Kevin Kilty
Do they or don’t they? It’s the perennial argument, and I claim that it shouldn’t be difficult to show that they do not. However, I have to admit that there is not a readily available and convincing set of data or a graph that will make the case. The problem is made difficult because there are so many factors that have some impact on electric service prices. Whatever simple analysis one tries to make on the basis of plotting one factor against price contains mostly noise.
What Greg Brophy Meant to Say
The article that set my efforts here into motion was that by Greg Brophy. This “all of the above” energy strategy, in my mind, is an invitation to disaster if taken literally. What he is actually advocating is a “Best of the above strategy”. I know that “all of the above” was meant to be a clever play on a multiple choice exam, but all of the above combined with open-ended subsidies is an invitation to all sorts of evils – not the least of which is an invitation to overdevelopment of renewables as developers seek tax subsidies and renewable energy certificates. There are environmental and social costs to this. Sometimes it’s better to be clear than clever.
Graphs that Don’t Demonstrate Diddly
I am convinced that when choosing between a world with prosperity hobbled because of expensive and poorly performing energy systems, against a world of growth in atmospheric CO2 that is one, two or even three doublings of what presently exists, there is no choice. Opt for prosperity.
Thus, I became a member of Clintel and the CO2 Coalition for this reason. However, I have advised people that just plotting price against some measure of penetration of renewable energy is not convincing. For example, The CHECC have used this graph. [1]
Figure 1. From CHECC vs. EPA
The first problem with Figure 1 is that there appears to be a lot of scatter in the data and there is no estimate of how much of the variance in the figure is explained by the linear trendline (an R2 value for instance, would be helpful). Second, we also know that the nations involved are European, but they are very different from one another, of very different sizes, and generate energy in very different ways. Finally, the trend line appears overly influenced by two to four outliers among the 26 nations.
A different take on this same sort of graph is this one in Figure 2 which was produced by a group called Energy Innovations, but which came out of an article in Yale Climate Connections.
Figure 2. From an article by Dana Nuccitelli in Yale Climate Connection from September 18, 2024.[2] The vertical axis is cents per kWhr in spite of the odd percent sign suggesting otherwise following the 50 label. Despite this graph being created from year 2023 EIA data there are discrepancies with EIA 2023 tabulated data.
While the graph offered by Nuccitelli was produced by Energy Innovations [3], it is identical to a plot that Nick Stokes offered as a counter argument to one of my comments.[4] Nick suggested it shows price declines with more wind. Despite Nuccitelli claiming otherwise in the text, the label on this graph in his essay claims “No Correlation between Renewables and Electricity Rates”. I agree with whomever titled the graph. It mainly suggests a thinning of the ranks at high wind adoption, not the value of wind.
Figure 3 is another attempt to show some direct relationship. It plots rates of change in both variables to see if there is an obvious relationship there.
Figure 3. The compound annual growth rate of residential electric service rates plotted against the growth rate of renewable energy.
I don’t see anything obvious in Figure 2. There is no more correlation. Energy Innovation then offered Figure 4 which plots gas usage against price.
Figure 4. Gas share of electrical generation in year 2023 against price rise over the period 2020 to 2023. Plot by Energy Innovations, dashed trendline added by Nuccitelli.
What should people conclude from this graph? Here is what Nuccitelli thinks they should conclude.
“Innovation concluded that the most expensive rate increases happened in states with more fossil-fueled power generation. The report found that many utilities have continued to invest significant amounts of money in aging, expensive coal power plants. And it noted that “the states most reliant on natural gas for electricity generation were among those with the highest rate of retail price increases…”
But let’s examine the logical flaws here. First, why is natural gas usage increasing? Well, the standard tale is that gas produces electrical energy more cheaply than coal. It is also true that gas allows for combined combustion generation which saves money too because it has relatively high efficiency. On these bases one would think that replacing coal with gas would lower costs, not increase them.
Second, did anyone consider other reasons, not immediately related to cost of generation, for increasing gas usage? Well, gas turbines, simple cycle gas plants, are used as peaker plants to balance renewables. So, perhaps, increasing renewables which requires the usage of natural gas to balance their unreliable effort has something to do with price increases.
While the volatility of gas prices is a concern for electric service affordability, and undermines to some extent the claim that it is cheaper than coal, the need to balance renewables leads to using the least efficient gas generating plants in the least efficient manner. Single cycle peakers may have efficiencies as low as 20% – well below the typical 33% efficiency of coal plants used in baseload operation and far below that of combined cycle plants.
A Careful Look at South Dakota
Yes, South Dakota facilities produce a fair amount of electrical energy from the wind (3500 MW nameplate). There is only one coal-fired plant in the state of 475MW nameplate capacity. This plant obtains its fuel by rail from the Powder River Basin.
There are four hydroelectric facilities on the South Dakota stretch of the Missouri River which were built in the 1930 to 1960 time frame. These produce low cost electrical energy. Their power flow is under the control of the Western Area Power Authority, Upper Great Plains Region, and is made available to the Southwest Power Pool ISO (SPP) which serves as the balancing area authority. Because of balancing operations, one can’t guarantee that energy generated in South Dakota is actually consumed there and that it has much impact on local prices.
