This article could lead readers to conclude that we can decrease electricity prices by installing more wind and solar. This would be the opposite of the truth. In ALL countries where intermittent renewables have been installed electricity prices INCREASE. This increase is exponential rather than linear.
The reason for this is the very high cost of dealing with intermittency. Essentially one either needs to operate two electricity generating systems with the dispatchable one on permanent standby, or one has to have high capacity electricity storage systems, which are extremely expensive.
This is only part of the story. Your second footnote starts to explain the rest, but is not complete. Most of the offshore wind CfDs prices are far higher than £50/MWh. Some are over £200 in today's terms. Today's price on Trading Economics is £105/MWh. And of course they are index linked so go up each year with inflation. So even though the wind farm gets paid £105, we pay over £200 in our bills. I have solar panels on my roof from 2010 and now get paid over £600/MWh generated. This partly explains why electricity prices have not fallen very much even though gas prices are down over 80% from their peak.
Plus, you missed out the eye-watering grid balancing costs for renewables that amounted to over £4bn last year, compared to £500m in 2011. Index linked CfDs for renewables and rising grid balancing costs drove the increase in electricity prices in the decade to 2021. Gas prices were pretty stable.
A point missed is that electricity produced by natural gas peakers to balance intermittent solar/wind is much more expensive than electricity produced by far more energy-efficient Combined Cycle Gas Turbines that run 24/7.
For intermittent and variable sources like wind and solar, the length of three blue rectangular area on your chart which shows capacity is confusing because capacity is the maximum electricity that can be generated, but to meet demand the actual important measure is how much of that capacity is actively generating. On a still night, the dashed line for demand can stay in place, but the blue box will then shrink to zero, meaning the other boxes slide to the left causing the high marginal price to kick in and a much lower demand point. This is the folly of becoming dependent on solar and wind. Nuclear, geothermal or increased gas production with fracking would all bring down costs significantly.
I draw a weird conclusion from your article. If two neighboring countries, e.g. England and France, are both generating most of their electricity from cheap sources but both get priced by their most expensive source, then they could both benefit if, e.g. (i) france sold a bunch of their clean energy to England, so that England could be using all-cheap energy and paying low prices. Meanwhile France would need to burn more gas to make up for the cheap energy it sent to England, but this wouldn't change the high price France is *already* paying for power. If England now sent some of the money they saved on power to France, everyone would be better off. What stops this kind of "power arbitrage"?
The relative cost graphs are entirely disingenuous, they look like the cost is tiny compared to gas, because the scales are out. As noted in comments above, the strike price for wind is often in excess of the price of gas generation, and backup is needed anyway to accommodate for periods of low wind. All in, poor solutions.
Very interesting article Hannah. The marginal costing model makes sense and in a simple world would drive the expansion of renewables as super profits would be earned by renewable producers which doesn’t seem to be the case currently. The comments were extremely insightful- thanks to the authors! Clearly distribution and storage innovation are lagging primary renewable production and we read about the enormous amounts of money required to ensure the end to end supply chain for renewables becomes cost efficient. Integrated planning of this appears lacking and seems the logical area for governments and academics to focus attention. It would be interesting to read about countries that are making progress in this domain as it would be catastrophic if the sunk cost of legacy fossil fuel distribution and storage infrastructure holds back the renewables transition.
Its the great myth that Renewables are cheaper, and here's why from someone with 35 years in the industry from Grid Control, to gas, magnox and AGR generation.
You need a number of things to balance the grid.
1. Balance in generation and demand in real time
2. You need to balance reactive load MVAR's)
3. You need local voltage support in certain area's
4. You need a DIVERSE SUPPLY to prevent common mode, common cause, and price stability
If you have 100% gas generation and the gas price shoots up, so does your electricity price, worse still, high prices indicate supply shortage, so not only is it expensive, you might not actually get the gas.
Equally, you can have 100% renewables, but it suffers from common cause failure, if you get a long term blocking high (can be upto 4 weeks) in the middle of winter temperatures plummet, demand soars and you have minimal to no solar or wind - Result blackout of the grid.
To have storage to cover that period with peak demand, would be so expensive your eyes would water at your bills.
