The following article was written by a leading environmental activist, who’s also running for governor of California, not some fossil-fuel advocate.
Guest essay by Michael Schellenberger
Over the last year, the media have published story after story after story about the declining price of solar panels and wind turbines.
People who read these stories are understandably left with the impression that the more solar and wind energy we produce, the lower electricity prices will become.
And yet that’s not what’s happening. In fact, it’s the opposite.
Between 2009 and 2017, the price of solar panels per watt declined by 75 percent while the price of wind turbines per watt declined by 50 percent.
And yet — during the same period — the price of electricity in places that deployed significant quantities of renewables increased dramatically.
Electricity prices increased by:
- 51 percent in Germany during its expansion of solar and wind energy from 2006 to 2016;
- 24 percent in California during its solar energy build-out from 2011 to 2017;
- over 100 percent in Denmark since 1995 when it began deploying renewables (mostly wind) in earnest.
What gives? If solar panels and wind turbines became so much cheaper, why did the price of electricity rise instead of decline?
One hypothesis might be that while electricity from solar and wind became cheaper, other energy sources like coal, nuclear, and natural gas became more expensive, eliminating any savings, and raising the overall price of electricity.
But, again, that’s not what happened.
The price of natural gas declined by 72 percent in the U.S. between 2009 and 2016 due to the fracking revolution. In Europe, natural gas prices dropped by a little less than half over the same period.
The price of nuclear and coal in those place during the same period was mostly flat.
Another hypothesis might be that the closure of nuclear plants resulted in higher energy prices.
Evidence for this hypothesis comes from the fact that nuclear energy leaders Illinois, France, Sweden and South Korea enjoy some of the cheapest electricity in the world.
Since 2010, California closed one nuclear plant (2,140 MW installed capacity) while Germany closed 5 nuclear plants and 4 other reactors at currently-operating plants (10,980 MW in total).
Electricity in Illinois is 42 percent cheaper than electricity in California while electricity in France is 45 percent cheaper than electricity in Germany.
But this hypothesis is undermined by the fact that the price of the main replacement fuels, natural gas, and coal, remained low, despite increased demand for those two fuels in California and Germany.
That leaves us with solar and wind as the key suspects behind higher electricity prices. But why would cheaper solar panels and wind turbines make electricity more expensive?
The main reason appears to have been predicted by a young German economist in 2013.
In a paper in Energy Policy, Leon Hirth estimated that the economic value of wind and solar would decline significantly as they become a larger part of electricity supply.
The reason? Their fundamentally unreliable nature. Both solar and wind produce too much energy when societies don’t need it, and not enough when they do.
Solar and wind thus require that natural gas plants, hydro-electric dams, batteries or some other form of reliable power be ready at a moment’s notice to start churning out electricity when the wind stops blowing and the sun stops shining.
And unreliability requires solar- and/or wind-heavy places like Germany, California, and Denmark to pay neighboring nations or states to take their solar and wind energy when they are producing too much of it.
Hirth predicted that the economic value of wind on the European grid would decline 40 percent once it becomes 30 percent of electricity while the value of solar would drop by 50 percent when it got to just 15 percent.
In 2017, the share of electricity coming from wind and solar was 53 percent in Denmark, 26 percent in Germany, and 23 percent in California. Denmark and Germany have the first and second most expensive electricity in Europe.
By reporting on the declining costs of solar panels and wind turbines but not on how they increase electricity prices, journalists are — intentionally or unintentionally — misleading policymakers and the public about those two technologies.
The Los Angeles Times last year reported that California’s electricity prices were rising, but failed to connect the price rise to renewables, provoking a sharp rebuttal from UC Berkeley economist James Bushnell.
“The story of how California’s electric system got to its current state is a long and gory one,” Bushnell wrote, but “the dominant policy driver in the electricity sector has unquestionably been a focus on developing renewable sources of electricity generation.”
Part of the problem is that many reporters don’t understand electricity. They think of electricity as a commodity when it is, in fact, a service — like eating at a restaurant.
The price we pay for the luxury of eating out isn’t just the cost of the ingredients most of which, like solar panels and wind turbines, have declined for decades.
Rather, the price of services like eating out and electricity reflect the cost not only of a few ingredients but also their preparation and delivery.
This is a problem of bias, not just energy illiteracy. Normally skeptical journalists routinely give renewables a pass. The reason isn’t that they don’t know how to report critically on energy — they do regularly when it comes to non-renewable energy sources — but rather because they don’t want to.
That could — and should — change. Reporters have an obligation to report accurately and fairly on all issues they cover, especially ones as important as energy and the environment.
A good start would be for them to investigate why, if solar and wind are so cheap, they are making electricity so expensive.
Michael Shellenberger is a Time Magazine “Hero of the Environment,” Green Book Award Winner, and President of Environmental Progress, a research and policy organization.
Read more at Forbes Blogs
I have a theory too. People do not bother to read and understand their electric bill.
Drove by Starbucks the other day and noticed the long line at the drive through.
If they got a bill once on month from Starbucks they would love the power company.
