By Robert Bradley Jr.
“The LCOE narrative has just collided with reality. If ‘cheap’ solar and wind really were enough, the energy transition would largely run on autopilot. Emissions would fall. Subsidies wouldn’t be needed. Electricity would get cheaper. None of that is happening.” – Jonas Kristiansen Nøland, Norwegian University of Science and Technology (below)
Noncompetitive energies need studies; competitive energies need markets. This insight deserves to become an adage in today’s contentious debates over relative costs for electric generation. This is particularly true for levelized cost of energy (LCOE) studies purporting to show that wind and solar generation is competitive with thermal generation from oil, gas, and coal.
The most recent attempt is by the International Renewable Energy Agency (IRENA), titled “91 Percent of New Renewable Projects Now Cheaper Than Fossil Fuel Alternatives” (July 2025). And the fix was in with a study purporting to justify “accelerat[ing] the deployment of renewables-based energy transitions worldwide.”[1]
Jonas Kristiansen Nøland, Norwegian University of Science and Technology, took issue with their study, posting:
The LCOE narrative has just collided with reality. If “cheap” solar and wind really were enough, the energy transition would largely run on autopilot. Emissions would fall. Subsidies wouldn’t be needed. Electricity would get cheaper. None of that is happening.
Fossil energy use is still increasing, not decreasing. Electricity prices in low-LCOE-dominated electricity systems are rising, not falling.
Why? Because LCOE was never designed for weather-dependent electricity systems. Historically, LCOE was used by the International Energy Agency (IEA) to plan electricity systems based on firm, dispatchable generation fueled by non-weather-dependent resources.
Today, the same metric is used to justify electricity systems dominated by variable energy sources that require backup, reserves, ancillary services, and flexibility assets — costs LCOE simply ignores. The result? Low-LCOE power ≠ low-cost electricity.
This is exactly why a new UNECE report [United Nations Economic Commission for Europe] now calls for abandoning LCOE as a planning tool and replacing it with full system cost of electricity (FSCOE). System costs matter. Reliability matters. Physics still matters.
I’ve linked the UNECE report in the comments.
Curious to hear: Should LCOE finally be retired from energy policy?
Yes, it is time for LCOE to be demoted for energy policy-making. Pronto! And many of the 150+ comments agreed.
————————
[1] The About section reads:
IRENA is a lead global intergovernmental agency for energy transformation that serves as the principal platform for international cooperation, supports countries in their energy transitions, and provides state of the art data and analyses on technology, innovation, policy, finance and investment. IRENA drives the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy in the pursuit of sustainable development, energy access, and energy security, for economic and social resilience and prosperity and a climate-proof future.
IRENA’s membership comprises 170 countries and the EU. Together, they decide on the Agency’s strategic direction and programmatic activities, in line with the global energy discourse and priorities to accelerate the deployment of renewables-based energy transitions worldwide.”
Because of the need for backup, renewables can NEVER be cheaper than fossil fuels. End of.
Logic
To be clear, I meant atticman’s comment is logical. Not the “End of” logic.
More to the point, they can never replace fossil fuels.
LCOE should never have been a metric applied to wind and solar, because they are NOT DISPATCHABLE and therefore NOT COMPARABLE to dispatchable sources.
The only thing wind and solar can “transition” humanity to is POVERTY, MISERY AND SUFFERING.
LCOE is a crappola contraption concocted by idiot academic economists.
Use Total Cost of System, TCOS, instead.
The TCOS approach involves annual payments to banks by amortizing the bank loans and annual payments to owners by amortizing their investments
Like paying off two mortgages in 20 to 25 years.
I have used the TCOS method for over 30 years
You will find these two items far exceed the annual cost of all other items, such as O&M, taxes, insurance, grid extension/reinforcement, backup by mostly fossil fuel generators, dismantling/hazardous waste landfill, etc.
UK: average demand 39GW.
Installed gas: 38GW
Installed wind: 33GW
Installed pv solar: 21GW
Total wind + solar: 54GW – nearly 40% more than average demand.
