Dr. Lars Schernikau: Energy Economist, Commodity Trader, Author
Details including the full Blog “Rethinking the cost of electricity in a complex energy system” are available at www.unpopular-truth.com
We think we understand electricity costs. We don’t.
Most of us believe the cost of electricity is a question already answered. We compare technologies, quote numbers per kWh, and rely on a couple of familiar metrics to tell us what is cheap and what is not. But, what if i tell you that those numbers only tell part of the story?
For decades, the conversation has been shaped by simplified measures like the levelized cost of electricity (LCOE). These figures seem easy to communicate and widely accepted, yet they focus narrowly on individual power plants while ignoring the system they operate in… and that matters allot!
Electricity is not a product
Electricity is often treated as a commodity or a product . A unit of energy sold at a price per kWh.
In reality this is not correct as electricity is a service provided on demand 24/7/365.
Therefore, it must be delivered reliably, at the right voltage, frequency, phase, and current every milli-second of every day. That requires a highly complex system made up of generation, reserve capacity, storage, transmission networks, and stability mechanisms.
Once you look at electricity this way, the question to be asked changes quite a bit.
We are no longer just asking “what does this technology cost?” But rather “what does it cost to make the entire system work?” Because what would you do with electricity if it is not delivered to your location, ready for use?
What the standard metrics miss
Common metrics like LCOE were never designed to answer system-level questions as they capture plant-level costs, but leave out balancing, grid integration, backup, and storage (system-costs).
More complete approaches exist, such as the Full Cost of Electricity (FCOE), which attempt to account for the entire system required to deliver reliable electricity and when these broader costs are considered, the picture begins to shift.
Even institutions like the OECD and UNECE now acknowledge that increasing the share of wind and solar can raise total system costs (see links in the original blog here). Not because the technologies themselves are inherently flawed, but because they require additional infrastructure and support to function within a stable grid.
The paradox of adding more wind and solar
At first glance, expanding wind and solar seems like a straightforward path to cheaper and “cleaner” energy…but systems rarely behave that simply.
As their share increases, the cracks start to show….
- additional balancing and backup capacity is required
- grid infrastructure must expand and become more complex
- storage becomes a necessity and eats away at the generated energy
- market value declines through falling capture rates and on the list goes…
So as you can see, the more these technologies are deployed, the more they reshape the system around them and the more costs shift into areas that are often not immediately visible but should be considered!
A system under tension
Let’s look at today’s energy debate.
On one hand, there is a strong push to electrify quickly using wind and solar, reducing dependence on imports and lowering emissions.
On the other, there is continued reliance on coal, gas, and other dispatchable sources to maintain reliability, stability, and security of supply.
Both perspectives operate on different assumptions about how the system behaves and what it actually costs, but in the end coal and its dispatchable friends, seem to be the ones we can depend on.
Germany as a real-world example
Despite significant investment and a large expansion of wind and solar capacity, total system costs remain high and continue to rise. Installed capacity now far exceeds peak demand, yet the system still depends on conventional generation to ensure reliability.
So, how long will we avoid the unpopular but necessary question of:
Are we measuring the cost of electricity in a way that reflects reality, or are we relying on metrics that overlook the most important factors?
We are doing the latter…
In fact, in Germany, domestic lignite is the lowest cost of generating electricity with 40 EUR/MWh excl. CO2 and 120 EUR/MWh incl CO2. As you can see below, solar is and remains the most expensive.
A different way to look at cost
In my latest blog, I step back from the usual debate and looks at electricity from a system perspective.
I explore:
- the limitations of commonly used cost metrics
- the role of capture rates in understanding market value
- the often overlooked system costs of wind and solar
- and a simplified estimate of electricity costs in Germany
with the aim to better understand the full picture and not to provide a perfect number.
The question worth asking
If electricity is a system, not a product…
If costs extend far beyond individual technologies…
And if those costs rise as complexity increases…
Then the real question is no longer which technology is cheapest, it is:
What does it actually cost to keep the lights on, reliably, 24/7/365 year after year?
Read the full blog and try out my calculator linked in the blog to see for yourself how the numbers behave. 😉
Story tip: Electrical power is only effective when it is a continous flow of energy! Thus intermittent sources should not be considered at all, at least not to have access to the general grid!
Ruinable energy has too many coughs and burps. 🙂
continuous flow of energy + “matched to load demands”
Not continuous flow. Continuous availability. Current flow is always determined by load demand or the system fails one way or the other.
At least there has to be load balancing by, e.g., coal or gas. If Germany were located in the tropics solar might be more affordable, but at the northern latitudes it makes little sense. But, even closer to the tropics clouds happen or even too much sun, and adequate load-balancing is still required (see, for example, Spain, last year).
