LCOE purports to present an apples-to-apples comparison between various energy sources. However, the measure is meaningless because it ignores key costs such as those of providing backup power to compensate for the intermittency of solar and wind. Something must be available to step up when the wind and sun are not available for power generation. (2)
A 2022 study exposes LCOE’s flaws. First, LCOE assumes constant output, but solar and wind produce only 20%-30% of their designed capacity compared to 80%-90% for plants running on coal, natural gas, or nuclear fuel. (4)
Second, integrating solar and wind requires expensive infrastructure, including new transmission lines between population centers and remote industrial installations of wind turbines or solar panels, or to natural gas plants standing by as backups.
Third, LCOE ignores more subtle but, nonetheless, important operational considerations. For instance, as the output of solar and wind rises and falls with changes in the weather or the daily westward progression of the sun, fossil fuel plants must ramp up or down as back-ups, reducing efficiency and raising costs. (2)
The rosy numbers of LCOE don’t reflect the reality of electricity bills. In California, where so-called renewables make up more than 50% of electricity generation, residential rates hit 30 cents more per kilowatt hour in 2023—more than double the US average.
One dirty little secret is that, on a state-by-state basis, nine of the top 10 states in electricity prices in the United States in 2024 required renewable energy as part of their electricity mix. The bottom 10 states generally did not require renewable energy. (5)
It can cost utility companies more to provide people with electricity using intermittent sources than continuous sources such as natural gas, coal and nuclear power. The utility company is likely to need to put other energy sources in place to provide back-up should demand not be met when the wind doesn’t blow and the sun doesn’t shine.