I have been reading and understanding my power [bill? -mod] for 40 years because I work in the power industry.
Electricity is a very cheap commodity to produce and deliver. It is too cheap to meter for most users. The benefit is huge, the cost is low.
If you ever looked at a few utility annual reports for costs of producing and delivering power you would agree.
But there are other costs. Taxes, lawyers, and social engineering. It would appear the environmental attorneys worry more about country club dues than the environment.
Before blaming the cost of making electricity with wind and solar, I would start with taxes and income redistribution schemes.
As an addon to that – guaranteed returns.
This article expresses the logic that any human with half a brain should’ve realised. If there is a desire to have a reliable grid and you spend money to make it unreliable , the cost to make it reliable again will make it more expensive whether that is gas fired back up ,batteries, Snowy 2 , etc. The fact that renewables are becoming cheaper to install it’s still a cost ( which has to be more than zero ).
However, watch for the next stage of unintended consequence when large corporate users decide to generate their own electricity and go off the grid because of increasing costs. That will mean that the cost of running the grid would then be shared amongst less users meaning that the costs will need to increase again. I foresee that the current policies of many governments will cause a vicious cycle of never ending electricity price rises.
Cutting back how much power a fossil fuel or nuclear plant generates only has a small impact on how much it is going to cost to operate that plant.
On the other hand, trying to spread the cost of the plant over less power means the average price of that power is going to go up.
And that’s before we talk about being ramped up and down is very inefficient for plants that were not designed to operate that way.
You might liken it to a solar powered car whereby cheap nano solar paint can provide all the power the electric motor needs to climb hills and exceed the highway limit in bright sunshine. In fact at midday there’s electrons to burn but it’s obvious what will happen as the sun sets or it’s raining and overcast. No matter this is the world of the autonomous car and paywave per kilometre so just call up an ICE car although they’re more expensive per kilometre because they’re all carbon taxed to subsidise the nano solar paint cars running around. What has happened to the overall cost of motoring should be obvious in peak hour when everyone wants to call up ICE cars as the sun is setting. It’s a no brainer that we’re all interested long term in the average cost per km rather than the lure of fleetingly low marginal costs and capital costs are an integral part of that.
That’s what the technical and economic illiterates have done with a communal electricity grid largely designed around a few large despatchable generators that can follow demand with appropriate voltage and frequency. They ruined the level playing field and in the process produced a pure form of dumping that would normally raise the ire of anti-competitive authorities. What should have happened if it was deemed CO2 was the big bogeyman, then tax CO2 for all players equally at the price the supreme guru knows will bring the earth’s temperature back to the temperature the supreme guru knows it should be, but there was one more obvious caveat. No generator can provide anymore electrons to the communal grid than they can reasonably guarantee 24/7 all year round (ie short of unforseen mechanical breakdown). That way the unreliables’ dumping game is over and to lift their average tender they must incur the cost of storage and/or partner with thermals and pay them their just insurance premia they’ve been avoiding now. Actually the grossly perverse whereby the thermals have been cross subsidising the capital cost of the dumpers with RECs and the like.
There is of course another overall cost consideration with many spatially diverse small generators and that’s voltage and frequency control which is largely dumped on the managers of the poles and wires but that’s a hidden cost that the technical and economic illiterates never seek answers to and those that would know to bite their political tongues. In South Australia with generation and distribution separation it allows the unreliables fans to point to much of the rising costs of renewables as ‘gold plating’ of the poles and wires. When the Green overlords rush out 9 diesel generators that can consume 80,000 litres an hour of refined diesel you know something’s rotten in the state of Denmark but look over there at the unicorn Tesla battery folks.
I wouldn’t worry Audrey as the unreliables haves don’t want to leave the insurance of the grid with expensive batteries, just pass the premiums onto the have nots and all with the warm inner glow of saving the planet-
https://www.smh.com.au/business/the-economy/i-m-truly-concerned-aemo-chief-warns-on-rooftop-solar-20180424-p4zbg0.html
‘Economic bypass’ you say? One for the watermelons to get their small brains around but they might look up the old ‘fallacy of composition’ for a refresher in one of the basic laws of economics, although they might also muse on ‘From Gaia according to her ability and from the grid according to our need’ for some irony.
Is he making a play for the few remaining Republican voters in California with the “I’m the only rational guy on stage” ploy?
“Evidence for this hypothesis comes from the fact that nuclear energy leaders Illinois, France, Sweden and South Korea enjoy some of the cheapest electricity in the world.”
Huh?
South Korea? not cheap
It’s called the Utility Death Spiral. As renewables get cheaper more people generate their own electricity. That gives the utilities a smaller market share so prices go up so more people generate their own power.
Well there’s nothing like going along with the Green numpties to help the spiral along a bit and create a bit of scarcity for your product all in the name of saving the planet. Recall AGL are going to close Liddell power station and from wiki-
“Liddell Power Station is a coal-powered thermal power station with four 500 megawatts (670,000 hp) GEC (UK) steam driven turbo alternators for a combined electrical capacity of 2,000 megawatts (2,700,000 hp). However, as at April 2018, its operating capacity has been assessed at 1,680 megawatts (2,250,000 hp).[1] Commissioned between 1971 and 1973, the station is located at Lake Liddell near Muswellbrook, in the Hunter Region, New South Wales, Australia.