Service or product makes no difference. Gasoline can also be thought of as a service, so can groceries. Internet service is both product and service.
A commodity can be purchased by the consumer in volumes above the immediate needs and consumed at a time beneficial to the consumer.
Try doing that with a haircut.
Can you see the difference between a service and a commodity?
Like gasoline? Like a house? Like airline seats?
Gasoline? Yes. Think beyond the ICE gas tank. I’ve a can of gas for my lawnmower.
House? Yes. Many have more than one, but only one can be used at a time.
Airline seats are a service. You do not buy the seat. You pay to use it, just like you pay to see a movie.
Hmm … gasoline and groceries are produced goods per se that can be stored at minimal cost, loss and hardly any technological effort. Groceries are a bit more iffy in that aspect, especially long term.
The store or gas station that sell you that stuff offer the service of temporarily storing it for you until you purchase it. They’re also able to provide that service independently from each other.
To electricity applies none of the above.
Further distinctive property of electricity:
You can’t take it simply with you when or where you want it, it has to be provided (or produced) somehow….on time and on the spot.
But I dare you to carry a couple of electrons in your pocket at all times or tell me where wireless extention cords can be purchased.
Internet can only be accessed through providers and devices that allow and enable you access to the various providers of other online services…hardly a “good” in itself, further it doesn’t work without electricity.
Judges?
You can store gasoline in jerry cans.
You can store groceries on shelves or in refrigerators.
What kind of bucket is used to store electricity?
Internet service is not a product.
“What kind of bucket is used to store electricity?” A battery. Of course, you will lose some energy in the transfer – and leakage.
A great explanation of how electricity costs aren’t necessarily what they might seem to be. Maybe also, if since notional, scientifically dubious cost of carbon is included for comparison sake, then some accounting for the real costs of detrimental human health impacts and the many-fold forms of environmental damage caused by wind and solar should also be included?
The benefit of more plant food and the greening of the Earth should be factored into the value of ff energy.
Joseph – so right. See NASA’s 52 second video showing the benefits of CO2 Fertilization here: https://youtu.be/zOwHT8yS1XI At mid-video, the smokestacks are emitting water vapor. You have to laugh at those that use water vapor emitting smokestacks as image purveyors of destruction. Oh No!, run for the hills, there’s that killer H2O again! And OH NO!, ice is receding and being replaced by plants, as has been going on for apparent 10,000+ years, according to science.
“those that use water vapor emitting smokestacks”
The photos they use are lit so the water vapor looks very dark- like filthy smoke. That kind of lie really ticks me off.
A couple of days ago I listened to a presentation on solar power and how it’s going to change the world! The presenter is a climate change zealot and the presentation went as I expected. He discussed the plans for cabling from Morocco to Europe from some mega solar farm. He also discussed the U.K. national grid system, suggesting that it needs completely replacing. He didn’t say how this would be paid for and how long it would take. The positioning of satellites to transmit power via microwave radiation was also mentioned. The possibility of switching on gas powered electrical production as required was also mentioned along with China’s production of solar based power, completely ignoring their use of other sources of energy.
Just what Europe doesn’t need- energy of any type coming from an African Moslem country even though Morocco seems like a nice place.
Microwave powersats have been discussed for decades.
Problem 1: the cost of getting massive arrays up there in the first place.
Problem 2: the cost of repair and maintenance.
Problem 3: Microwaves cook birds, animals, and people. Consider the effect of an airliner straying into a powerful microwave beam.
There are more problems, but any one is sufficient to kill the idea.
‘X Links’ had a plan to construct a 1500 square mile solar, wind and battery facility in Morocco and connect it to the UK by a 4000km sub-sea cable.
It was cancelled last year.
For millennia, solar power has been changing the world. It brought Earth out of the killer deep-freeze of the Laurentide Ice Sheet that covered pretty much all of what is now Canada under at least a mile of ice. What is now Chicago was also under a mile of ice – it’s pretty hard to BBQ in your back yard in Chicago under a mile of ice (so was the solar induced melting of that glacier bad?).
As mankind left nomadic lifestyles for agriculture and developing commerce, solar powered sailing ships ever-increased civilization’s technologies, and with the solar-powered water cycle, early water turbines powered ever-growing industrialization. Even now the solar-powered water cycle produces regular occurrences of plant-life giving rain, warms Earth, grows plants and trees, and so forth and so on. Utilizing solar energy is nothing new under the Sun.
US bank JP Morgan has annual energy reports that have long been critical of the LCOE metric for comparing energy costs. You can get the reports for free here:
https://privatebank.jpmorgan.com/eur/en/insights/latest-and-featured/eotm/annual-energy-paper
Lots of charts and stuff, take it in small chunks, but it is good stuff.
alti: Thanks for the link!
