Streetwise Professor

August 3, 2019

Renewables Are Expensive Because You Can’t Stick ‘Em Where the Sun Don’t Shine (or the Wind Don’t Blow)

Filed under: Climate Change,Economics,Energy,Politics,Regulation — cpirrong @ 4:45 pm

I’m sure you’ve read articles claiming that the cost of renewables electricity generation is approaching that (or even lower than) the cost of traditional thermal generation. I am deeply skeptical of these claims even when evaluated on their own terms (which focus on generation costs alone), but find them particularly misleading because they ignore other costs attributable to the facts that renewables are intermittent and diffuse, and that the siting of renewables generation is sharply constrained because they are energy limited resources; the distribution of energy is dictated by nature; and typically is not closely related to the distribution of load.

In other words, renewables are costly because you can’t stick them where the sun don’t shine (or the wind don’t blow).

Case in point: Australia. As even Bloomberg (a tiresome renewables fanzine) reports:

Australia’s financing of cleaner power is slowing because the country’s aging grid isn’t being upgraded quick enough to accept new, intermittent generation and transport it efficiently to demand centers.

Although Bloomberg attempts to blame an old, creaky transmission system, this is misleading in the extreme. It would be far cheaper to upgrade Australia’s transmission system to accommodate thermal generation than it will be to build transmission to increase the fraction of generation coming from renewables.

This is true for at least a couple of reasons.

First, the energy-limited nature of renewables means that you have to site them where the energy is available–sunny or windy places. This imposes a constraint on the location of generation resources that is not relevant for thermal generation. With traditional fossil-fueled generation, you have more flexibility in trading off transmission costs with generation costs (including the cost of brining fuel to plants) than is the case with wind. This flexibility means that all else (notably the spatial distribution of load) equal, transmission costs are lower with thermal generation than renewable power.

Second, the intermittent and inherently more volatile nature of renewables generation increases the variance in the spatial distribution of generation. This variability in the spatial distribution of generation necessarily requires more transmission capacity per unit of load. This, in turn implies a lower average rate of utilization of transmission resources.

The basic idea here can be illustrated relatively simply. Consider a system with two generation resources. One is highly volatile (e.g., a renewable resource). The other is controllable. There is one load location. The transmission capacity from the volatile location to load must be high enough to carry the power when output is high (because the energy input is high due to the vicissitudes of sun or wind). The transmission capacity from the location with controllable generation must also be high enough to transmit enough power to fill the gap left when the renewable output is low.

Note that when renewable output is high, controllable output will be low and the transmission lines from the latter will operate at low capacity. When renewable output is low, the lines serving it will be operating at low capacity.

It’s possible to expand the example to include multiple variable, energy limited, but imperfectly correlated renewables resources, but the outcome is the same. You need more transmission capacity to deal with the spatial volatility in generation, and given load, higher capacity translates into lower average capacity utilization.

Thus, the problem that Australia is confronting isn’t a function of an old grid: it arises from the fact that increased reliance on renewables requires investment in new transmission capacity even in a system where transmission is optimized relative to (thermal) generation and load.

The need to maintain relatively underutilized transmission capacity to deal with the inherent volatility of renewables generation is mirrored by the need to maintain underutilized thermal generation capacity:

While new clean energy projects struggle to gain access to a congested grid, aging coal and gas-fired generators are being kept running for longer to maintain system stability. AGL Energy Ltd. said Friday it would delay the planned closure of its Liddell and Torrens A plants, both around 50 years old, to help the national energy market cope with peak summer demand, which has seen blackouts in parts of southeastern Australia in recent years.

Who knew?

Yet the renewables industry/lobby continues to flog the dogma that they will inevitably be more efficient:

Despite the challenges facing the industry, it’s not all doom and gloom. A number of coal-fired plants will be retired over the next decade and they will only be replaced by the cheapest cost of energy, which is renewables, Clean Energy Finance Corp. Chief Executive Ian Learmonth said in an interview.
“I’m hoping once some of these issues around the grid and regulations are settled that we’ll see another significant uptick in the renewable energy pipeline,” he said.

What costs is Mr. Learmonth including in his assertion that renewables are the “cheapest” source of energy? His statement that settling “issues around the grid” will lead to increased renewables investment suggests that he is ignoring crucial costs, because settling these issues doesn’t come for free.

It’s not as if the transmission issue is unique to Australia. It is present in every locale that has force-fed renewables. Germany is a prominent example. Wind energy is abundant in the North Sea, but believe it or not, there aren’t a lot of electricity consumers there (despite my ardent wish that Merkel and her ilk get into the sea). Major sources of load are in central and southern Germany, so bringing North Sea wind power to load requires massive transmission investments, which inevitably are not just costly, but politically difficult (Der NIMBY, anyone?). These difficulties inflate the cost.

Renewables boosterism operates in an atmosphere of serious unreality because it consistently glosses over–or ignores altogether–the costs arising from intermittency, diffusiveness, the energy-limited nature of wind and solar, and the caprices of nature that cause a mismatch between where the energy exists and where it is needed. When these facts are considered, sticking renewables where the sun don’t shine makes perfect sense.

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  1. I can’t get over the fact that Bloomberg let “upgraded quick enough” past the copy editing desk. And in the lede!

    Comment by Sam — August 3, 2019 @ 7:33 pm

  2. Was reading how Chattanooga’s airport is run by solar power now. 11 acres of solar panels to power the small airport. Seems like there is an opportunity cost to the 11 acres when it could be run by other types of energy.