Down at the distribution level the story becomes quite complicated. South Dakota is like most Plains and Mountain States in that it is covered by Rural Electric Cooperatives. There are two-and-a-half dozen of them in South Dakota alone. These are non-profit local utilities owned by the electrical consumers themselves. These cooperatives are, in turn, members of generating and transmission non-profit cooperatives. Examples include TriState Generation, East River and Basin Electric. Basin Electric supplies much power to South Dakota. It operates four coal-fired power stations – two in Wyoming and two in North Dakota. It owns some gas-fired plants, some wind facilities and a very small amount of solar. When these generating facilities have fulfilled their obligations to member cooperatives, they may have spare capacity to make available to the balancing authority. The North Dakota plants supply to SPP, and the Wyoming plants probably to the Western Area Power Authority, Colorado/Missouri region (WACM).
EIA data shows that South Dakota facilities produce about 40 tWhr of electrical energy per year while consumption within the state is only 20 tWhr. The balance of 20 tWhr is made available to the SPP in the event that it is needed overall in the ISO system, which stretches from North Dakota to New Mexico.
Three things are apparent.
First, quite a lot of the setting of rates is in the hands of owner consumers who have a mission and history of controlling costs and maintaining low rates. Each of these cooperatives faces somewhat unique conditions when asking the PSC for rates. All the rural states share this low-cost electrical energy ethic which is a vestige of the rural coop mindset. This is changing, however, under the mania of fighting climate change.
Second, when the utilities within South Dakota use SPP as their wholesale source of electric energy, they receive whatever the current mix of contributing generators is being handled by SPP. Figure 5 shows a typical recent week of generating mix. Note the substantial portion of coal, which along with gas plants balances the variation of renewables. The coming and going of wind/solar demands ramping up and down of thermal plants.
Third, we have no idea that the 20 tWhr consumed within the State of South Dakota has the same mix of generating source as the mix of generators within South Dakota. It is part of a large integrated market.
Figure 5. SWPP generation. Note that coal and natural gas combined are balancing wind, and there are days when coal must dominate the mix because wind is unreliable. SwedeTex’s analogy about owning four automobiles appears to apply.
Why Do Renewables Raise Prices?
I have advised people that the simple plots of price against renewables don’t prove much of anything because they reflect mainly the variance of many local factors. In order to prove anything one has to descend to the level where rates actually are argued and set – the hearings for convenience and necessity and general rate cases.
However, Figures 6 and 7 show at least some reasons about why renewables are a nuisance. Figure 6 shows the situation in the PacifiCorp East balancing area in early 2019. Coal is being used to balance wind production and a little solar along with ramping some because of daily demand fluctuations. The variations are as much as 1,500 MW on some days; sometimes almost none. There is more ramping than there was in 2010 but this EIA dashboard display isn’t available in earlier years to demonstrate it.
Figure 7 shows what things looked like six years later in January 2025. There are no days with little ramping. Wind and solar production have grown substantially, and the coal plants variations are now as large as 3,000MW (look at January 18 through 23, for instance) and go up and down obviously twice each day.
The deeper the curtailments shown in either figure, the lower the capacity factor of the plant. More renewables to balance, more lowering of the capacity factor of whatever is called upon to balance. This leads to further effects.
First, the lowered capacity factor means that the coal plants now provide less utility to the ratepayers ultimately; while O&M, taxes, depreciation and return on rate base remain constant.
Second, while there is a small savings in fuel usage, but this savings is not fully effective. For example, if the heat rate of a coal plant being curtailed to make way for one extra kWhr of wind power is 10,000 BTU per kWhr, there won’t be a savings of 10,000 BTU of unburned coal by adopting an extra kWhr of wind. Some component of that 10,000 BTU is simply heat that makes its way to the dead state without doing useful work and which will be replaced by a fresh charge of coal later. The renewable plant doesn’t use fuel, itself, but it has induced some additional waste of fuel in the coal plant.
Third, the extreme ramping up and down is exactly like accelerated life testing. While the damage to the coal plant looks like the same wear and tear that normal operation causes, it now occurs more rapidly. Balancing wind/solar leads to some increase in O&M.
Figure 6.
All the ramping is done so that the wind/solar facilities can earn both production tax credits (PTC) and also renewable energy certificates (RECs), both of which have value to the utility. Yet I have not seen any evidence that these advantages to the utility produce any savings to the ratepayers.
It isn’t difficult to see why wind/solar increases system costs, but it is substantially complex to quantify it.
Figure 7.
Final Comment
I have made an argument about why mixing unreliable wind/solar into grids once dominated by coal has had a deleterious effect on the capacity factor of the coal plants, which in turn impacts all the elements that determine utility rates. Only fuel costs appear to be lower. Renewables even negatively impact the volumetric risks that utilities face because they complicate the estimation of how much service can be sold.[5] Switching from coal to gas-fired plants simply complicates these problems more, especially by adding the volatility of gas prices to the issue. Note in this regard that gas prices to electric power producers are even more volatile than city gate prices.
In the far future, of course, the goal of renewable enthusiasts is to rid us of all thermal combustion and to replace it with batteries. If adopting natural gas as a fuel preferable to coal has contributed to rising prices, then replacing it with battery storage ought to raise prices hugely. Batteries are not a generating source, but rather a new load on the system, and will require a huge, i’d say impossible, overbuilding of wind/solar and battery capacity.
Notes:
- https://yaleclimateconnections.org/2024/09/donald-trump-is-wrong-about-the-cost-of-wind-energy/
- Energy Innovation has this to say about themselves.
“Energy Innovation is a non-partisan energy and climate policy think tank. We provide customized research and policy analysis to decision-makers to support policy design that enhances security and access to affordable energy, while reducing emissions at the speed and scale required for a safe climate future.”
One’s beliefs about climate change are highly correlated with political affiliation to an enormous degree. To advance a transformation of the energy systems to reduce carbon emissions marks one as a “Progressive” left Democrat. This effort is not non-partisan.
