Over the past few articles, we’ve looked closely at South Australia, which has become one of the clearest real-world examples of what a high-renewables power system looks like.
Thank you for your efforts to understand and explain wholesale and retail energy costs in part of Australia. I wonder how the South Australia case study relates to other lands. It would be educational to do something similar for other areas like Iceland, Norway, and France which rely on different energy sources than Australia, and each other. Then Germany and Great Britain's efforts, similar to Australia's, might be evaluated.
There are the other crucial parts of "the politically loaded claims in the energy debate"- 1) reduction in carbon emissions and 2) actual effect on global warming and sea level rise. Energy independence is another desired outcome and maybe easier to evaluate. The proposed energy transition involves trillions of dollars in costs, revenues, and profits and losses. If money corrupts, well..... Alas, so many moving parts! Whew!
Steve: I could summarize your analyses by saying 1 MW-h of electricity from non-dispatchable renewable generation (like solar) is not worth as much as 1 MW-h of electricity from fossil fuel or nuclear generation that can be dispatched to meet demand. The LCOE for renewable generation is merely propaganda in a real world where prices are determined by the law of supply and demand. The challenging question is: HOW MUCH LESS is electricity from renewable sources worth? The answer to that question depends on what fraction of electricity is coming from intermittent sources (penetrance) and local factors that affect the abundance and variance of wind and sunshine. I see two possible answers to this dilemma.
As best I can tell natural gas generation can provide a relatively cheap way to make unreliable renewable generation reliable. Most of the cost of natural gas generation comes from the cost of the fuel, and customers only need to pay for fuel when the sun isn't shining or the wind isn't blowing. They pay only a small capital charge continuous to have a gas plant on stand-by when renewable generation is meeting demand. The capital charge needed to store enough solar to cover a predictable number of HOURS of night with batteries is already tolerable, but storage become impractically costly when meeting demand during an unpredictable number of DAYS of calm or cloudy skies.
One place I can roughly estimate the lesser value of electricity from renewable sources is looking at plans for meeting demand with 100% renewable sources. Back in the good old days, you analyzed a paper by Budischak for meeting historic demand on the PJM grid using renewable electricity based on historic weather on 99.9% of days. IIRC, the optimum solution involved mostly building enough wind generation capacity so that even weak winds could meet demand most of the time. That meant building three times the wind capacity needed to meet average demand and wasting 2/3rds of the electricity that could have been generated. If I remember correctly, that would imply that 1 MW-h of electricity from renewable source is worth 1/3 as much as 1 MW-h of electricity that can be generated to meet demand. Princeton U has plans for meeting 100% of US demand for electricity with Net Zero CO2 emissions by a variety of scenarios, including one that relies on 100% renewable generation. IIRC, that plan also calls for building average renewable generation capacity about 3 times larger than conventional generation capacity, plus about one day's worth of storage capacity plus a 5-fold increase in transmission capacity. If properly analyzed by the standards you used for South Australia, this might be used to demonstrate that 1 MW-h of electricity of from renewable sources is worth less than 1/3 as much as electricity from generators that can dispatch electricity on demand.
I see LCOE as a "potentially" useful tool - *prior* to intermittent renewables. That's if you wanted a headline number to show policy makers. But even then it was more a cudgel to wield.
With intermittent renewables - it's useless for sensible decision making. But excellent as an even bigger cudgel where you can cherry pick 18 different assumptions and declare "cheaper!" Or "more expensive!" - Select as appropriate.
Back in the old days circa 2015 when I compared wind power to natural gas, I remember reading a paper where some academic had produced a paper. He or she randomly decided to select the time period of a few years in Europe which just happened to coincide with a very high gas price. And then compared European gas plants using this gas price with Oklahoma wind with its fabulous high wind capacity factor - 40%+.
You could switch around and compare gas plants in the US using the Henry Hub price (1/5 of the European peak price of the era) with German wind power capacity factor of less than 20%.
The ratio would shift by a factor of 10.
It's laughable stuff. He who pays the piper.
In this new world of renewables, the comparisons are very very dependent on the wind+solar characteristics, the transmission capacity throughout that region, and the cost of coal & gas.
I don't think one number can be created to compare. Not if you want a useful answer.
Yes, I agree that comparing the "value" of 1 mW-h of electricity from an intermittent renewable source to 1 mW-h of electricity that can be delivered on demand is challenging and depends on many factors. However, without quantifying this difference, few understand how big it is. (IIRC Budischak's optimum plan achieved reliability mostly by building an enormous number of wind turbines and using only about 1/3 of the electricity they could generate to meet actual demand.)
Activists are promoting Net Zero (with no nuclear). Even Pielke Jr is talking about Net Zero by 2070-80, so the difference in value needs to be known for 100% renewable penetrance. The Princeton Net Zero Plan covers the entire US, which includes a typical mixture of areas with abundant and limited wind and sunshine. If I remember correctly, the Princeton Plan starts with current demand, how it is being met, projections for future demand, and how it could be met with increased transmission and with storage.
