Do Renewables Make for Cheaper Electricity?

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:

1. https://www.4cleanair.org/wp-content/uploads/Concerned-Household-Elec.-v.-EPA-Rehearing-Petition-7-10-23.pdf

2. https://yaleclimateconnections.org/2024/09/donald-trump-is-wrong-about-the-cost-of-wind-energy/
3. 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.

4. https://wattsupwiththat.com/2026/01/24/red-states-have-reliable-power-because-they-embrace-an-all-of-the-above-strategy/#comment-4158055
5. The volumetric risks associated with wind/solar are why capacity auctions never include any significant bids from operators of these plants.