If you ask Google’s AI Gemini the question “Is LCOE a misleading metric for the cost of producing electricity?” it will do a reasonable job explaining why FCOE is a better real-world way to compare energy sources.
How the query is framed is key.
And on any debatable issue, ask the AI to “Provide a principled critique of the answer you just gave.” You might be surprised at what the first answer left out.
As I frequently say, renewables do not provide the same “product” as fossil fuels or nuclear. If they were required to add storage, inertia etc. to their costs we would have a much better comparison. Comparing apples with oranges!
More of apples to aardvarks. “Renewables” and thermal generators are not related as closely as different fruits are (think Kingdom, Phylum, Class, Order, Family, Genus, and Species).
But wait, it gets worse. By forcing an expensive, and destabilizing energy source onto the grid, the Climate Industrial Complex is attacking industry, the economy, and national security. Even if the abomination of wind and solar were to stop today, the damage done will take decades to recover from. All of the “investment” in those energy systems is wasted, making them stranded costs. Then there are the lost opportunity costs. And the longer this scam continues, the longer it will take to recover from it.
All brought to us by pure speculation about CO2’s effects on the Earth’s weather and climate.
The Western World’s ruling class has gone stark raving mad over CO2.
It’s been a rather cold spring here in New England. Some weather forecasters are talking about a long lasting arctic blast that may stick around this region for weeks. On the few warm days so far I’ve seen many people in my ‘hood outdoors, walking their dog, running, biking, looking happy. On the colder days I see nobody. The theory by our state governments here that we’re all gonna burn up is beyond insane.
Yes, the jet stream has been in a configuration for months that funnels cold Canadian air down into the northeast U.S., one month after another.
CO2 IS AN ABSOLUTELY VITAL FOR GROWING FLORA AND FAUNA; NET ZERO IS A SUICIDE PACT
https://www.windtaskforce.org/profiles/blogs/co2-is-an-absolutely-vital-gas-ingredient-for-growing-flora-and
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The IPCC, etc., has endowed CO2 gas as having magical global warming power, based on its own “science”
The IPCC, etc., claims, CO2 acts as Climate Control Knob, that eventually will cause runaway Climate Change, if we continue using fossil fuels.
The IPCC, etc., denies the Little Ice Age, uses fraudulent computer temperature projections.
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Governments proclaimed: Go Wind and Solar, Go ENERGIEWENDE, go Net zero by 2050, etc., and provided oodles of subsidies, and rules and regulations, and mandates, and prohibitions to make it happen.
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Net-zero by 2050 to-reduce CO2 is a super-expensive suicide pact, to:
1) increase command/control by governments, and
2) enable the moneyed elites to become more powerful and richer, at the expense of all others, by using the foghorn of the government-subsidized/controlled Corporate Media to spread scare-mongering slogans and brainwash people, already for at least 50 years, extremely biased CNN, MSNBC, NPR, PBS, NBC ABC, CBS come to mind.
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CO2, just 0.042% in the atmosphere, is a weak absorber of a small fraction of the absorbable, low-energy IR photons.
CO2 has near-zero influence on world surface temperatures.
CO2 is a life-giving molecule. Greater CO2 ppm in atmosphere is an essential ingredient to:
1) increase green flora and fauna, reduce desert areas, such as the Sahara, and
2) increase crop yields to better feed 8 billion people.
At About 30% Annual W/S Electricity on the Grid, Various Costs Increase Exponentially
The W/S systems uglify the countryside, kill birds and bats, whales and dolphins, fisheries, tourism, view-sheds, etc.
The weather-dependent, variable/intermittent W/S output, often too-little and often too-much, creates grid-disturbing difficulties that become increasingly more challenging and more costly (c/kWh) to counteract, as proven by the UK and California for the past 5 years, and Germany for the past 10 years, and recently in Spain/Portugal.
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All have “achieved” near-zero, real- growth GDPs, the highest electricity prices (c/kWh) in the EU, and stagnant real wages for almost all people, while further enriching the moneyed elites who live in the poshest places.
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Native People Suffer Extra Burdens: Their angry, over-taxed, over-regulated native populations, already burdened by the wind/solar/batteries nonsense, and then further burdened by do-good bureaucrat and self-serving moneyed elites bringing in tens of millions of uninvited, unvetted, uneducated, unskilled, ghetto-trash, crime-prone, poor folks, from dysfunctional countries.
Those folks are sucking from the multiple, government-program tits, while making 1) minimal efforts to produce goods and services, and 2) maximum efforts to be chaotic, culture-destroying burdens, the native populations never voted for.
