Those claiming that wind and solar energy are cheaper than fossil fuels should be writing scripts for science fiction dramas.
Yet global organizations such as investment firm Lazard and the International Renewable Energy Agency expect this bogus claim to be taken seriously as a basis for investing many billions into essentially useless technologies to save the planet from a made-up climate crisis.
The metric used to perpetuate the wind and solar fantasy is the levelized cost of electricity (LCOE), a deeply flawed tool that masks the real costs of these energy sources whose ability to perform is subject to the weather and time of day.
Designed to deceive, LCOE creates a mirage that has seduced many a foolhardy policymaker. LCOE takes the total lifetime cost of building and operating a power plant and divides it by the amount of electricity it will generate. This gives a cost per megawatt-hour that can be compared across technologies. But there’s a catch – actually, several.
By ignoring critical factors like reliability, infrastructure and subsidies, LCOE paints a deceptively rosy picture, leaving consumers footing a far higher bill than advertised.
LCOE treats all electricity as equal. A kilowatt-hour produced at 2 a.m. is valued the same as one at 9 a.m., even though demand and value are vastly different at these times. In real life, electricity at peak demand is far more valuable than off-peak power.
Traditional power plants, like gas and coal, can ramp up to supply electricity when it’s needed most. Wind and solar lack this fundamental capability. Their output is a gamble on the availability of sunlight and wind.
Wind and solar need backup sources of electricity such as natural gas-fired plants that run in standby mode or massive battery banks that store excess energy for later use. LCOE pretends this very significant cost does not exist.
The more renewables added to the grid, the worse this problem becomes. That’s why Germany, despite spending hundreds of billions on wind and solar, still relies on coal and imported power. LCOE estimates never warned of the grid instability, power curtailments and price spikes that followed.
Both offshore and onshore wind installations are typically in remote locations far from population centers needing the power. The high-voltage transmission systems and underwater cables required to move the electricity are additional costs not recognized by LCOE.
Because the electricity produced by wind and solar is distinctly different than what comes from spinning turbine-generators, additional equipment is needed to maintain operational balance in the power grid. These billion-dollar upgrades – you guessed it – are not counted by LCOE.
Experts now advocate the levelized full system cost of electricity (LFSCOE) as a truer measure of effectiveness in electricity production. This adds in the system-wide costs of transmission, storage, curtailment, and backup. The result? Wind and solar no longer look cheap.
A 2022 study in the journal Energy found that LFSCOE for power grids with a high percentage of wind and solar sources could be two to three times higher than LCOE estimates, especially in regions with variable weather. For example, while LCOE might peg solar at $40/MWh in a sunny region, LFSCOE reveals a true cost closer to $120/MWh once storage and grid costs are included.
But don’t expect these metrics to be adopted by advocates of “green” energy anytime soon. LCOE’s simplicity – despite its flaws – makes it useful for headlines and lobbying. Irony hit stratospheric levels when the same people claiming that “solar and wind are cheaper than fossil fuels” demanded hundreds of billions of dollars in subsidies under the “Inflation Reduction Act” for this supposedly “cheap energy.”
How can such “cheap” technology require this much public money? And if they’ve been in the market for more than 30 years, are wind and solar still “emerging” technologies? Or are they now part of an entrenched system that benefits from political favoritism and economic distortion? The answers are obvious but ignored.
As energy analyst Alex Epstein testified in the U.S. Congress, the U.S. Federal Energy Regulatory Commission should “require solar and wind generators to bear the full costs of the backup, storage, and transmission they need to provide reliable electricity. This will end the unfair practice of socializing the costs of intermittent generation across ratepayers or the grid.”
LCOE is a flawed tool, one that might have worked when comparing steady-output power plants. But for intermittent renewables, it’s a square peg in a round hole. It’s time to retire this broken metric. More comprehensive cost assessments – like LFSCOE – must take its place. Until then, public debates will continue to be skewed, and consumers will keep paying for a lie.