- https://wattsupwiththat.com/2026/01/24/red-states-have-reliable-power-because-they-embrace-an-all-of-the-above-strategy/#comment-4158055
- The volumetric risks associated with wind/solar are why capacity auctions never include any significant bids from operators of these plants.
Electric prices follow von Mises principle that “administered” prices are information free as to real demand. Wind and solar usually operate with subsidies, and required purchase rules, so their prices are as meaningful as Cuban consumer prices on the general economy.
And the place that shows this very clearly is health care costs. Examine the insurance reimbursements allowed for lots of simple tests and you’ll be shocked by the lack of reason.
An example: one day, getting ready for bed, I removed my hearing aids and put them in their charge. I must have been extremely tired because the tips (wax filters) came off in my ears but I didn’t know it. In the morning, I noticed the tips were missing so I searched everywhere but couldn’t find them. Later, I started to hear weird sounds and though maybe the tips were in my ears so I went to my local doctor. He saw them in there but couldn’t remove them. He said I had to go to an ear, nose, throat doctor. So, I went to one. It took her about 3 seconds per ear to remove them with a tool that looked like a screwdriver with a curve on the end. Weeks later I get a letter from my insurance company which said the doctor charged $1,100 for that service. Of course the insurance company wasn’t going to pay that much- I think they paid something like $350.
Electricity prices — just like climate change — are vastly more complicated than most people (and most headlines) pretend. The science and economics are not settled. Not even close.
Actually it is settled, wind and solar drive up energy prices and fail to produce enough electricity to sustain their own operation. Not even close.
bingo!
The cost of making electricity with steam is not that complicated. What you pay is complicated because of income redistribution. Old coal and nuke plants that have paid off initial capital cost produce the cheapest and most stable power. If that power is taxed at reasonable rates, then your retail power cost are low.
The most common reason for high energy bills is using a lot of energy. When I was working in the power industry I overheard a manager complain about her electric bill. Their house was twice as big as mine. In fact we had low electric rates due to coal and nuke generation. We had low property taxes and good schools thanks to a good local government.
“Do Renewables Make for Cheaper Electricity?”
Well the answer is clearly NO!
Besides the cost of installation and life expectancy, adding neglected disposal costs and unpredictable enviromental impacts (prolonged dense cloud coverage or no wind periods, severe hale storms, etc.) which all can be monetarized there lures the ignored cost of lost convenience.
No sun and hardly any wind from dusk till dawn but still lots of demand for electric energy. So either shut down all energy consuming activities or shut up pretending “renewables” are good for anything (except burning cash).
Renewables are like a second spare tire in your car, you could argue it’s good for something which, if you are sincere to yourself, is the bitching that it cost you money, constantly occupied space in your trunk, raised your fuel consumption and you never needed it.
Judges? sarc?
Also, and never counted, is the loss of “ecosystem services” as vast areas of land are covered with ruinables. There should be dollar signs put on that loss.
The answer is, it depends!
I have been sailing for over 30 years on a lake created by a large hydroelectric system. The reason my boat was there was because it was the good wind resource. I was there working at the nuke plant.
The purpose of the wind farms that were built is to suck money out of Califonia. I bought my boat and lived in it in SF Bay I worked at one of the three California that closed. The main reason the three plants closed was bad management.
Wind and solar suppliers and investors love complicated comparison analyses because they provide ample scope to obfuscate and deceive consumers.
‘Apples and oranges’, direct comparisons with thermal generation do not make sense because intermittence puts them in completely different category of generation.
Thermal generation whatever the fuels do not need wind and solar, wind and solar need thermal to fill the gaps.
Wind and solar were initially sold to consumers as virtuous and necessary to ‘fight climate change’ despite additional cost, but now that the CO2 hysteria is subsiding the renewable industrial complex is desperate to protect its investments.
Without climate and CO2 alarmism together with government mandates tax concessions and subsidies and deceptive propaganda wind and solar as sources of utility scale electricity would not exist.
Do Renewables Make for Cheaper Electricity?
The answer is clearly no .. in the best cases like South Dakota they aren’t making it more expensive but that isn’t cheaper.
But as I explained even South Dakota isn’t a good example because an intermediary, the Soutwest Power Pool, cuts the relationship between in-state generation and in-state use.
Renewables are touted in every state so all one has to do is look at their monthly electricity bill to see the increase in cost is related to renewable adoption. No graphs needed.
Except sizeable inflation has hit equipment and utility trucks.
Why is that?
Comparing wind/solar with the thermals is a comparison of lemons and apples.
Wind/solar machines have a design capacity which they almost never produce. On average they produce about 1/3 or less of their design capacity., sometimes nothing, and when and what they produce is unpredictable. Further, they are subsidized for their construction and operation, utilities are required to accept whatever they are producing at any time. forcing the thermals to reduce their output. Furthermore, when wind/solar are producing more than the grid can accept, they get paid for what they are forced to not produce! But wait, there is more. Who pays for the much longer cables required to bring distant wind/solar to the customer? The grid does, passed on to their customers. Who pays for the added machinery needed to stabilize grid voltage and frequency because wind/solar cannot do this? The grid does, passed on to their customers. And who pays to replace wind/solar machines when they reach their short lifetimes? We all do.