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Minimal Temperature Change due to CO2: The climate is not any different, even though, atmosphere CO2 increased from 280 ppm in 1850 to 420 ppm in 2025, 50% in 175 years. During that time, world surface temps increased by at most 1.5 C +/- 0.25 C, of which:
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1) Urban heat islands account for about 65% (0.65 x 1.5 = 0.975 C) of the warming, such as the UHI of about 700 miles, from north of Portland, Maine, to south of Norfolk, Virginia, forested in 1850, now covered with heat-absorbing human detritus, plus the waste heat of fuel burning.
Japan, China, India, Europe, etc., have similar heat islands
https://wattsupwiththat.com/2025/05/16/live-at-1-p-m-eastern-shock-climate-report-urban-heat-islands-responsible-for-65-of-global-warming/
2) CO2 accounts for less than 0.3 C, with the rest from
3) Long-term, inter-acting cycles, such as coming out of the Little Ice Age,
4) Earth surface volcanic activity, and other changes, such as from increased agriculture, deforestation, especially in the Tropics, etc.
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BTW, the 1850 surface temp measurements were only in a few locations and mostly inaccurate, +/- 0.5 C.
The 1979-to-present temp measurements (46 years) cover most of the earth surface and are more accurate, +/- 0.25 C, due to NASA satellites.
Any graphs should show accuracy bands.
The wiggles in below image are due to plants rotting late in the year, emitting CO2, plants growing early in the year, consuming CO2, mostly in the Northern Hemisphere. See URL
https://gml.noaa.gov/ccgg/about.html
Do not sugar coat it like that.
Tell us how you really feel.
🙂
(Good post, by the way.)
How dare you!
How dare you associate “class” with politicians.
Politicians rarely, if ever, exhibit class.
🙂
Wind, solar, etc., have caused major distortions of the electrical systems in many countries.
Infrastructures are required to create/support/retire wind, solar, etc.
Ending wind, solar, etc., is similar to recovering from the damage of a major war.
Europe has lots of experience recovering from many wars during the past 500 years, but that has come to an end, because Europe lost its colonies to suck from.
It tried to suck from the US, but Trump is telling them no more sucking, stand on your own.
Major panic and hand wringing is the result.
The European elites are desperate to get to reliable fossil fuels from the Caucasus, Caspian Sea, etc., and are financing Ukraine as a proxy battering ram “for as long as it takes” to get at them.
Severe Conditions During the Little Ice Age
As the climate was getting colder (the low-point was about 1700), Europe experienced a 500-year history marked by nearly continuous conflict, transforming from a medieval continent into a global power through industrial-scale violence, while spreading the Christian faith under the leadership of the Roman Catholic Church.
These 500 years witnessed numerous wars of religion, imperial and Roman Catholic expansion to the “New World”, and ideological conflicts that culminated in the unmatched bloodshed of World War I and World War II. Historical data indicates a near-constant state of war, with nations and states frequently in conflict over control of territory, resources.
Empires at war in Europe, often were also at war in North America and other parts of the world, resulting in significant casualties in colonies and wars between tribes of indigenous populations. European elites had exploited their colonial empires to enrich themselves beyond anything imagined.
Colonization and the Great Dying: European colonization resulted in the “Great Dying,” where introduced infectious diseases (smallpox, measles, influenza, etc.) killed up to 90% of the indigenous population in North and South America, amounting to roughly 55 million deaths by 1600. This rapid depopulation was so significant it caused vast areas of agricultural land to be abandoned and reforested. This die-off took place before Roanoke Colony 1585, Jamestown Colony 1607, and Plymouth Colony 1620.
After the US Civil War (1861 – 1865) this die-off was continued by exterminating Indians and driving the remainder onto reservations to clear the land for newcomers. Mass-killing of bison (a bounty was offered for a skull) by the US Army, etc., deprived millions of indigenous people of their main sustenance, such as the Blackfeet, Sioux, Cheyenne, and Comanche tribes.
Absolutely right! In the US alone, we have sunk almost $1 trillion into useless wind, solar, transmission, and battery systems since 2010. None of these would have been built were it not for the Climate scam. Over the same time interval, the US has wastefully spent an extra $40 billion on bio fuels. In addition, since 2010 the US and American consumers have marginally spent an extra $100 billion on EVs compared to internal combustion vehicles, plus another $40 billion for charging infrastructure. Since 2010, EVs have also cost state and Federal government close to $10 billion in lost motor fuel tax revenue. These costs are all inflation adjusted to 2025.
In total, the United States alone has wasted about $1.2 trillion on the Climate scam since 2010.
This is not to say that EVs are useless, but they have been needlessly forced on the public at an accelerated pace before they could realistically compete in the consumer market. On the other hand, wind and solar are totally useless — money down the toilet.