So why do we need gas?
Contribution to demand wind + solar, 35%. Aha! So what we need is to build more and more wind and solar capacity. Got it.
Today – demand UK: 44GW, wind supplying 2.6GW.
Something from the UN regarding AGW that I agree with? Why are my cynic receptors tingling? I bet it’s because the replacement for LCOE will be worse.
LCOE is about as real as global circulation models. Very consistent, but consistently describing some other world than this.
Wind does not blow, it sucks.
For electricity it looks like it’s on autopilot now. (See, for example, Pakistan)
Yes, let’s all regard Pakistan as the world leader in best practice affordable, dispatchable energy systems.
Yeah-Nah.
Well, no wonder so many businesses and data centers are moving to Pakistan./s/
The irony is, nuclear is as close to autopilot as it gets, you are certainly pro-nuke, right?
It’s the second time you have used Pakistan as a reference for grid operation which makes you either stupid or naive or both.
Here is some very basic reading for you … educate yourself
https://thedailybrief.zerodha.com/p/why-pakistans-solar-revolution-backfired
So here are the points
Point 1: Solar growth is based on policy and it has a huge problem
Let’s revisit something we mentioned earlier: Pakistan’s infamous circular debt problem. The government remains locked into expensive take-or-pay contracts with independent power producers (IPPs)—meaning it has to pay for electricity whether it’s used or not. Even if rooftop solar reduces actual grid consumption, the government still owes the same money to producers.
So when solar users leave the grid, the cost of this unused electricity doesn’t disappear—it simply gets dumped onto whoever’s left behind. That’s usually the poorer households who couldn’t afford solar panels in the first place.
Point 2: The whole system is on the edge of collapse
Instead of reforming the utility model, the government has gone after solar users.
In 2025, it slashed net metering buyback rates from Rs 27 per unit to Rs 10 per unit—making it far less profitable to sell excess solar to the grid. And now, they’re considering fixed monthly charges for solar users—essentially charging people just to stay connected to the grid, even if they barely use it.
That’s a desperate move. And it’s not unique to Pakistan—California tried this too. Their utilities pushed for “solar taxes” and fixed grid fees to recoup lost revenues. But it backfired—hitting low- and middle-income solar adopters hardest, and stalling the transition.
Point 3: Who is worse off from the solar scheme
This is where the real inequity kicks in.
Rooftop solar is capital-intensive. Most adopters are upper-income households that can afford the upfront costs. Once installed, they cut their grid bills close to zero. But that leaves the rest—especially middle and lower-income consumers—carrying the entire weight of rising tariffs.
And it’s only going to get worse. The more people leave the grid, the more expensive it becomes for those who stay. This forces even more people to leave—a classic death spiral.
So using Pakistan as a poster child for renewables or solar is just crazy there whole grid is on the verge of collapse.
Australia is going down that same path, as is often explained here by RickWill.
Here in Britain Mad Ed Miliband has recently announced a £13bn campaign to provide generous grants and subsidies for solar homes and heat pumps
This despite the World Bank’s ‘Global Photovoltaic Power Potential by Country’ ranking the country 229th out of 230 for solar power potential.
Recently a cross party committee of MPs estimated that up to 25% of the country’s farmland could be taken out of production and given over to solar panels!
Should it be retired? Yes, of course it should. The way its usually done and presented its accounting fraud.
The only correct way of comparing the costs of any two technologies of power generation is by using Net Present Value analysis, as covered in any standard corporate finance textbook, as taught in all business schools, as practised by all large western corporations.
Explained most clearly and in detail in Brealey and Myers, Principles of Corporate Finance. But almost any textbook will explain it.
The reason why activists never do this is that when its done properly the results always show wind and solar to be several times more costly. Despite the fact that wind is free!
Try and publish your earnings to shareholders and the stock market using the same principles that underlie LCOE, and you would be prosecuted for false accounting.