Equally renewables are "capacitative" while synchronous generators are inductive, that means the grid is set up for inductive generation and not to handle capacitative renewables.
Equally large generators have "inertia" a capability to hold rotating mass for short term frequency fluctuations and they have "AVR's" Automatic voltage regulators to provide voltage support, and large generator transformers capable of providing reactive load adjustments (essential to grid stability).
Now lets look at the grid, its currently constructed of Nuclear base load, then renewables depending on how much it can produce, and then the variable supply of renewables is made up with either gas or coal generation as the only large scale, variable supply capable of that function and supplying voltage support and reactive load management and then hydro as pumped storage for short term supply surges.
There's a limited amount of hydro, it can produce a lot but not for long.
Economics - if you have a 10GW gas station you'd like to run it flat out to maximise your income and minimise your fixed costs. If, because of renewables you can't generate 10GW a year but only 5GW your fixed costs become a higher percentage of your revenue, therefore, rising renewables means less gas generation and to keep gas profitable you have to increase your prices.
Equally, load varying causes metal fatigue and shortens the life of gas power stations, again increasing fixed costs by shortening plant life.
Therefore renewables forces up the price of gas generation, and as the article shows, gas sets the price.
Are renewables cheaper? The latest BEIS report put renewables (Onshore wind £44/MWH, Offshore £44/MWH, Solar £41/MWH) So cheaper right?
Except after putting out those prices it got ZERO bids in AR5 and the government had to ramp up offer prices to £73/MWH for renewables, but still cheaper right?
Well it priced gas at £114/MWH, but £60 of the cost breakdown was carbon taxes giving a clean cost of £54/MWH, far cheaper than any renewables now.
But is the cost of renewables true? No its not, it the cost at the output of the wind or solar farm, its not the cost to your house.
To connect in those renewables requires £58bn of grid upgrades required which will require 5 TIMES the pylons and cabling and as a result 5 TIMES the ongoing maintenance all going on your bills as a result.
Does the costs of renewables end there? Absolutely not, if you want to replace gas and coal, you'll need to find the voltage and reactive load management support they produce, where's that coming from.
On top of that you'll need to make renewables reliable, or as its known "dispatchable" which means storage, all the costs of that are directly attributable to renewables.
Now here's the really interesting and costly bit.
If you have a winter blocking high that can last for upto a month (think Feb 2010) where temperatures plummeted to -17C at night and was never above zero for over a three weeks, and add in electric cars and air source heat pumps which can draw 7KW and 3KW respectively per household where peak demand could hit between 135 - 150GW (currently 55-60GW) and no gas, no coal and very little renewables.
To supply that grid through either batteries (on current minimum prices of £120/kwh storage) and an average load of 90GW per day for three weks would cost 6.4 TRILLION (UK total debt is 2.7 TRILLION)
To do it with hydrogen (and IGNORING THE HUGE CAPITAL COSTS of the infrastructure) to use renewables at say £60/MWH through an electrolysis then to storage to then burn in a gas fired power station is 20% efficient, so renewables at £60/MWH would reconstituted to electricity again would be £60/0.2 = £300/MWH, nearly three times the price of gas.
Now to effect that you need to have several gas power stations sitting idle and staffed most of the year doing nothing but paid for and the whole hydrogen system built, now at a BEST guess that would add another £100 to £150/MWH to the hydrogen cost taking it to £400 - £450/MWH now at least 4 times the price of gas.
All that will have to go on your bills, so renewables are not reliable and the price of making them reliable is prohibitive.
Your bills on a net zero grid will mean just that, you'll have net zero in your bank account after paying your bills.
Do you have any favourite studies into a 100% renewable UK? Are these taking an integrated European super-grid approach where heaps of power can be exported and imported as needed? With HVDC only losing 3% power per 1000 km, there are papers that suggest a super-grid would do a lot better. EG: This paper on Germany-as-an-island seems to suggest they would need 12 WEEKS storage! I'm not sure what the motivation was to look at Germany alone - but 12 WEEKS!