EUROPE AIMS TO WEAKEN THE US WITH EXPENSIVE OFFSHORE WINDMILLS THAT PRODUCE EXPENSIVE, LOW-QUALITY ELECTRICITY
https://www.windtaskforce.org/profiles/blogs/europe-attempts-to-entangle-us-with-expensive-offshore-windmills
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Net zero by 2050 Euro elites tried to weaken the US, with help of the unpatriotic, leftist Biden clique, into going down the black hole of 30,000 MW by 2030 of expensive, highly subsidized, weather-dependent, grid-disturbing offshore windmill systems, which would need expensive, highly subsidized, short-lived, battery systems for grid support.
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Offshore wind full cost of electricity FCOE = 30 c/kWh + 11 c/kWh = 41 c/kWh, no subsidies
Offshore wind full cost of electricity FCOE = 15 c/kWh + 11 c/kWh = 26 c/kWh, 50% subsidies
The 11 c/kWh is for various measures required by wind; powerplant-to-landfill basis.
This compares with 7 c/kWh + 3 c/kWh = 10 c/kWh from existing gas, coal, nuclear, large reservoir hydro plants.
Some values increase due to inflation and as more W/S systems are added to the grid.
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Such expensive W/S electricity would have made the US even less competitive in world markets.
Any US tariffs on the European supply of wind systems would greatly increase their turnkey capital costs/MW and their electricity costs/ kWh.
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Almost the entire supply of the wind projects would be:
1) designed and made in Europe,
2) then transported across the Atlantic Ocean by European specialized ships,
3) then unloaded at new, taxpayer-financed, $500-million storage/pre-assembly/staging/barge-loading areas,
4) then barged to European specialized erection ships for erection of the windmill systems.
5) The financing would be mostly by European pension funds, that pay benefits to European retirees.
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Hundreds of people in each seashore state would have jobs during the erection phase
The other erection jobs would be by specialized European people, mostly on cranes and ships
Hundreds of people in each seashore state would have long-term O&M jobs, using mostly European spare parts, during the 20-y electricity production phase.
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Conglomerates owned by Euro elites would finance, build, erect, own and operate almost all of the 30,000 MW of offshore windmills, providing work for many thousands of European workers for decades, and multi-$billion profits each year.
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That Euro offshore wind ruse did not work out, because Trump was elected.
Trump-hating, Euro elites are furious. Projects are being cancelled. The European windmill industry is in shambles, with multi-$billion annual losses, lay-offs and tens of $billions of stranded costs.
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Trump spared the US from the W/S evils inflicted by the leftist, woke Democrat cabal, that used an autopen for Biden signatures, and bypassed on-the-beach/in-the-basement Biden, an increasingly dysfunctional Marionette.
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Trump declared a National Energy Emergency. He put W/S/B systems at the bottom of the list, and suspended their licenses to put their rushed, glossy environmental impact statements, EIS, under proper scrutiny.
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Euro elites used the IPCC-invented, “CO2-is-evil” hoax, based on its own “science”.
These elites used:
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1) the foghorn of government-subsidized Corporate Media to propagate scare-mongering slogans and brainwash the people,
2) censorship to suppress free thinking on town hall forums,
3) election interference, as in Moldova and Georgia,
4) ostracizing /marginalizing major political parties to produce desired outcomes, as in Germany.
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Wall Street elites saw an opportunity for tax shelters for its elite clients.
Woke politicians/bureaucrats were “cut-in” on $juicy deals to pass subsidies, favorable rules and regulations, and impose government mandates.
Euro elites wanted the US to deliver electricity to users at very high c/kWh, to preserve Europe’s extremely advantageous trade balance with the US.
https://www.windtaskforce.org/profiles/blogs/international-trade-is-a-dog-eat-dog-business
I failed to add that due to higher electricity rates due to wind and solar, electricity cost consumers an additional direct payment of $500 billion on their electric bills over the same period from 2010 to present.
pflash:
Regarding EVs, IMO there is one downstream benefit to the ‘EVs will save the planet’ scam: The hype & subsidies surrounding Tesla’s rise allowed Musk to fund SpaceX. Waiting for NASA to produce a reuseable rocket would have been 20yrs and $100s of billions down the road.
Geostrategically, EVs [& batteries, wind, solar, rare earths, …] empower China and weaken the West. The CCP is laughing all the way to the bank.
The choice of words I would have made is “sunk costs.”
Sunk infers gone for good.
Stranded suggest a possibility for recovery or partial recovery.
Good to know, thanks.
There was a time when a drive through the country would include scenes of farms and their windmills. The windmills pumped water up and out of wells and into one or more water tanks at or above the surface. The water was free but drilling and maintaining the well, windmill, tank and plumbing represented a significant investment and maintaining them wasn’t free.