Longevity and replacement cost must also be factored in. Solar needs replacing every 15-20 years…or after every Hail Storm. Wind might last 20 years but is also susceptible to storm damages destroying blades and towers forcing early replacement with new foundations.
On a video where workers were getting ready to access a large very tall windmill in order to swap out the generator and all bearings.
The young reporter said ‘isn’t that unusual?”.
The worker just stared at her, shook his head like he was clearing it and started getting his rigging ready.
Another man said that this was regular maintenance, and most turbines need regular maintenance.
LCOE has long ignored all of Renewable energy’s side costs. Including any inverters.or other connections to the grid.
I think you’ll find wind’s useful lifespan is around 7 years; nowhere close to 20.
Don’t get your news from facebook
Wind turbine lifespan claim generates misinformation
That is misinformation itself because it basically a how long could it theoretically last
The number one problem with wind turbines is the bearings and gearbox
https://www.windsystemsmag.com/bearing-and-gearbox-failures-challenge-to-wind-turbines/
The problem that always comes up with these thing is the same as car parts .. can a spare part still be purchased or manufactured by someone.
A lot would depend on who made them, surely Shirley?
+100 to that because it’s not just initial quality its are there any spare parts around to keep it running.
It’s not just windmills. A Ford dealership manager a couple of months ago: “Anything over five years old is almost impossible to get replacement parts for.”
Reliability engineers calculated the mean time between failures for WTG at 4.3 years with 50% of the failures requiring expensive equipment replacements.
That does not include anything to connect it to the load.
And all the energy inputs into the necessary serial manufacturing of all that worse-than-useless junk come from?
Coal, oil and gas.
“Here’s the new boss….same as the old boss” – The Who
Offshore wind will be lucky to last 15 years as maintenance costs become prohibitive
Net Present Value is quite useful in comparing two technologies at a given time. Cost to produce, install, and revenue generated by the system (present and future). It includes parameters for the future value of money and is used to determine if an investment is likely to generate a ROI over a given time interval.
NPV does not take into account future requirements, such as maintenance, repair, demolition, and disposal. TCO does, although it does require the p1, p2, p3 cost analysis for each.
NPV does not take into account future requirements, such as maintenance, repair, demolition, and disposal.
Oh dear. Of course it does. Net present value is the discounted value of all future cash flows, incurred for any reason. It is the only valid way to value an investment. Read Brealey and Myers.
“It is the only valid way to value an investment.”
Had me until this. I think that incremental IRR reflects what most want for their money. Yes, if the payoff is too far off, if the IRR is a distributed value with the cha ching in a large, tight tail, if incremental cash flows result in dual ROR’s (they can), use common sense. But IRR evaluation of a string of B-A cash flows indicates how fast your spends can grow thru project end. NPV’s don’t.
“Net present value is the discounted value of all future cash flows, incurred for any reason.”
Including subsidies (if any).
No. The usual confusion.
In LCOE you are trying to assess and compare the absolute cost of the systems.
Subsidies are irrelevant. You include operational cash flows. What you as a policy body are trying to find out is how much subsidy will be required to make up for the fact that one system costs more than the other. If you choose to go the subsidy route.
For Heavens sake learn how to do this stuff! What you just wrote is Sky Dragon stuff, its accounting illiteracy.
Nick knows maffs, not accounting.
“The only correct way of comparing the costs of any two technologies of power generation”
The real world way of comparing is to measure what they can produce, and at what price. And wind and solar work. Here is a plot (in the style of Mark BLR) of the actual residential price of electricity in American states, versus the fraction of their power that is generated by wind.
Using lots of wind certainly does no harm to end price.
Nick, you’re reminding me more and more of those WW2 Japanese soldiers who got isolated on a Pacific island, and kept fighting the war until the 1970s.
It’s over, old mate.
Yes, it’s over.
What a piece of lying BS. You are fast getting a reputation for peddling complete garbage. Wassa matter? Soros not paying you enough for better quality crap?
Looks fine to me, but I guess some people here prefer this.