In contrast, thermal machines have a design capacity which they can produce in full whenever called on and the electricity they produce is already stabilized and ready to go. They are highly reliable machines and can and do operate for half a century or more. But with wind/solar present, thermals must reduce and modulate their output so that the actual electricity demand equals the actual electricity supply at all times. When thermals must reduce output to achieve this balance, they make less money because they are paid only for what they produce and their constant cycling increases maintenance. They often cannot sell enough to pay all of their “rent.” At this point, even the thermals must be subsidized simply to hang around because at unpredictable times, they must do it all.
These two systems are simply not comparable unless all of the costs and production constraints are counted. XY graphs can’t do that because there are too many variables.
Who on earth could possibly have designed such a foolish, expensive and unreliable system? As we know, its politicians and lawyers.
Except it wasn’t designed. It was merely decided.
If it isn’t intuitively obvious that building two infrastructures instead of one is more expensive than just building one, there’s probably not much value in trying to explain the data.
The less you use the conventional power plants, the more they cost. They must recover their capex over their useful life which is as big a factor as fuel costs. A $1billion plant costs $1billion if you are using it 90% of the time or only 10% of the time. Since you have to build it anyway, building a second infrastructure that you must ALSO pay the capex on makes little sense.
But you see the argument from the people who insist renewable sources make for cheaper service either just cite the “no fuel” argument, which I hoped to show here is insufficient, or they think that fuel cost is a huge component of generation costs. Nick and another person claim 2 cents ber kWhr as a fuel cost based on a very high cost for coal ($100 per tonne).
The two best run power plants that I know much about use Powder River Basin coal and have almost no transportation cost. Their fuel cost is somewhat above 0.64 cents per kWhr but probably not much above that because PRB coal is only $15 per tonne. Saving 0.64 cents per kWhr will never be observed in utility rates that have another 10 cents per kWhr or more in other costs.
You were worried about cherry picking before. PRB and it’s $15 per tonne is far from typical. Its bad quality coal in terms of btu/lb and not much of it is economically recoverable cheaply. The Wiki sums it up as….
PRB coal has been very steady at 15 per tonne for quite a while now, and has a heating value of 8,500 BTU/Lb. It may be low rank but makes electrical energy fine even in a near supercritical plant. I don’t what Wiki is talking about but if only 10.1 billion tonnes were economic in 2008 we’d have just about run out of coal by now.
Here is from the original USGS report that Wiki is quoting,
OK. Well from the EIA its still going to work out to be $40-45 per tonne delivered so its still going to be a significant cost for generation…especially considering its low quality and will require more tonnes for the same energy compared to the more expensive coals
From the EIA we also have
I wasn’t expecting that. I mean…with regards to
If that’s not a killer argument, I’ve never seen one. Surely I’m misinterpreting it.
For people reading, dark spread is defined here as
This is very confusing, but let’s first note that the dark spread is wholesale power price minus fuels input costs. Thus an increasing spread, that is becoming more positive, means it went from being negative in 2023 to being positive (2.1 cents per kWhr positive) in 2025. The results ( PJM here) are highly station specific. Stations that use underground coal, or have lots of transportation costs, or are old inefficient plants, will have very different costs of generation.
Our other confusing point is that I am saying that retail prices don’t have a huge contribution from fuel costs, and you keep looking at wholesale prices or quality of coal, or other factors. Now, I ought to be more careful about what I am talking about when I say “generation costs” but my entire essay has been about costs to consumers — that just looking at retail prices versus wind power percent doesn’t mean much in regard to the argument that renewables make for cheaper service. I stand by that.
The important factor is fuel costs as a proportion of generation. If the argument is that fossil fuel energy is cheaper than fuel-less renewables then that’s the comparison.
All sorts of additional costs can be added after the fact to get to the retail price but they’re mostly irrelevant to that argument.
It ought to be intuitively obvious that to transition from one to the other requires both during that transition and accept that the cost will be greater.
Transitioning for the reasons of carbon emissions reduction was never going to be a sensible path and people like Mann have a lot to answer for. Transitioning for the reason of getting away from the limited resource that is fossil fuels has different drivers and timescales and could have been managed much more efficiently.
David, A simple life cycle NPV analysis would provide a clear preferred system. Trouble is, I don’t think many renewables advocates have a clue what NPV stands for and how it is done or they just won’t do it because they know it will produce a result that they don’t want to know about.
Simple? Exactly how do you account for distant future fuel prices and availability?
Let me put it this way, if Germany had favoured gas over renewables, how do you think its NPV calculation would have stood up in the light of the completely unpredictable Russian (ie supply) influence?
Any predictions of the future, particularly economic ones in the far future can be taken with a large grain of salt.
Supply problems only have an effect on NPV if the cost changes. That can, and does occur, regardless. Inflation is only a guess when you look forward 30 years. If you wish to include risk management factors, then do so. We certainly did for storms, floods, fires, etc.
Here is a factor for wind and solar. What happens to wind and solar NPV when replacement/disposal costs are required at 15 years instead of 25 years?
Do renewables lower energy prices? In the aggregate, no. There are quite a few variables to consider, and these graphs are interesting and informative.
We know from debacles like Solyndra that, even with heavy subsidy support, things like solar power can’t stand on their own, at least if you’re looking to make it a significant fraction of the market. In small, localized, ideal areas, especially with subsidies, then it’s possible that renewables can have a positive local or short-term effect on prices. But on the balance, even with subsidies, the answer is no, they won’t lower costs. Even if the government subsidized renewable 100%, you’d run into the Warsaw Pact Shortage Economy debacle, where even though the governments supported every industry, there were shortages everywhere all the time (that’s how we know that socialism doesn’t work- it’s been tried before, with a 100% failure rate). Even if we didn’t run into shortages, and renewables could some how support demand, AND if the government enacted price controls to keep a ceiling on rates/prices, then the taxpayers would be eviscerated, and the currency destroyed.