    Comment by Jeff Carter — August 4, 2019 @ 7:33 am

  3. Sad that these wind and solar sources keep getting pushed when the real true green energy is nuclear. And then the new show of Chernobyl comes on and scares people yet again. That show isn’t at all accurate to either the actual disaster or the dangers of radiation. Nuclear can be done at a safety level well beyond 50 years ago and leaves a low footprint compared to all others. Shame.

    Comment by Daniel Rust — August 4, 2019 @ 10:15 pm

  4. Using the word “renewable” to describe intermittent wind and solar electricity generation is deceptive and misleading. At the current state of development, the ONLY renewable resource known to humans is managed forests.

    It would take at least an order of magnitude reduction in the cost of energy storage for intermittent wind and solar to come close to being a renewable energy source.

    The area specific energy density for wind generators is similar to managed forests. Both range between 5 to 10kWh/sq.m/yr. Managed forests have far ge=reater visual appeal than wind turbines and forests provide bird habitat rather than slicing and dicing birds.

    Comment by RickWill — August 4, 2019 @ 10:37 pm

  5. Who’d have known?

    Comment by I.M. Pembroke — August 4, 2019 @ 11:39 pm

  6. There is a hugely misleading aspect to the “cost parity” argument – it’s that the sun doesn’t shine brightly most of the day, and in fact not at all at night. Typically the capacity factor for solar is around 26 percent, which means if you have a constant load of 100 MW, you need about 400 MW of solar capacity and 300 MW of storage capacity to serve that 100 MW load. Given storage losses, it’s probably more like 400 MW of storage that would be needed. A conventional generation fleet typically has about 65 percent capacity factor, so about 150 MW is needed to serve the 100 MW load. So in fact, 1 kW of renewable energy capacity is not equal to 1 kW of conventional. It’s more like 4 kW of solar plus 4kW of storage equal 1.5 kW of conventional (plus fuel costs). You can do the same analysis for wind.

    On the good side for solar, the actual load does tend to peak when the sun’s shining and be lowest late at night, so some use of solar for peaking applications avoids the problem noted above. However, overbuilding of solar results in the “duck curve,” which is the requirement to rapidly ramp up conventional production as the sun is going down, but the load isn’t going down as quickly in the early evening. Storage could help with this somewhat, but the cost is prohibitive.

    Comment by Jim Bowen — August 5, 2019 @ 10:48 am

  7. @Jim: Your argument is true for now, but as solar keeps getting cheaper*, we are rapidly approaching the point where it becomes possible to pay an older fossil fuel plant to remain on standby to deal with the duck curve, and to get electricity for free (I mean, the marginal cost) during the day. Even if you don’t believe in manmade global warming (though I do), mining does a lot of other kinds of environmental damage and being able to avoid it sounds good to me.

    *For example the Eland project in LA is proposing under 2 cents per kWh during the day and 1.3 cents per kWh from batteries for the first 4 hours of the evening. Yes, it benefits from a tax credit, but so does oil exploration and I don’t see people whinging constantly about that. The battery storage element is still a little suspect to me, but I assume the bidder has a plan in mind. Of course, this project is on a particularly sunny hilltop in a particularly sunny part of a particularly sunny state, but it’s getting harder and harder to argue that the “cost parity” argument is false…

    @Rickwill: For managed forests, are you comparing thermal energy (for the forest) with electrical energy (for the turbines)? If yes, your answer would be wrong by a factor of 3. Plus, there’s a sizeable amount of carbon involved in cutting and transporting the wood, and a sizeable amount of methane released from the disturbed soil and decaying leftovers, so it is not at all clear that this is carbon neutral (nor that the trees could be grown fast enough). Plus fast-growing Fir species have a tendency not to support much forest life, to acidify the soil and to displace cropland. And personally, I’d prefer to look at some wind turbines (which allow the land to continue to be used for crops) than a massive, dead, monoculture…

    Comment by HibernoFrog — August 6, 2019 @ 4:28 am

  8. @Rickwill: I think you must have your numbers wrong. I just did some checking: Even in cold, rainy, cloudy Ireland, 1 square metre of solar panel should put out about 200kWh/year (3hrs avg sunshine per day). It doesn’t seem likely to me that either wind turbines or forestry are so uncompetitive…

    Comment by HibernoFrog — August 6, 2019 @ 8:05 am

  9. Hot off the press:

    Seems the National energy regulator has collected all the data is seeking damages from 4 wind farm operators for the 2016 state wide system black.
    About time.

    Comment by crankshaft — August 6, 2019 @ 6:13 pm

  10. I occasionally wonder if anyone has looked at the U.S. input-output tables, swapped out the appropriate rows and columns for fossil fuel production, distribution and consumption, subbed in solar and wind at larger scale to replace those inputs, and checked whether the resulting matrix satisfies the Hawkins-Simon conditions. My hunch is that the answer is no, although I would not be shocked if it were yes. But maybe someone should check.

    On the one hand, this is unfair because presumably lots of other technologies, and hence input-output coefficients,would have to change in order to make the all-renewables solution viable. OTOH, it is very fair because a) the test is rather weak–not having the economy collapse into a Mad Max world without industry and b) the needed changes to the other parts of the input-output matrix in order to keep it invertible would be a good indicator of how radical and impoverishing such a policy would be.

    Comment by srp — August 15, 2019 @ 6:23 pm

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