About Media Bias / Fact Check .com–
Founder Dave Van Zandt is a registered unaffiliated voter with no ties to political organizations. His only political donation was a one-time $10 contribution to Bernie Sanders in 2016, driven by a personal objection to corporate influence in politics.
Dave reckons he has no political leanings though.
Maybe Dave needs to fact-check himself?
So you’re using a website mediabiasfactcheck that according to wikipedia: Four main categories are used by MBFC to assess political bias and factuality of a source. These are: (1) use of wording and headlines (2) fact-checking and sourcing (3) choice of stories and (4) political affiliation…. uh?
Ember?
They’re citing Ember?
Despite all their faux excitement over solar growth, they couldn’t shy away from this reality –
the main reason why electricity demand growth was elevated in 2024 compared to 2023 was an increase in air conditioning use during heatwaves.
fossil generation increased by 1.4%
Of course China would publish this. They want a captured industry.
But please note, the chart is “installed capacity.”
Enough said on that already.
Remember China has 50 ghost cities in which nobody lives. How many of their solar farms are actually producing electricity or even connected to the grid?
Yes, rooftop solar is a wonderful thing. You can power your lights for 4 hours per day in the summer if the weather is good.
“who got isolated on a Pacific island”
Well, my Pacific island is Auatralia. It is quite a big one, and I am not isolated.
You’re Australian? I do feel ashamed…..
I suspect Nick is a converted (reconditioned?) Pom.
One way to tell –
ask him who he hopes will win the 5th Test in Sydney today.
Born in Sydney
Wasn’t that where all the financial criminals were transported?
Brisbane, 1941. (Contemporary to Hugh Lunn in Annerley in the 40’s.)
C’mon Nick.
Everyone in Moyhu is isolated. Nobody goes there.
And today I can hear all the airconditioners thrashing their guts out while the electricity meters are stuck on 11.
Seriously Nick, I hope you’re not in the path of any of the fires going in Vic at the moment.
And worse to come weather-wise tomorrow I read.
Hope you’re properly prepared, and keep a keen weather eye out for the wind behaviours.
Much water in the King?
Thanks, Mr, but no, I’m not in danger. I have friends who are, though. It’s a huge worry.
Should have paid more attention to the 1939 wildfires and the lessons that were learned, and then ignored, hence the 2019 ones spread so easily.
Yes Nick.
I have rels and friends in the danger zones too.
Fingers crossed for all of the people in these areas.
I evacuated twice in the 2009 events.
Wouldn’t like to go through that again at my age & condition now.
“Well, my Pacific island is Auatralia.”
That is like saying my island is North America and used to include South America before the Panama Canal was dug.
Ridiculous.
“The real world way of comparing is to measure what they can produce, and at what price”
I don’t think many CPAs would agree.
Certainly not when “what they produce” is not “produced” on demand, when and where it is needed, nor reliably, predictably, or consistently.
This is especially true when what is being produced either can’t be stored, or can only be stored at huge cost.
As mentioned in another article, Nebraska and North Dakota have lower electric energy prices and lower fraction of wind power production than Kansas, South Dakota and Iowa.
Idaho also has low electric rates and a low wind penetration. The states with the highest wind penetration are the Great Plains/ High Plains states west of the Mississippi where the meteorological conditions are favorable to wind generation. These states also have access to low cost natural gas and coal useful for back-up generation.
Also remember that wind was NOT available during the great cold spell of a few years back.
I looked for this data and quit. Found a few “top 10 states” sites, but nothing for all states with significant wind contributions. Would you please link me up, or point me to sources I’m missing here? I’m thinking of weighing the data by cum power produced/latest year available and checking out it’s statistical durability..
It’s EIA data from here, and you have to burrow down a long way. I’ve put a zip file here with the original EIA spreadsheets and a csv file of the data I plotted (eiadata.csv).
Yes, all the top ten stuff from AI etc is very annoying.
Thx for sharing. Especially in a palatable format. Yes, I found the AI stuff, but opened many possibly useful links as well.