I’d be curious to see nameplate generation capacity in the electrical grid vs the actual generation into the grid or exported from the grid. I suspect that as capacity factor of the grid declined the price of power on the grid would go up. A web search revealed, “Between 1982 and 2000, utility capacity utilization increased from 80% to 97%. Since 2001, this trend has reversed; while production grew 14% by 2019, capacity utilization fell from 92% to 75%.”
The other thing to examine would be price volatility of the power generated. Non-dispatchable generation likely has a lot of generation that results in negative prices when generation is high but the dispatchable generation would generate very high prices when the nondispatchables in the grid were not available.
Yes to all these factors.
Actually I should elaborate a bit. Between 1982 and 2000 demand was growing and so the slight overbuilding of plants, which utilities do to meet expected future demand, was making this pay off. But 2000 to present has seen real growth of subsidized wind and solar which now competes in an unfair way with thermal generation, which is forced into making up for the deficiencies of wind/solar. The additional costs are blamed on coal and gas, while the promised lowered power costs do not appear because they are too small to notice in the data noise from other sources.
In the Western grid covered by the current imbalance market (WEIM) there is 22tWhr of curtailed solar energy in the southwestern U.S. that people would probably sell for minus one or two cents per kWhr just to gain the production subsidies and RECs involved if there were a way to transport it to consumers. This would raise additional problems with keeping sufficient thermal generation on the grid.
Simple check: If the rising electricity price was caused by rising fossil fuel prices not by wind and solar then countries with more fossil fuel and less renewables would have larger increases. They don’t
Short answer –
NO.
The author reports, “ open-ended subsidies is an invitation to all sorts of evils – not the least of which is an invitation to overdevelopment of renewables as developers seek tax subsidies and renewable energy certificates”. But then neglects these two factors and doesn’t even mention the biggie, Cap and Trade. These three (3) items have more to do with the growth in RE (Ruinous Energy), than any pretentious save the planet concern. Clearly, a best fit for follow the money.
Everyone knows about investment and production tax credits, no discussion required. Not the case with Renewable Energy Certificates (RECs). There are two types: voluntary, and Solar Renewable Energy Certificates (SREC’s)
RECs ((Voluntary)
A REC is a certificate that represents 1 megawatt‑hour of renewable electricity generated.
Companies buy them to claim “clean energy use.”
Because “voluntary” RECs are cheap and easy
· Corporations use them to make big renewable claims
· Utilities use them to appear compliant
· Cities use them to publish “net‑zero” strategies
…without making any physical change to their energy mix
.
Effectively: RECs let organizations buy an image rather than reduce emissions. Voluntary RECs, sell for only $1–$5.
SRECs (solar renewable energy credits), especially in certain Northeast states, can reach $150–$400+ — and those are not cheap or easy for utilities or ratepayers.
When you combine:
• the large states with high renewable mandates,
• the Northeast states with very expensive SRECs,
• dozens of smaller REC markets across the country, and
• the compliance costs paid when utilities fall short,
…the total national REC + SREC spending for 2025 is almost certainly in the range of:$4 billion to $6 billion nationwide per year. Six $billion in the “scheme” (literally) of thing is pennies, but still for something that adds to utility costs that doesn’t generate a watt of electricity it’s still “something”.
RECs isn’t what gets the fraudsters salivating about wind and solar, it’s Cap and Trade:(Not $billions, $100’s of billions every year).
Is Cap-and-Trade Saving the Planet—or Just Creating the next Bubble?
Cap-and-trade sounds like an elegant solution: set a cap on emissions, let companies trade allowances, and watch the market drive efficiency. It’s less about physics and more about finance.
Cap-and-trade isn’t an environmental solution—it’s an economic distortion. It creates a trillion-dollar speculative compliance market that rewards financial engineering over real emissions reduction, while consumers and manufacturers shoulder the cost. Financial intermediaries—banks, brokers, carbon funds—often profit more than technology innovators.
Here’s how it works: Governments set an emissions cap and issue allowances. Companies that emit less than their allowance can sell credits; those that exceed must buy credits or pay penalties. This creates an artificial market for carbon credits—value driven by regulation, not intrinsic utility.
The money flow starts with regulated industries purchasing credits, moves to credit holders and trading desks, and governments skim auction revenue.
This is what makes storage so important on the grid. Below is a graph of Western Australia’s generation profile for today. You can see the coal and gas generation were relatively constant which is how they’re best run. Then excess energy is used to charge the batteries which in turn covers the peak periods and reduces variability at other times.
It’s funny — if you take wind and solar out of the mix, you don’t need batteries at all. You seem convinced it makes sense to spend two dollars to get a dollar’s worth of power, when you could spend half as much and get the same result. Wind and solar require backup because their output is unpredictable. Coal, gas, and nuclear don’t, because their output is stable and reliable.
This whole post is about…
And even Kevin acknowledges its not as cut and dry as you believe. Personally I could care less about emissions and think that the warming climate with additional CO2 is probably a net benefit.
But I recognise that the fossil fuels are a limited resource and they’re running out. It takes a very long time to transition because it takes a very long time to do the R&D, implement and learn and eventually converge on the best solutions. So far its been maybe 20 years to get as far as we have so we need to be doing it…or transitioning toward nuclear and we’re just not doing that.
” ….. fossil fuels are a limited resource and they’re running out.”