Prior to September 2014 Liddell power station was part of NSW Government power producer, Macquarie Generation.[2] Macquarie Generation’s assets were acquired by AGL Energy in September 2014.[3]”
So what are they replacing it with? Only 252MW of gas fired power along with more unreliables-
https://www.msn.com/en-au/money/company-news/agl-announces-newcastle-gas-fired-power-plant-to-replace-the-liddell-power-station/ar-AAwmfXV
Interesting article and interesting discussion. It all goes to show that the average person does not understand the economics of power generation, the requirement of transmission infrastructure build out to reach wind and solar, the need for reserve in its most expensive form, and the complexities of grid management.
You folks likely know this better than I, but much about the power industry is counterintuitive. For instance, it makes no sense to most people that when the populationreduces its energy consumption, electric power rates must rise – the resulting revenue shortfall must be made up.
Here, human perception comes to play again: wind and the sun are free and they are adding to the supply of power. Decreased fuel cost and increased supply MUST lead to lower prices. But they don’t and most people are surprised at the sharp cost increases.
I see no conspiracy among Greenies and journalists here. The decision to go with solar and wind has been made to move away from carbon. Whether we like it or not we will pay for electricity one way or the other, either through rising costs of renewables or the catastophic effects of putting large amounts 200 million-year-old carbon into the atmosphere.
I live on Miami Beach where sea level had risen 14 inches since 1988 alone. As a result, the City is in the midst of a half-billion-dollar infrastructure project to put in huge pipes and pumps, to push water back into Biscayne Bay – because during the King Tides in October, if it rains, cars float. Even so, I could easily live to see the end of South Beach. One big Category 5 hurricane could do it in.
The Department of Defense has stated that climate change is the single greatest threat to our national security. That, and the overwhelming scientific concensus that anthropogenic global warming and climate change are facts, should give us a sense of urgency to solve this problem. We should be throwing everything at it we can. In the scheme of things, an increased electric power rate is a small price to pay.
If not, make sure you visit South Beach now, before it’s gone.
Atlee stop looking out your condo window at Miami Beach and projecting your RE problems onto the world-
http://dailycaller.com/2016/07/10/miami-is-sinking-but-that-doesnt-mean-sea-levels-are-rising/
Thankfully we are enjoying a long interglacial warming and here’s the real scientific picture of that sea level rise globally- http://www.cmar.csiro.au/sealevel/sl_hist_few_hundred.html
Basically you don’t cherry pick the tide gauges for Venice and Miami and run around like Chicken Little calling the end is nigh.
“overwhelming scientific concensus”
Please enlighten us. Consensus about what conclusion, exactly?
That climate is changing, like always?
“I live on Miami Beach where sea level had risen 14 inches since 1988 alone.”
Wrong-o, Atlee. Miami Beach has sunk such that the relative sea level has “risen 14 inches since 1988 alone.” Actual sea level rise of about 1.7 mm/yr has resulted in a real sea level rise of about
2 inches (51mm) over that period.
The other foot of relative sea level rise is caused by land subsidence. Whacking at CO2 will not change that.
Atlee: “The Department of Defense has stated that climate change is the single greatest threat to our national security.”
Indeed. It infects governments leading to their making increasingly irrational decisions. It is a form of insanity.
Because the U.S. President at the time told them to say that, Peter.
It is, or should be, fairly obvious that renewables will cause electricity prices to rise. In extremis 100% replacement of fossil fuel with renewables means complete duplication of the required generating capacity. So you pay for the fossil fuel generation and then pay again for the renewable generation. the one does not replace the other but duplicates it. Then you have to add the cost of re-engineering the distribution system for renewables. Then you have to add in the market inefficiencies imposed by governments to enforce use of renewable generation and the cost of subsidies to some consumers at the expensive of others.
The alternative might one day in the future turn out to be a combination of renewables and batteries, but not for a long time yet.
All this is obvious without recourse even to the most simple back of an envelope calculation.
Large scale renewable energy is a con, a political project relying on a combination of gullibility, ignorance (children are being weaned of hard subjects like maths and science), and fear of extinction of the human race at our own hands for selfish reasons linked to filthy capitalism.
There is another option. Don’t back up renewables with reliable fossil fuel generation. This would please the anticapitalists prominent in the Green movements but no sane government would openly adopt such a policy. But there are signs not all governments are sane.
Jerry Brownout has twice proven your assertion, Peter.
The real reasons why with renewables electricity is going up in price and not down.
1. Wind turbines do not produce 50/60Hz electricity. They do produce ample harmonics termed in the industry as dirty energy and which through smart meters are fraudulently added to consumers power bills. Wind turbines are a massive rort.
2. While PV solar panels may heat ones own water the panels do not have enough grunt/oomph to push that electricity to the boundary, up the street and into a neighbours property to heat their hot water. No one should be paid to supply solar power into the grid