We are both aware that there’s more going on than these 2 variables, but still interesting to me.
Here is how to get to the original data. Start at https://www.eia.gov/electricity/annual/
Then click on “New Generation”.
Wind is Table 3.18
Solar is Table 3.21
Instead click on “Electricity Sales”
State prices on Table 2.1
That isn’t what Electricity Sale 2.1 is
Table 2.1. Number of Ultimate Customers Served by Sector, by Provider, 2014 through 2024
Table 2.4 is more like why I cast doubt on your graph
https://www.eia.gov/electricity/annual/table.php?t=epa_01_02.html
It gives an average cost residential, commercial, industrial etc which is one of the problems I have with your data there is no one cost.
There are US state based data but nothing lines up with your data and as I expected there is ranges on the cost not one number. What would you one number be an average across the 12 months?
Sorry, typo, I meant 2.10, not 2,1. Rounding error.
There are massive rebates hidden behind some sectors you can easily tell that just from the numbers
Take Massachusetts
Residential: 29.35 Commercial: 20.90 Industrial: 18.19 Transport: 9.22
That is twenty cents difference and why can’t the residential get some of that 9.22 power.
Then the even weirder part
EV charging costs in Massachusetts vary widely, with home charging being cheapest (around 28-31 cents/kWh), while public Level 2 is often 30-40 cents/kWh, and DC fast chargers (like Electrify America or Tesla Superchargers) can range from 22 cents to over 60 cents/kWh, depending on the network, location, and time, with some towns adding parking fees
Where does the 9.22 number even come from?
The data leaves me with more questions and it makes little sense.
Reading the bottom the data is coming from some form EIA-86 … we really need to know if this has any relevance to what a consumer actually pays.
Looks to me like W+S/Total column in your csv is actually W/Total. Just FYI – the table is exactly what I aksed for.
Thx again
You cannot use end price because it includes subsidies.
So do you think the state governments of Iowa, OK, KS etc are pouring in state funds to save the planet?
It doesn’t matter whether they are or not. Price is what you can get for it. Cost is what it costs you to make it. They are different. Price is not a proxy for cost. Subsidies are one reason they are different, but there are lots of other reasons they may differ.
Your argument is at the level of thinking so many MW can power a given number of homes. Its not MW, its MWh.
Read a finance textbook and come back afterwards. What you are doing is wilful ignorance. Put it another way, for a mathematician, its like a literary critic trying to argue on conceptual grounds that the fundamental theorem of calculus is in some vague way mistaken. That is how stupid this is, in accounting terms.
They aren’t doing it to save the planet, they are doing it to placate the climate alarmists.
It’s way more than just state subsidies.
PS: Thank you for admitting that your figures exclude subsidies.
“they are doing it to placate the climate alarmists”
So why in IA, ND, KS, OK and not in New England, say?
You are funny the common theme is they are tiny states by population below 4M and SD barely 1M.
Go the other way they have the highest per capita energy use USA states 🙂
https://ksdata.ku.edu/ksdata/ksah/energy/energyconsumption.pdf
Alaska is the highest energy user per capita population 740,000.
Think about it why is there power per capita so high of small states? That is part of the problem with your graph.
Are you claiming that there are no differences between size, population, electricity demand, land available between these states?
That is exactly what his comparison does … wonder how many turbines does can fit on New York High Rises:-)
No
To placate the climate alarmists, true, and in so doing working to get re-elected.
That aside, they are also doing it for the “10% for the big guy” process.
Price has nothing to do with it, its about cost. Price is what you can get for it in the market as it is. Cost is what it cost you to make it. Price is irrelevant to the cost.
LCOE is a way of calculating the cost of generation which leaves out half the costs.
The cost is the net present value of the associated cash flows. All of them.
You know a better way, write it up, submit it to the finance journals. A Nobel Prize and a Professorship of Accounting awaits you. The world will beat a path to your door.
Or alternatively, join a listed company as Controller, do your reporting of revenue and profit in the way you suggest, and wait for the regulatory authorities to call on you, shortly to be followed by the filing of charges of accounting fraud.