Scotland has enough coal for around 300 years so not running out any day soon, we just aren’t allowed to use it at present.
USA has a lot. Australia has a lot. China has a lot but uses a lot. The problem is that “The World” doesn’t have so much and according to the Worldometer…
Coal is the most abundant resource with 133 years at current usage rates but oil and gas are much less with 47 and 52 years respectively.
Maybe there’s more yet to be found but the real problem is that oil and gas production rates will eventually start to drop and there will be shortages well before the “end”. If we go down the fossil fuel path then as oil and gas production drops, coal usage will increase.
But I guarantee you that we’ll use as many fossil fuels as it takes to transition and probably keep using some fossil fuels for a long time to come where they make sense.
You can make gas out of coal.
You can, but it requires enormous infrastructure to have been built close to the coal and will burn through our coal that much faster.
We’ll be all nuclear at least 200 years before we run out of coal. But yes, expensive plant. Cost would be equivalent to BTU’s available from wind and solar,3x more expensive than CCGT at $5/mcf NG
Yes, pipeline quality gas at Dakota Gas since 1983. I worked there for 5 years. CO2 for enhanced oil recovery and NH3 plus more.
The world has a lot, it’s just that most places haven’t been searched yet.
Wishful thinking indeed.
You mean they won’t do the environmental, safety, health Ben Dovers you want? Sorry/not sorry…
They are running out, but we have hundreds of years of supply left. It is stupid to stop using fossil fuels now, and destroy our economies now to avoid something that won’t happen for centuries, if ever.
Battery is too expensive. Period. I’ve a friend in St. George Utah who has $30,000 worth of batteries storing solar energy each day to just get through one night of air conditioning. Imagine each utility account needing $30,000 capital investment in batteries alone just for their own use. $30,000 is twice the current capital per account in PACE.
At least $40,000 w/o subsidies. I’m surprised he can get by that “cheap”
Less than $100 per kWh and dropping for the cells themselves. Installed cost is much higher at maybe AU$800 per kWh. I also have a friend who went for batteries and solar and it will pay back well before it’s lifetime. Meanwhile his electricity usage bill has reduced to zero (plus unavoidable service charges) and in summer actually pays him with surplus so he’s now immune to power price increases.
“All the ramping is done so that the wind/solar facilities can earn both production…”
If you look at the 2019 plot, the ramping doesn’t match wind changes, and while it might coincide with solar peaks, it is obviously a lot greater. The 2025 plot likewise does not show ramping in response to wind, though the greater solar fluctuations could have more effect. But why doesn’t gas respond?
The solar variations are predictable, as were the earlier diurnal demand variations, which also forced coal to respond.
To make that argument, he really needed to show a much higher resolution graph of maybe a single day or two, not a whole month.
My graph above has 5 minute data points so really does visually track and compare generation of the various sources. for a 24hour period.
While 5 minute data might show some very detailed balancing, one hour data works fine to demonstrate the anti correlation resulting from balancing. I’ve shown a month of one-hour data in Figures 6 and 7. If I were to use only one day, Nick, would complain that I cherry-picked. A year’s worth is too dense to show in a graph. One hour data is 720 data points per month, and the correlation between wind and solar here on Figure 7 I’d guess to be around -70%, and -50% for correlation with wind which I’ve calculated in other equivalent time periods. A 50% correlation with 720 data points, even if the data points are not all independent, is highly significant.
You need the detail to make the claim. Your claim was based on the correct argument that fossil fuels (coal in particular) can’t track demand efficiently but you’re showing it at timscales where they can.
The correlation in 2023 between coal and wind was -52%, between coal and solar -70%. You have to be in denial not to see how coal is balancing wind/solar. Or maybe you believe that curtailing coal causes wind? Gas is also balancing mainly solar. The ramping of daily demand contribute a plus or minus 10%. Take a look at Figure 5.
But for flares, variations of the sun’s energy output are indeed predictable. There is a very complete discussion of this matter in WUWT a couple days ago. What is not predictable is the amount that gets to the surface of the earth during daylight hours. At night, of course, it’s zero. Predictable though it may be at the top of our atmosphere, heavy daytime cloud cover can reduce the amount delivered to a solar farm to near zero. An ordinary cloudy day can reduce it by half. Fleeting clouds can temporarily reduce it to 50% to 90% of the clear sky amount depending on the thickness and extent of the clouds. Clouds are what cannot be predicted therefore solar energy cannot be predicted either but for everybody’s prediction that you get nothing at night. Clouds also effect winds and contribute to the unpredictability of wind as well. I am sure you know these things Nick. They are very straightforward. The pertinent data is readily available. The issue is why do you not reflect such information in your comments?
In any grid with significant renewable capacity, there needs to be also an equivalent capacity of conventional generation as regularly renewable generation level drops to near zero. (The amount of power available, on demand, from a neighbouring grid can affect that statement).
If economy is the aim, eliminate the renewables as all that they cost is superfluous.
From that I suggest the argument that renewables are cheaper is false.
Fuel costs will rise for the conventional generators but they will also be more efficient as light y loaded conventional generation is less efficient which they often are when renewables are in the mix.
A couple of years ago at this page I made this figure with publicly-available data.
Note the total absence of countries in the high renewables / low electricity price quadrant.
This, as addressed, is a pointless question because it addresses price and not cost.
The important question is not whether there is a correlation between prices and renewables. Prices are driven by a whole lot of things in the local political environment, regulation, subsidies etc.
The important question is whether, on a fully costed basis, renewables deliver dispatchable power at lower total cost than gas, coal or nuclear.
