308work.aspx
It’s a very slick piece which uses logic, reason and observed evidence to dismantle the claim of ‘cheap’ renewables.
The fact that none of this will permeate the brains of our political class is very telling.
Needs repeating:
“The fact that none of this will permeate the brains of our political class is very telling.”
An axiom [2 points determine a straight line] is not easily defeated.
. . . . . . . . [CO2 heats the atmosphere] . . . .
What to do?
It won’t persuade vested interests until those people are cut off from subsidies.
Some people just refuse to see it, wind and solar aren’t free.
Wind power is for the birds, solar arrays at + 52ºN is bonkers and quite apart from the fundamental problem, when you need electricity most, wind and sun let you down.
Gotta get back to coal and yesterday wouldn’t be soon enough.
The variable cost for wind and solar approaches zero. In that sense, it is free.
Fixed cost is horrendous. Politicians are easily dazzled by the shiny low variable cost.
Only the direct, at the turbine variable cost.
‘The Inflation Reduction Act has been designed to make this a reality.’
That’s where the U.S. spent $1,000,000,000,000 to reduce inflation. Maybe if they had spent a trillion more, they would have solved it.
Spending money solves inflation?
Yep. It’s right there in the title.
‘Spending money solves inflation?’ – of course. It seems that to beat inflation is just to increase wages to balance it out – I hear that all the time on the radio from strikers.
AEP isn’t paid to understand Paul, just push an agenda. He can’t be that thick can he?
First place to start is drastically reduce, ideally scrap the taxes at point of sale to the consumer. Those taxes are particularly bad for transport fuels, but they are not the only ones with excessive taxes.
>>bring down energy costs
On of the main reasons that the cost of energy and fuel has had a large increase is the change in the ETS which came in a couple of years ago .
Unreliables generators are given carbon credits , which companies who use any fossil fuels have to buy from them .
This has led to the ” cost of living crisis ” and put the price of just about everything up by a large amount .
But it also is a very sneaky way of concealing the subsidies to the unreliables as the cost of these carbon credits is now paid by everybody without them mostly realising it .
Unless government spending reduces, taxes will then have to go up elsewhere. Quite how we now spend 50% of what we earn on the state is completely beyond me.
This is the problem. Too many non-jobs exist already, yet they keep getting invented while claiming “not enough money” for the basics.
>>Unless government spending reduces
Possibly because it takes 5 state workers to do the job that 1 worker in the commecial sector does
It wouldn0t be as bad if those state workers actually did something useful. But just look at the number of non-jobs, for example anything with “climate” in the job title, but also things like “street football coordinator”.
In the meantime, potholes don’t get repaired and schools and hospitals don’t get built
>>Possibly because it takes 5 state workers to do the job that 1 worker
Those that understand the energy sector have never been fooled by the ‘cheap renewables’, it is a misnomer
The biggest deliberate lie coming from both renewables and Government comes from the way they confuse the MSM and then the public between energy and power.
For instance the Government’s press release “Energy security boost with multi-million backing for renewables” issued 03/08/2023 makes the claim that the AR4 auction for “11 GW of low carbon capacity will generate sufficient electricity to POWER 12 million British homes……”.
https://www.gov.uk/government/news/energy-security-boost-with-multi-million-backing-for-renewables
This is simply untrue.
11 GW may, in a year generate sufficient ENERGY for 12 million homes, although my calculations show this to be insufficient by some 20%, but far more importantly the 11 GW of renewables are totally incapable of providing the dispatchable (always on demand) POWER required for 12 million homes because of intermittency.
Looking at the wind and solar data for 2022 you can find instances where the 42 GW of installed renewable power generates just 0.5 GW.
No-one in the UK expects their power to be intermittent.
The MSM and public need to be told this information to realise that renewables cannot operate without a parallel fossil fuel backup system in place and there is no plan, even in 2050, for any non-fossil fuel grid scale storage because it is so hideously expensive.
I have calculated the energy and power for the Labour Party’s proposal to decarbonise our electricity by 2030 by quadrupling offshore wind, doubling onshore wind and trebling solar, plus costing to increase the installed power further to enable dispatchable power using either hydrogen or batteries for storage.
For anyone interested to see the calculations, please email me at jbxcagwnz@gmail.com
11GW of wind at say 45% capacity factor generates about 43.4TWh. That’s about 3.6MWh per home if you assume 12 million homes. Perhaps enough electricity for current electricity consumption, but totally inadequate for ENERGY consumption: Heating demand will multiply this by a significant factor, as will energy used for transport.