When the picturesque windmills were replaced by electric pumps, reliability was increased but at a cost.
It’s not just electricity …
The cost of owning and operating an automobile begins with actual cost of the actual automobile. Many buyers look only at their monthly payment … and maybe the cost of gasoline … when deciding which car to buy … or worse, to lease.
I used to be in the car business. Mea culpa.
Author, Please explain capture rates
I looked it up.
Capture rates as a metric is totally bogus.
Throwing sand in the eyes of naive/brainwashed folks.
If little wind and little or no solar, aka DUNKELFLAUTE, there is near-zero output of wind and solar, and a large fleet of OTHER plants, domestic or foreign, must provide the missing electricity up to demand, 24/7/365
These other plants have to be fueled, staffed, kept in good working order to instantly provide what is missing.
The more wind and solar, tied to the expanded/reinforced/more complex grid, the more OTHER plants.
THAT DOES NOT COME FOR FREE.
See my above comment
BATTERY SYSTEM CAPITAL COSTS, OPERATING COSTS, ENERGY LOSSES, AND AGING
https://www.windtaskforce.org/profiles/blogs/battery-system-capital-costs-losses-and-aging
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Utility-scale, battery system pricing usually not made public, but for this system it was.
Neoen, in western Australia, turned on its 219 MW/ 877 MWh Tesla Megapack battery, the largest in western Australia.
Ultimately, a 560 MW/2,240 MWh battery system, $1,100,000,000/2,240,000 kWh = $491/kWh, delivered as AC, late 2024 pricing. Smaller capacity systems cost much more than $500/kWh
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Annual Cost of Megapack Battery Systems; 2023 pricing
Assume 45.3 MW/181.9 MWh; turnkey cost $104.5 million; 104,500,000/181,900 = $574/kWh, per Example 2
Amortize bank loan, 50% of $104.5 million, at 6.5%/y for 15 years, $5.484 million/y
Pay Owner return, 50% of $104.5 million, at 10%/y for 15 years, $6.765 million/y (10% due to high inflation)
Lifetime (Bank + Owner) payments 15 x (5.484 + 6.765) = $183.7 million
Assume battery daily usage, 15 years at 10%; loss factor = 1 / (0.9 *0.9)
Battery lifetime output = 15 y x 365 d/y x 181.9 MWh x 0.1, usage x 1000 kWh/MWh = 99,590,250 kWh to HV grid; 122,950,926 kWh from HV grid; 233,606,676 kWh loss
(Bank + Owner) payments, $183.7 million / 99,590,250 kWh = 184.5 c/kWh
Less 50% subsidies (tax credits, 5-y depreciation, loan interest deduction, etc.) is 92.3c/kWh
Subsidies shift costs from project Owners to ratepayers, taxpayers, government debt.
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Excluded costs/kWh: 1) O&M; 2) system aging, 1.5%/y, 3) loss factor 1 / (0.9*0.9), HV grid-to-HV grid, 4) grid extension/reinforcement to connect battery systems, 5) downtime of parts of the system, 6) decommissioning in year 15, i.e., disassembly, reprocessing, storing at hazardous waste sites. Excluded costs would add at least 15 c/kWh
COMMENTS ON CALCULATION
Almost all existing battery systems operate at less than 10%, see top URL, i.e., new systems would operate at about 92.4 + 15 = 107.4 c/kWh. They are used to stabilize the grid, i.e., frequency control and counteracting up/down W/S outputs. If 40% throughput, 23.1 + 15 = 38.1 c/kWh.
That is on top of the cost/kWh of the electricity taken from the HV grid to charge the batteries
Up to 40% could occur by absorbing midday solar peaks and discharging during late-afternoon/early-evening, in sunny California and other such states. The more solar systems, the greater the midday peaks.
See top URL for Megapacks required for a one-day wind lull in New England
40% throughput is close to Tesla’s recommendation of 60% maximum throughput, i.e., not charge above 80% and not discharge below 20%, to perform 24/7/365 service for 15 y, with normal aging.
Owners of battery systems with fires, likely charged above 80% and discharged below 20% to maximize profits.
Tesla’s recommendation was not heeded by the Owners of the Hornsdale Power Reserve in Australia. They excessively charged/discharged the system. After a few years, they added Megapacks to offset rapid aging of the original system, plus they added more Megapacks to increase the rating of the expanded system.
http://www.windtaskforce.org/profiles/blogs/the-hornsdale-power-reserve-largest-battery-system-in-australia
Regarding any project, Banks and Owners have to be paid, no matter what. I amortized the Bank loan and Owner’s investment
Divide total payments over 15 years by the 15-y throughput to get c/kWh, as shown.