How many times will Nick have to be corrected on this error before he finely gives up?
You are not accounting for how much power each of those states get from surrounding states.
Mr. Stokes: So, in your real world, the wind and solar “produce” electricity, but they cannot produce a “grid”. Fudge #1. Your “what they can produce” side only considers “electricity” produced, but it never produces a grid. On your second point, the grid-using residential price excludes all subsidies. I wonder why you chose those numbers??!! What’s the color of the sky there in your real world?
Need the source of the data it’s on your site so I am skeptical because you treat data so badly. It doesn’t even tell us what year or period it’s over it could be a 1min period on a single day.
You also need to look at rebates etc. If you did this exercise in Australia while the feds were handing out freebies to every account the price would look good.
Not so now since they stopped the freebies on 1st Jan.
I’ve linked above to a copy of the original EIA spreadsheets. It is annual data for 2024.
The point isn’t whether the price is good or bad. The point is that the price is lower in states that use a lot of wind.
Lower you mean on par I suspect. Let me look at the data source because I have doubts, I suspect it is like the garbage the CSIRO peddled out then back tracked then adjusted and is largely laughed at.
the price is lower in states that use a lot of wind
I don’t know whether it is or not, but its irrelevant to the question of whether wind is a lower cost generating technology than (for instance) gas, because the question is cost not price.
Your reply above suggested that if a state subsidizes wind, that is a cash flow that the state should consider in determining whether wind is cheaper. That is so obviously ridiculous. The question we are trying to answer is whether a subsidy is needed.
The same argument would mean that anything at all that the state chooses to subsidize becomes cheaper for it as a result.
We could make coal cheaper too, very easy. All we have to do is subsidize it and add the subsidies into our NPV calculation. In fact, follow this methodology and nothing has any absolute cost at all, the only driving factor is how much we subsidize it.
A nation is considering whether to move houses to heat pump from gas boilers. Lets say a heat pump costs $10,000 and a boiler $3,000. Fine, you say, we just give the heat pump a $10,000 subsidy, and that means its cheaper. Its so much cheaper, its actually free! Why not make the subsidy $20,000 and we’ll (who is ‘we’?) make a fortune, people will actually be paid handsomely to install them, what could possibly go wrong?
Cheaper for who? Not for the nation.
A nation is wondering does it have a competitive advantage in growing some crop. All it has to do is throw enough subsidy at it, and it will have one. As big as the subsidies?
The way to bankruptcy passes through accounting illiteracy and often has a terminating stop in fraud. The method you propose is just a way of losing money while pretending not to.
“Your reply above suggested that if a state subsidizes wind, that is a cash flow that the state should consider in determining whether wind is cheaper. “
I said nothing like that. I just pointed out that NPV, as you said it, adds in all future cash flows, which includes subsidy. That is an investor calculation. Now it is you suddenly switching to state, not me.
You don’t get it. The question is, which is a lower cost generating technology. Subsidies have no bearing on that.
If you can count subsidies in assessing which is lower cost then anything at all can be made lower cost just by increasing the subsidies. This is true accounting illiteracy.
Subsidies have no bearing on which technology is lower cost. Read the textbooks.
Total cost of ownership include what it takes to get the system up and running and all future repair and maintenance costs.
Just fuel costs and energy revenues does not cut it unless amortized non recurring costs are included.
The data you use ignores the subsidy investments as those are paid by tax payers, not rate payers..
As usual, Nick tries to pretend that power produced at midnight has the same value as power produced at noon.
“Net Present Value”
I stand corrected.
I consulted my CPA wife and she pointed out that Total Cost of Ownership applies to non-revenue generating systems and NPV is the correct application.
TCO would apply to an F-16, your car or house, or even a battery powered leaf blower.
I apologize for the error and thank you for clarifying.
You’re a lucky man!