Lower total cost means the total cost, including transmission, of delivering dispatchable power to the point of demand.
So, as in a current UK case which has attracted some controversy, you are thinking of building a wind farm off the north coast of Scotland. Add up the costs of installing it. Then add in the cost of making its supply dispatchable. And add in the cost of transmission to the Midlands or South East of the UK. And take account of all the subsidies scattered around.
What you want is to compare the costs of delivering the same product to the same place for a wind farm off the north coast of Scotland versus a closed cycle gas plant located somewhere near Birmingham. And you must take out all renewable obligations or other tricky ways of favoring the wind farm, including constraint payments. Which you can handle in one of two ways, first show the constraint payments as a cost of wind power, second don’t count any power produced in excess of demand, which will mean there won’t be any constraint payments, but total production will be lower.
I have never seen a case showing that wind and/or solar is the low cost provider when you take all the costs of delivering dispatchable power to the point of demand. Not for want of asking.
As for price, in the present environment it is not a guide to relative cost of production and delivery. Its so distorted by regulation and subsidy.
“distorted by regulation and subsidy”
While gas accounts for c. 93% of UK wholesale electricity prices those wholesale prices are only around 40% of bills.The costs of Capacity Market (CM) and Contracts for Difference (CfDs) are included in the wholesale costs.
Then there are the policy costs. Renewable Obligations Costs (ROCs), Feed In Tariffs (FIT), Energy Company Obligation (ECO), Warm Home Discount (WHD), Green Gas Levy (GGL), Network Charging Compensation Scheme (NCCS) and Assistance for Areas with High Electricity Distribution Costs (AAHEDC).
https://watt-logic.com/2025/05/19/new-report-the-true-affordability-of-net-zero/
Good analysis here, Kevin. Thank you.
Those “…beliefs about climate change…” have distorted the otherwise entirely technical problem of affordable, reliable electricity supply for decades now.
It may take more years or decades for it to be re-discovered that there was no good physical reason to have ever expected incremental CO2 to drive harmful “warming.” This was well stated in 1938 in comments by Simpson and Brunt on Callendar’s attribution of reported warming to rising concentrations of CO2.
https://wattsupwiththat.com/2025/04/06/open-thread-138/#comment-4058322
Those pushing wind and solar make the claim that even if climate change wasn’t a problem, then wind and solar backed by batteries and hydro storage would still be cheaper than coal, gas, and nuclear.
Pandering to climate change constituencies brings in some level of public support for wind and solar. But the real draw among the voting public is the claim that wind and solar are inherently cheaper.
Millions of voters have embraced the claim that the renewables are cheaper on their own alleged merits. These voters don’t care about climate change, they don’t care if CO2 either is, or isn’t, the climate’s control knob.
They’ve bought the snake oil that they’ll be paying less for electricity when wind and solar are the dominant forms of power generation. The climate change issue itself plays next to no part in how the voting public perceives the value of wind and solar.
“The climate change issue itself plays next to no part in how the voting public perceives the value of wind and solar.”
You are most likely right about the majority of the voting public. But the state legislature and the current administration in NY, for example, are aggressively pushing wind and solar with massive battery support, with extensive electrification for buildings and transportation, in the recently updated and adopted “Energy Plan.” The justification is not on the claim that the electricity will be cheaper than gas-fired generation but that it produces “benefits.” The speculative Avoided GHG “benefits” arise from incorrect beliefs about climate change. The speculative Health “benefits” arise mainly from incorrect and exaggerated impacts of particulate emissions. Neither of these categories of “benefits” generates any hard-money receipts to justify the cost.
https://drive.google.com/file/d/1_gt5EYltq5B2Y2tSAA7zf6GbNkbg3Xso/view?usp=drive_link
My point is that it is the beliefs of the state officials and representatives, not so much the beliefs of the voters, that have driven policy off the rails.
As an antidote to that I ask people if they read their utility bills. They admit they don’t. Rhey can’t understand it. However, to a one they admit to recognizing that the electric bill has gone up a lot. I am slowly becoming a regular on local talk radio, and the host has been hinting that we need to tackle the issue of understanding utility bills in an upcoming episode
Renewables, gas, oil, coal, hydro and nuclear make energy prices lower. Wind and solar drive up energy costs exponentially. Proven facts, no debate needed.
The latest wind auction in Britain shows that wind power is much more expensive than gas. This one auction alone will add 1.9 billion pounds to Britain’s electricity bills.
https://notalotofpeopleknowthat.wordpress.com/2026/01/14/ar7-will-add-1-9-billion-to-electricity-bills/
The latest tactic by the Climate Industrial Complex: Michigan Sues Oil Giants, Saying They Collude to Make Energy Costlier: https://www.nytimes.com/2026/01/27/climate/michigan-oil-companies-lawsuit-antitrust-affordability.html
When you can’t win with one lie, just try another.
When working for the telephone company, we used 30 years as the expected life span as the starting point for examining capital investment. Everything was thrown in the bucket to determine a net present value to see what rate recovery would require.
I sit here wondering what will occur when the current fossil fuel plants need to be shut down due to life expectancy expiration. Will wind, solar, and batteries ever be able to absorb the needed demand 24/365 10, 20, 30 years from now? What will the cost be? These are the studies that need to be done right now with the assumptions being transparent.
The CAGW warmests and environmental people won’t have a leg to stand on when it becomes apparent that new fossil fuel/nuclear will be required as current plants expire and are closed. I fully expect a great gnashing of teeth when this occurs because of a lack of foresight.