Loss factor = 1 / (0.9 *0.9), from HV grid to 1) step-down transformer, 2) front-end power electronics, 3) into battery, 4) out of battery, 5) back-end power electronics, 6) step-up transformer, to HV grid, i.e., draw about 50 units from HV grid to deliver about 40 units to HV grid. That gets worse with aging.
A lot of people do not like these c/kWh numbers, because they have been misled by self-serving folks, that “battery Nirvana is just around the corner”.
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NOTE: EV battery packs cost about $135/kWh, before it is installed in the car. Such packs are good for 6 to 8 years, used about 2 h/d, at an average speed of 30 mph. Utility battery systems are used 24/7/365 for 15 years
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NOTE: Battery system turnkey capital costs and electricity storage costs likely will be much higher in 2023 and future years, than in 2021 and earlier years, due to: 1) increased inflation rates, 2) increased interest rates, 3) supply chain disruptions, which delay projects and increase costs, 4) increased energy prices, such as of oil, gas, coal, electricity, etc., 5) increased materials prices, such as of tungsten, cobalt, lithium, copper, manganese, etc., 6) increased labor rates.
Falling capture rates refer to the decreasing average price per megawatt-hour that renewable energy producers receive for the electricity they generate and sell, often due to market fluctuations and increased supply. [Web] My bold.
{Me} Would not “Decreasing Return” convey the concept of “falling capture rates“? Pretentious and confusing is not a virtue.
Good article.
A related fallacy is that proponents of wind + solar + battery sources for grid supply will point to places like Texas, where penetration is high, and say “LOOK, Texas has relatively low electricity costs!”
Compared to what??
The fallacy is that no one explains what the system costs could have turned out to be in the alternative. What alternative? The case where no intermittent sources were ever incentivized and allowed to connect and inject kWh into the system with no responsibility for what happens when it’s calm or dark.
Thank you for listening.
I wonder how much of the cost of electricity in Texas is hidden from people when paying their monthly bill- in terms of tax money covering some of the costs. I dunno- just guessing.
Spain discovered that the inability of their solar and wind systems to precisely match the grid 50 Hz, would lead to a country wide blackout
I am a Texan and I completely agree. The marginal extra costs on our utility bills have been hidden through a lot of Green handwaving and propaganda. Furthermore, these butt-ugly systems have caused widespread environmental damages and destroyed natural view scapes.
Texas would have much lower rates , c/kWh, if it had no wind, solar, batteries
Regarding the wind facilities in TX:
See the web entry for Pickens_Plan. Scroll down to the section Questions over Pickens’ motives and methods
There is a link to T. Boone Pickens, now deceased at age 91.
DD:
We must also recall that the Texas electric grid [managed by ERCOT] nearly failed in Feb 2021 during a winter storm. Over 200 Texans died during the week long rolling blackouts ERCOT mandated to prevent a total blackout. Lack of winterization, ill-timed maintenance and overreliance on wind sources were major issues.
The Texas grid is not a system to emulate.
IMO, those who think Texas’ electric prices would be lower without wind & solar are correct.
“At first glance, expanding wind and solar seems like a straightforward path to cheaper and “cleaner” energy…but systems rarely behave that simply.”
I’m no economist- but I did take a good basic course in accounting ages ago. Perhaps wind and solar are cheaper in the short term but since they will have to be replaced much sooner than real power plants- I wonder if the true costs are considered from a strict accounting perspective? If you have to build a wind or solar “farm” 3-4 times during the life of a real power plant, how can it be cheaper? And this is even ignoring all the other costs associated with ruinables, like far greater cost for the grid, battery systems, etc. I recall taking that one accounting course. It wasn’t terrible exciting- but I did appreciate the logic- keeping track of every penny- and determining things like net present value of future costs and profits. It was back around 1970- but the logic has staid with me- that accounting is a very powerful tool. More politicians and policy thinkers everywhere should get grounded in it.
I’m not sure if you need a ‘license’ to be an ‘economist’ but I think you need some kind of testing to be a CPA.
That got me to thinking about things that require a license – driving a car, flying a plane, selling real estate, pulling teeth, cutting hair… the list is nearly endless.
You know what does NOT require any sort of credential? Running a government. Just be a certain age and, you too, can spend trillions of dollars of Other People’s Money and dictate how they live their lives. Does that make sense.
There really does need to be some kind of test. C’mon Gavin, Maxine, AOC, Ms. Bass; open your test booklets and show us what you got…
Fascinating point of view! I like it!
Engineers calculate the mean time between failures (MTBF).
The MTBF for WTGs was calculated to 4.2 years with 50% of the maintenance replacement costs being the most expensive components.
