Wind and Solar—Expensive Renewables

President Obama says we should 'invest' in renewables as energy sources of the future. Yet after investing billions of dollars in taxpayer subsidies in renewable energy, those sources provided only 7.5% of America's energy in 2012, which was actually less than 9.3% of renewables in 1948, more than 60 years ago. That's not a lot of progress for the politically popular taxpayer subsidized renewables. When it comes to solar and wind, those energy sources provided only 1.8% of America's energy in 2012. (1)

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Both wind and solar have been highly subsidized world-wide, not just in the United States, and for this reason are one of the most contested areas of public policy. You will hear that there have been noticeable increases in both wind and solar, and this is true. Since 1990, wind-generated power has grown 26% per year and solar a phenomenal 48%. But the growth has been from almost nothing to slightly more than almost nothing. In 1990, wind produced 0.0038% of the world's energy; it is now producing 0.29%. Solar-electric power has gone from essentially zero to 0.04%. (2) The question is how to calculate the actual cost of electricity generated by these technologies. As The Economist reports, “Whereas the cost of a solar panel is easy to calculate, the cost of electricity is harder to access. It depends not only on the fuel used, but also on the cost of capital (power plants take years to build and last for decades), how much time a plant operates, and whether it generates power at times of peak demand. To take account of all this, economists use 'levelized costs'--the net present value of all costs (capital and operating) of a generating unit over its life cycle, divided by the number of megawatt-hours of electricity it is expected to supply.” (3) The problem with this approach is that levelized costs do not take account of the costs or intermittency. Wind power is not generated on a calm day, nor solar power at night, so conventional power plants must be kept on standby—but are not included in the levelized cost of renewables. Electricity demand also varies during the day in ways that the supply from wind and solar generation may not match, so even if renewable forms of energy have the same levelized cost as conventional ones, the value of power they produce may be lower. In short, levelized costs are poor at comparing different forms of power generation. (3)

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A recent Brookings Institution report by Charles Frank gets around this problem by using a cost-benefit analysis to rank various forms of energy. The costs include those of building and running power plants, and those associated with particular technologies, such as balancing the electricity system when wind or solar plants go off-line or disposing of spent nuclear fuel rods. The benefits of renewable energy include the value of the fuel that would have been used if coal or gas-fired plants had produced the same amount of electricity and the amount of carbon dioxide emissions that they avoid. When all this is taken into account, wind and solar look far more expensive than they appear on the basis of levelized costs. (4) Nuclear power plants, which run at about 90% of capacity, avoid almost four times as much CO2 per unit of capacity as do wind turbines, which run at about 25%; they avoid six times as much as solar arrays do. If you assume a carbon price of $50 a ton (way over most actual prices), nuclear energy avoids over $400,000 worth of carbon emissions per megawatt of capacity, compared with only $69,500 for solar and $107,000 for wind. Seven solar plants or four wind farms would thus be needed to produce the same amount of electricity over time as a similar sized coal fired plant. And all that extra solar wind wind capacity is expensive. (4) References 1. Mark J. Perry, “Despite Obama claims, Department of Energy forecasts suggest that fossil fuels are the energy sources of the future,” aei-ideas.org, July 9, 2013 2. Bjorn Lomborg, “The decline of renewable energy,” project-syndicate.org, August 14, 2013 3. “Sun, wind and drain,” The Economist, July 26, 2014 4. Charles R. Frank, Jr., “The net benefit of low and no-carbon electricity technologies,” Brookings Institution, Global Economy & Development Working Paper 73, May 2014

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