As coal disappears, what will replace it? As gas disappears, what will replace? Somehow I don’t expect battery technology to meet the challenge at a reasonable cost (along with the wind and solar to charge them).
“As coal disappears, what will replace it? As gas disappears, what will replace? ”
Both will. In the blink of an eye, relative to human history.
Right now, the only viable options are renewables. Want clean, safe, cheap, SMR’s? Line forms behind me. Not viable yet, but I’m sure that they will be, the day that Republican COTUS members firm up that health care plan that will be better, completely available, cheaper. IOW, passed down from The Lord, “Not in my lifetime, bob”.
At a personal level, the long-term issues with health care aren’t completely solvable, given that sooner or later, all of us die. At least at that point, we don’t care about health care issues anymore. It’s somebody else’s problem.
Concerning the very long term future of energy beyond the year 2100, the great bulk of it will be produced by nuclear fission. Over a transition period of a hundred years or so, the world will be running on some combination of uranium, thorium, and plutonium.
Diesel fuel, gasoline, and jet fuel will be synthesized from CO2 extracted from seawater using nuclear-generated electricity and process heat. A hundred years from now, we will still be flying from one place to another in jet airliners.
Will the Boeing 737 and the Airbus A320 still be in production in the year 2125? Will my descendants still be driving my beloved 2010 Mazda 6, a car which refuses to wear out, in the year 2125? I myself can’t say for certain, but who knows?
George Jetson redux….
A rapid expansion of power generation capacity, as stated in terms of terawatt-hours produced annually, simply isn’t going to happen in the US. A number of near-term and mid-term issues with the equipment supply chain must be solved before a rapid expansion can begin to occur.
Two or more decades of hard work will be needed to recover the industrial capacity we once had for manufacturing power generation and distribution equipment.
In the meantime, wait times for delivery of gas-fired power generation equipment is now running at five to seven years. As the price of these limited supplies of power generation equipment continues to rise, who will be gaining access to that limited supply of equipment? Only the highest bidders?
If CCGT manufacturer’s didn’t need to factor into to their investment decisions the prospect of liberal/progressive/climate alarmist/democrats getting back in power and blocking all natural gas efforts there wouldn’t be a backlog. There would be bright shinny new CCGT manufacturing plants in several red states.
Non-genertor backup will eventually be charged by a generator of electricity. Why then would you need a non-generator at all? Follow that chain of logic all the way back.
“This “all of the above” energy strategy, in my mind, is an invitation to disaster if taken literally.”
I vaguely recall that Obama said that too- and wrong for the same reason. Especially because he didn’t mean it.
Although probably most on here will not care, statistical importance for cross-sectional population analyses is better understood by the significance of the model and parameters, and sure an R-sq might typically be 0.3-0.6, but “populations” have a lot of variability, and potential trends are usually the factor of interest. Physics relationships are typically not about cross-sectional analyses of populations. Check out a few medical studies.
The article misses the point. Yes there’s a lot of scatter, but if wind and solar truly reduced the cost of electricity then there would be a clearly visible trend that way. There isn’t. The fact that the trend goes the other way is clear evidence that wind and solar do not reduce electricity prices.
It’s not even close. The three European countries with the highest retail electricity prices are UK, Germany, Denmark, which are the highest or among the highest wind and solar generators.
Before those three countries went so heavily into renewables, they weren’t the most expensive, and that’s important because it shows that renewables are not even reducing their prices relatively.
The problem with understanding renewables and associated costs is that their cost is upfront and needs to be recovered so high energy prices are passed on initially. However over time they ought to relatively drop as the cost of running them ought to be lower with no fuel required. We’re still adding them so we’re still suffering the initial cost issue. It’s very much the case of time will tell.
Mike, I suspect that most bloggers here at WUWT are in the top 10% of the general population in climate and energy awareness. But surprisingly, many of them are so naive they seem to think that wind and solar can cost effectively supply 50% or more of the required power for a modern society or even 25% of primary energy. They express concern about coal and natural gas depletion, but it’s a non-issue for 100 years. Unless we’re mostly nuclear by 2126 we will have a lot more serious issues to deal with. Can you explain the dichotomy in their reasoning?
I have a graph above showing Western Australia supplying 60% of its grid with wind and solar over a 24 hour period. That’s a factual statement.
Fossil fuel lifetime is documented as less than 100 years. You can make an argument there is more to find but it’s not a given.
You can use actual data to make an argument or you can make unsupported claims based on your biases.
Now show us a 24 hour period where fossil fuels supplied 60% of its grid.
You realize that 60% is not 100%, right? How do you get to 100%?
Who cares?
We dont need to get to 100% if we have enough storage to get through the periods where statistically, renewables cant cope across the entire grid. Then we run a smaller amount of reliable dispatchable generation (eg nuclear or coal/gas) to provide base load and enable the storage to fill.
Right now, we’re transitioning so dont bother pointing out the current state of the solution cant do that.
Also dont bother pointing out some locations dont get sun for months. Obviously regional solutions vary.
Furthermore if nuclear generation becomes accepted, economically viable and are actually built then it’d be possible to move away from wind and solar over time.
I care. As pointed out, batteries are not generators. When they are discharged, they are done until recharged. You can’t plan their availability with any given certainty.
When they are discharged, what is going to recharge them. Are we going to build over and above what is needed to meet demand in order to guarantee availability of power for recharging?
You appear to ignore or simply dismiss risk management considerations. That’s not a good look.
Well then dont. If you dont mistakenly believe we need to get to 100% renewable energy then you can start to think about what makes the most sense.