So, while replacement might be 3 – 4 times in a 40 year life, the serious maintenance costs occur 10+ times in that interval.
The 20 acre solar “farm” behind my ‘hood was built in 2012. About 5 years later, they had to replace a big section due to lightning damage. I talked to the guy doing the repair and asked why so many panels needed replacing. He said that if one panel is damaged like that- it effects all the others wired in sequence or whatever as I don’t understand electronics and wiring.
Think Christmas tree lights. Lightning doesn’t stop at the first one, it keeps going on up and down the line and can jump to other lines also.
This German author has drunk the climate KoolAid.
“Even institutions like the OECD and UNECE now acknowledge that increasing the share of wind and solar can raise total system costs (see links in the original blog here). Not because the technologies themselves are inherently flawed, but because they require additional infrastructure and support to function within a stable grid. “
Wind and solar do in fact raise total system costs because the technologies are indeed inherently flawed.
Later, in his slide depicting the cost of energy in Germany, he saddles fossil fuel combustion based tech technologies with a wholly fictitious cost of CO2. He also treats the need for backup for wind and solar as a minor cost, also a fiction. Casting aside these lies provides a more realistic comparison, starkly revealing wind and solar to be multiples of the cost of dispatchable combustion-based energy.
His last slide then implies that conventional dispatchable energy is “dirty,” but only if you consider carbon dioxide to be a pollutant.
In the end, the article uses mental contortions to try and justify the European net-zero illusion, telling the European reader who has bought into the climate emergency scam that they should be happy to spend 10 times as much for allegedly “clean” energy.
It is not that the technologies of solar and wind are flawed, it is the toddler level assumption that they will produce “nameplate” power 100% of the time. This assumption causes the power generation to be grossly over estimated by a factor of 10X. It also causes most of the actual costs to be ignored.
All true, but coupled with the “free fuel” meme.
I agree there is some crazy talk in this article, e.g.,
‘In fact, in Germany, domestic lignite is the lowest cost of generating electricity with 40 EUR/MWh excl. CO2 and 120 EUR/MWh incl CO2.’
Really?
Totally agree.
I am on his distribution list.
I keep sending him articles that prove he is somewhere off the reservation.
He is a smart fantasist with fancy looking, meaningless graphs.
He certainly is no energy systems analyst
Absolutely no investor would ever use his numbers to make any investment.
How in hell does he get people to listen to his write ups?
The ultimate cost is what consumers pay plus what taxpayers pay for electricity. Everything else is determining what investors should receive.
Capture rate. A more useful concept than capacity factor. I learned something today.
learned from whom?
it is totally bogus.
invented by eco warriors.
Doubling the size of a system doubles the revenue, doubles the errors, and doubles the impact of each error. As a result your error costs quadruple while revenues double. This is the hidden cost of adding intermittency.
Good analysis that will be ignored by the zealots. The devil is in the details.
As a person who worked off and on in the upstream oil and gas sector (first as a professor, then researcher and manager), I often thought about exploring the full range of costs of all of the energy-generating technologies. It makes sense that an energy trader could do it far better than I.
It also would be good to have 30 years of experience In energy systems analysis
Very nice, the point is that wind and solar can’t support a modern society. Fossil fuel, hydro and nuclear can. Spend our money on the things that can support a modern society.
The problem with all this is not the economics of W&S but the willingness of the distribution companies to cross subsidize from one source to another.
If wind received the spot price at the location where they inject it into the grid they would never build it.
In NZ we have generators who also have retail clients they use their hydro which costs a trivial amount and average down the cost of W&S which clearly costs more than 20c/Kwh and sell into the wholesale at 20c/Kwh to themselves so they can sell to customers at 40c/Kwh with lines and distribution to come out.
But the takeaway is that the 20c/Kwh cost of W&S is allowed to flourish while industry if there is any left atrophies.
We are in a death spiral.
Poppy cock, I say. Trying to sit in front of a computer and figure out what things cost. This is central planning like the USSR. We know how that ended.
The accidental genius of the market system is that it doesn’t require a bunch of smart guys figuring out what things ought to cost. Price discovery works automatically, almost magically. If wind/solar offers cheaper electricity, let the govt stand back and let them do so. If the grid has to spend $$$ to accommodate these technologies, then prices go up for the rate payer. Verdict. Wind/solar do not reduce costs. This is so obvious. Only grids which allow independent suppliers of power to provide energy, with govt incentives, have much wind/solar on them because obviously they are more expensive than traditional sources of power. This is just an example of govt bureaucrats meddling in market economics. On the same level of stupidity as rent control. The Western world is hurting itself in multiple ways. This green energy scam is just one of them.