FF will ALWAYS be a better alternative to Wind and Solar regardless of fuel cost. FF can provide energy generation On Demand…whenever it’s needed. Wind and Solar can only provide generation when Nature DECIDES to provide it’s Low Density fuel sources. Sun is only available Off Peak and never at night. Wind is only available when the wind is blowing Just Right. Too soft and inertia can’t be overcome, too hard and auto-breaking kicks in and the blades stop turning. Both are not resilient in the face of inclement weather and neither lasts longer than 20 years … Or the next storm requiring them to be replaced at least 3 times over the life of most FF generation sources.
Both also require either expensive storage to make their Off Peak generation available during Peak Demand or Reliable duplicate FF back-up available as spinning reserves.
Hydrocarbons and coal (carbon fuels) are free.
The cost is extracting them from the earth and transporting them to where they are needed and/or can be used, then converting them into something usable and transporting that to where it is needed and/or can be used.
Wind and sunlight are also free.
The cost is converting them into something usable and transporting that to were it is needed and/or can be used.
People see those and conclude (wrongly) that WTGs and WVs are obviously cheaper as it has fewer steps.
When engineering gets involved, it becomes obvious that the conversion cost and the transportation costs are comparatively different and excessively so. Carbon fuel generation beats W&S generation hands down, except in specific niche applications.
This excludes the oft ignored magnitudes of differences in environmental impact. That also is a cost but it is rarely if ever put on the accounting ledger.
The big problem is people only see recurring costs. If the non-recurring costs are amortized over the production, they would scream. For W&S those costs are hidden via subsidies and the tax payers pay it, not the rate payers.
LCOE was designed by Lazard as a mechanism to aid in rent-seeking. That is its only purpose. All else is facade.
Yes.
And JP Morgan were disputing Lazard’s use of LCOE several years ago.
But the fake make it look cheap LCOE dominated until reality and economics and fantasy collided.
Schernikau, Smith, and Falcon, 2022 Full cost of electricity ‘FCOE’ and energy
returns ‘eROI’. Journal of Management and Sustainability Vol. 12, No. 1, June 2022.
This article was published in 2022. A book is now underway in which details of LCOE and its transition into the real world are presented. Part of the difficulty is that the ‘real world” is not a nice, simple metric. We are writing a macro for FCOE which will be published so anyone with a spreadsheet on a laptop can compute for themselves. No mystery, no fuss.
In their March 2024 Annual Energy Paper JPMorgan said
“LCOE is a mostly useless measure when comparing renewables to baseload power” and
“After 16 years Lazard admitted the cost of firming the intermittency of wind and solar – that is the cost to provide power when there is not enough wind or sun to meet load demand”.
They also noted that Lazard also assumed the life of a natural gas plant was only 20 years when 30-40 years was often the case.
Yet Nick Stokes seems to be determined not to change his view, or is it religion? How many times have we been through all this with him?
“Should LCOE finally be retired from energy policy?”
My understanding is LCOE was applicable to similar systems integration where the only variable was the actual power generation system. Comparing various steam turbine generators for oil, gas, and coal as an example.
In that limited scope, where the assumptions of infrastructure and load variables were not needed, it can still be used.
I can due a LCOE using carbon zinc cells versus primary Lithium Ion cells in a flashlight. Cell life and purchase cost are the basis.
If I include in the mix NiCad, NiMH, or Lithium Ion secondary cells either I ignore the cells can be recharged or include the infrastructure required for recharging, in which case I use what in the past was called TCO (total cost of ownership).
FSCOE is TCO rebranded.
Definition of a system is the problem with LCOE. As pointed out, LCOE as used for solar/wind does not include things the logistics tail (spares, maintenance, supply chain, redundancy).
Backup, frequency modulation,…
I seem to recall that even the perpetrators of LCOE admitted that it COULD NOR BE USED to directly compare intermittent sources with dispatchable sources.
And then of course proceeded to do exactly that, apparently hoping that inconvenient truth would remain lost in the “fine print.”