Steve,
Thank you for your efforts to understand and explain wholesale and retail energy costs in part of Australia. I wonder how the South Australia case study relates to other lands. It would be educational to do something similar for other areas like Iceland, Norway, and France which rely on different energy sources than Australia, and each other. Then Germany and Great Britain's efforts, similar to Australia's, might be evaluated.
There are the other crucial parts of "the politically loaded claims in the energy debate"- 1) reduction in carbon emissions and 2) actual effect on global warming and sea level rise. Energy independence is another desired outcome and maybe easier to evaluate. The proposed energy transition involves trillions of dollars in costs, revenues, and profits and losses. If money corrupts, well..... Alas, so many moving parts! Whew!
Steve: I could summarize your analyses by saying 1 MW-h of electricity from non-dispatchable renewable generation (like solar) is not worth as much as 1 MW-h of electricity from fossil fuel or nuclear generation that can be dispatched to meet demand. The LCOE for renewable generation is merely propaganda in a real world where prices are determined by the law of supply and demand. The challenging question is: HOW MUCH LESS is electricity from renewable sources worth? The answer to that question depends on what fraction of electricity is coming from intermittent sources (penetrance) and local factors that affect the abundance and variance of wind and sunshine. I see two possible answers to this dilemma.
As best I can tell natural gas generation can provide a relatively cheap way to make unreliable renewable generation reliable. Most of the cost of natural gas generation comes from the cost of the fuel, and customers only need to pay for fuel when the sun isn't shining or the wind isn't blowing. They pay only a small capital charge continuous to have a gas plant on stand-by when renewable generation is meeting demand. The capital charge needed to store enough solar to cover a predictable number of HOURS of night with batteries is already tolerable, but storage become impractically costly when meeting demand during an unpredictable number of DAYS of calm or cloudy skies.
One place I can roughly estimate the lesser value of electricity from renewable sources is looking at plans for meeting demand with 100% renewable sources. Back in the good old days, you analyzed a paper by Budischak for meeting historic demand on the PJM grid using renewable electricity based on historic weather on 99.9% of days. IIRC, the optimum solution involved mostly building enough wind generation capacity so that even weak winds could meet demand most of the time. That meant building three times the wind capacity needed to meet average demand and wasting 2/3rds of the electricity that could have been generated. If I remember correctly, that would imply that 1 MW-h of electricity from renewable source is worth 1/3 as much as 1 MW-h of electricity that can be generated to meet demand. Princeton U has plans for meeting 100% of US demand for electricity with Net Zero CO2 emissions by a variety of scenarios, including one that relies on 100% renewable generation. IIRC, that plan also calls for building average renewable generation capacity about 3 times larger than conventional generation capacity, plus about one day's worth of storage capacity plus a 5-fold increase in transmission capacity. If properly analyzed by the standards you used for South Australia, this might be used to demonstrate that 1 MW-h of electricity of from renewable sources is worth less than 1/3 as much as electricity from generators that can dispatch electricity on demand.
Frank,
I see LCOE as a "potentially" useful tool - *prior* to intermittent renewables. That's if you wanted a headline number to show policy makers. But even then it was more a cudgel to wield.
With intermittent renewables - it's useless for sensible decision making. But excellent as an even bigger cudgel where you can cherry pick 18 different assumptions and declare "cheaper!" Or "more expensive!" - Select as appropriate.
Back in the old days circa 2015 when I compared wind power to natural gas, I remember reading a paper where some academic had produced a paper. He or she randomly decided to select the time period of a few years in Europe which just happened to coincide with a very high gas price. And then compared European gas plants using this gas price with Oklahoma wind with its fabulous high wind capacity factor - 40%+.
You could switch around and compare gas plants in the US using the Henry Hub price (1/5 of the European peak price of the era) with German wind power capacity factor of less than 20%.
The ratio would shift by a factor of 10.
It's laughable stuff. He who pays the piper.
In this new world of renewables, the comparisons are very very dependent on the wind+solar characteristics, the transmission capacity throughout that region, and the cost of coal & gas.
I don't think one number can be created to compare. Not if you want a useful answer.
Yes, I agree that comparing the "value" of 1 mW-h of electricity from an intermittent renewable source to 1 mW-h of electricity that can be delivered on demand is challenging and depends on many factors. However, without quantifying this difference, few understand how big it is. (IIRC Budischak's optimum plan achieved reliability mostly by building an enormous number of wind turbines and using only about 1/3 of the electricity they could generate to meet actual demand.)
Activists are promoting Net Zero (with no nuclear). Even Pielke Jr is talking about Net Zero by 2070-80, so the difference in value needs to be known for 100% renewable penetrance. The Princeton Net Zero Plan covers the entire US, which includes a typical mixture of areas with abundant and limited wind and sunshine. If I remember correctly, the Princeton Plan starts with current demand, how it is being met, projections for future demand, and how it could be met with increased transmission and with storage.
Steve,
Thank you. I finally got around to doing my post using your research. Why "Cheap Renewables" Don't Deliver Cheap Electricity https://pragmaticenvironmentalistofnewyork.blog/2026/04/23/why-cheap-renewables-dont-deliver-cheap-electricity/
I appreciate your effort. Thanks again.
Roger Caiazza