The Government’s press release does specify just the electricity. Taking the energy produced (TWhrs) from the latest DESNZ “Energy in Brief 2023” and the installed capacity of wind and solar from Wikipedia (the Energy Brief for some strange reason does not have this data…) I calculate the capacity factors are onshore wind 29%, offshore wind 37% and solar 11%. These figures give a total energy of 28.6 TWhrs from the 11 GW of renewables, whilst the 2900 KWhr/year average UK consumption given by Ofgem comes to 34.8 TWhrs/year. I rather doubt that an average capacity factor of 45% for wind is achievable when onshore and ageing wind turbines are take into account?
The message is (just) getting through: I was amazed there were so many comments from the kool-aid kids. I find it incredible there are so many believers in the nightmare of ruinables. There are still those who claim wind and sun is free!! Sadly, I think some of them are MPs….
Kathryn Porter is on a roll at the moment: she also had a recent piece looking at EVs that put the cat among the pigeons.
https://www.telegraph.co.uk/news/2023/08/20/electric-cars-expensive-unreliable-not-green-charging/
They carried across to her blog where she wrote it up again with references.
I do not believe the author has the understanding nor has got his analysis of the duck curve correct. It isn’t the unreliability on a day-to-day basis. It is the generally reliable daily impact of mainly solar. When the sun is out it displaces other generation, depressing the midday grid generation. Then when the sun goes down, all the generation has to rapidly ramp up to cover the solar loss.
It has got so bad in some regions (California and South Australia come to mind) that the shape is a canyon, and the effective grid load is negative – only kept in balance because the power is exported to other regions at giveaway prices. This depresses the economics even further.
And as we are told the energy price cap is going to reduce in October, once again the standing charge will be increased. It is almost as if the cost of keeping the grid running with unreliables connected has increased….oh wait.
I’m confused by all of this. Wholesale gas prices are close to pre-spike levels (a week or so ago they were at 2018 levels) and are 18% of the peak (88 vs 486). Not 18% down from the peak but 18% OF the peak. Why then do we need a cap and why are standing charges rising?
Lack of storage capacity in the UK. We can’t buy much gas until we’re using more of it than now, which means when the prices have gone up as global demand rises from autumn onwards.
The standing charge includes the cost of grid balancing which is at a record high. Before the unreliables came it was £200m a year, last year it was £2bn although I did read it might have been as high as £4bn. Destroying a stable functioning grid comes at a cost. Also covered by the standing charge is the need to provide connections to the far flung places that are home to the windmills.
Renewables (wind/solar) exist because they get free backup.
At some point of market penetration (Gamecock has been predicting 30% for a decade), the free backup goes away. Proclamations of “Renewables are the cheapest form of energy (!)” ignore the elephant in the room, that because of their intermittency, they will eventually have to also pay for whatever backup there is. Which murders claims of low cost.
It is stupid to talk of the cost of renewables without including the fixed cost of backup. Which drives a wooden stake through the heart of renewables. Since you are going to pay the fixed cost of the backup, anyway, you may as well rely on them as your primary source.
Literally, renewables can never be more than supplemental. All else is intrigue.
The cost of any part of the system is irrelevant. Consumers pay the cost of the entire system. It’s that costs that matters. Renewables impose additional costs aross the system. Those are at least as large as the difference in cost between Renewables and gas generation. Thus our bills get higher.
With renewables, you have to pay for TWO systems.
And, on top of ‘free backup’, GC, ruinables don’t have to pay for the grid-balancing that their products make necessary.
It’s not bad but its wrong about prices. In a non-commodity market, prices are set by value, not production cost. And commodity prices are set by the marginal costs of the lowest cost producer required to fulllfill demand. In both cases, the lowest cost producer makes the highest margin. Producers thus chase lower costs to gain higher margins, not to lower prices. A properly competitive market with all producers chasing higher margins through lower costs results in lower prices as producers try to maintain market share or repel new competitors. And old plant that is paid off will usually have significantly higher maintenance and operating costs than new plant, so the differential in total costs is rarely as large as she claims.
I’m confused by all of this. Wholesale gas prices are close to pre-spike levels (a week or so ago they were at 2018 levels) and are 18% of the peak (88 vs 486). Not 18% down from the peak but 18% OF the peak. Why then do we need a cap and why are standing charges rising?
Oh so boring but yet again our expensive windmills faceplate 28gigs are producing 1.7Gw or 6%. Yawn yawn
Kathryn Porter is bloody brilliant and has a clear logical mind of renewables and nuclear. If we sacked everyone in the Dept of Zealot Greencrap and put her in charge, the UK would avoid economic decline.
‘If projects are not economic when electricity prices are at record highs, how will they work if a time comes when electricity prices are very low?’
Presumably when electricity prices become low it means all the infrastructure has been completed and needs no subsidy so normal pricing and running profits will kick in. I don’t think this will happen though.