Do what the boss wants done
+ say what the boss wants said
+ LCOE
= GIGO
The wrong use of LCOE is more than a conversation piece. Many countries have suffered enormous financial losses because of the wrong electrical generation systems being recommended by financial and engineering ‘experts’. These advisors in at least some cases would have known that their advice was not honest.
The customary principles of accountability have to apply. Where a person has sown to have caused such financial loss to others, punishment is required. Loss of employment, loss of formal credentials that allow work at high levels, appearance before committees of inquiry and so on, are called for.
There are many players in electricity generation who should never again be let near an advisory function, but right now there are many offenders still climbing the ladder as if they had been angelic instead of destructfully and knowingly hurting many innocent power users.
In my Australia, mobs of them currently populate bodies on which governments rely for continuing advice. That way lies madness.
If they are not held to account and punished, society will see more examples of this abandoning of proper professionalism because it was trendy. That is not the way that our futures should advance. Call them out!
Geoff S
Substitute “trans-climate activists” for “advisors” and you score 110%.
As an aside, maybe there were engineers involved, but I find it hard to believe they were and if they were once engineers and endorsed this, they no longer deserve to wear that august title..
This is an extract from Australia’s energy market operator:
The Draft 2026 ISP reaffirms that renewable energy, firmed with storage, backed up by gas and connected by upgraded networks, presents the least-cost way to supply secure and reliable electricity to consumers, while meeting government policies.
https://www.aemo.com.au/-/media/files/major-publications/isp/draft-2026/draft-2026-integrated-system-plan.pdf?rev=01e6116c8dbd473a954928253886791c&sc_lang=en
If NetZero is you governments policy then wrongly named “renewable”energy is the lowest cost path forward. Its is lower cost than carbon capture.
Australia needs Trump.
That extract meets the literal and intended meaning of Rube Goldberg.
The problem is that we have allowed people and organizations to lie and cheat us for far too long. It is a lie to say that wind and solar are cheaper than fossil fuel and nuclear, those who claim it is should be held accountable. LCOE is only one consideration. Government mandates, subsidies, tax preference, price advantages, payments for not producing power, forgiveness for breaking environmental regulations and more are the real problem. It is dishonest to use LCOE but that pales in comparison to the power of crappy dishonest government.
And the real problem is people voted these Yahoos (Gulliver’s Travels) into office.
There is nothing wrong with LCOE (simply the annuity form of net present value) IF it is correctly calculated. It usually isn’t, and then reality bites per this post.
To show how off renewable advocates can be, I reworked the Obama EIA 2015 ‘official’ LCOE for CCGT and onshore wind, which estimated them at parity! The correct result was CCGT $68/MWh, onshore wind $146/MWh. There were some obvious EIA assumption cheats, and some not so obvious ones. Used the ERCOT grid actuals at its then 10% wind penetration for the not so obvious ones. The EIA rework details were posted some years ago over at Judith’s under guest essay ‘True Cost of Wind’.
See Google and its large behind the meter power plant projects. Like some other public debates, the engineering and science are moving over and around past the issue while the debaters don’t notice what changed.
J. K. Noland hits the nail on the head with his opening observation, and the fact that the UN’s conclusions back him up should lay to rest any arguments that try to over-support claims that wind and solar are capable of supplanting fossil fuels. Unfortunately there are still those in government places and environmental organizations who stand to lose too much by admitting these previous two sources are likely to be right.
STG – Steam Turban Generator
fueled by carbon-based fuels or uranium.
We need to stop using the “Trans-Climate Activist” term “fossil fuels.” Precise scientific language is, or should be, mandatory.
Coal, oil, and natural gas are not fossils.
fossil, n.: the remains or impression of a prehistoric organism preserved in petrified form or as a mold or cast in rock.
petrify, v.: change (organic matter) into a stony concretion by encrusting or replacing its original substance with a calcareous, siliceous, or other mineral deposit.
This cost analysis has no relevance if it ignores the fact that these sources have zero ability to respond to load demand. They cannot supply load as needed. They are unsuitable.
The value of their output is less than zero in a free market.