But this next study shows inter-connectors between countries can reduce storage 30%
In a 100% renewable energy scenario of 12 central European countries, we investigate how geographical balancing between countries reduces the need for electricity storage. Our principal contribution is to separate and quantify the different factors at play. Applying a capacity expansion model and a factorization method, we disentangle the effect of interconnection on optimal storage capacities through distinct factors: differences in countries’ solar PV and wind power availability patterns, load profiles, as well as hydropower and bioenergy capacity portfolios. Results indicate that interconnection reduces storage needs by around 30% in contrast to a scenario without interconnection. Differences in wind power profiles between countries explain around 80% of that effect.
Keywords: Applied sciences; Engineering; Energy sustainability
Should we INCREASE fuel prices with a big tax? That would reduce consumption, which is what we want. It can all be made tax neutral by disturbing the fuel tax revenues to everyone on an equal basis. Result: Green and Equal.
This article could lead readers to conclude that we can decrease electricity prices by installing more wind and solar. This would be the opposite of the truth. In ALL countries where intermittent renewables have been installed electricity prices INCREASE. This increase is exponential rather than linear.
The reason for this is the very high cost of dealing with intermittency. Essentially one either needs to operate two electricity generating systems with the dispatchable one on permanent standby, or one has to have high capacity electricity storage systems, which are extremely expensive.
This is only part of the story. Your second footnote starts to explain the rest, but is not complete. Most of the offshore wind CfDs prices are far higher than £50/MWh. Some are over £200 in today's terms. Today's price on Trading Economics is £105/MWh. And of course they are index linked so go up each year with inflation. So even though the wind farm gets paid £105, we pay over £200 in our bills. I have solar panels on my roof from 2010 and now get paid over £600/MWh generated. This partly explains why electricity prices have not fallen very much even though gas prices are down over 80% from their peak.
Plus, you missed out the eye-watering grid balancing costs for renewables that amounted to over £4bn last year, compared to £500m in 2011. Index linked CfDs for renewables and rising grid balancing costs drove the increase in electricity prices in the decade to 2021. Gas prices were pretty stable.
More here:
https://davidturver.substack.com/p/lies-damned-lies-wind-power-lobbyists
And here:
https://davidturver.substack.com/p/exposing-the-hidden-costs-of-renewables
A point missed is that electricity produced by natural gas peakers to balance intermittent solar/wind is much more expensive than electricity produced by far more energy-efficient Combined Cycle Gas Turbines that run 24/7.
For intermittent and variable sources like wind and solar, the length of three blue rectangular area on your chart which shows capacity is confusing because capacity is the maximum electricity that can be generated, but to meet demand the actual important measure is how much of that capacity is actively generating. On a still night, the dashed line for demand can stay in place, but the blue box will then shrink to zero, meaning the other boxes slide to the left causing the high marginal price to kick in and a much lower demand point. This is the folly of becoming dependent on solar and wind. Nuclear, geothermal or increased gas production with fracking would all bring down costs significantly.
I draw a weird conclusion from your article. If two neighboring countries, e.g. England and France, are both generating most of their electricity from cheap sources but both get priced by their most expensive source, then they could both benefit if, e.g. (i) france sold a bunch of their clean energy to England, so that England could be using all-cheap energy and paying low prices. Meanwhile France would need to burn more gas to make up for the cheap energy it sent to England, but this wouldn't change the high price France is *already* paying for power. If England now sent some of the money they saved on power to France, everyone would be better off. What stops this kind of "power arbitrage"?
The relative cost graphs are entirely disingenuous, they look like the cost is tiny compared to gas, because the scales are out. As noted in comments above, the strike price for wind is often in excess of the price of gas generation, and backup is needed anyway to accommodate for periods of low wind. All in, poor solutions.
Very interesting article Hannah. The marginal costing model makes sense and in a simple world would drive the expansion of renewables as super profits would be earned by renewable producers which doesn’t seem to be the case currently. The comments were extremely insightful- thanks to the authors! Clearly distribution and storage innovation are lagging primary renewable production and we read about the enormous amounts of money required to ensure the end to end supply chain for renewables becomes cost efficient. Integrated planning of this appears lacking and seems the logical area for governments and academics to focus attention. It would be interesting to read about countries that are making progress in this domain as it would be catastrophic if the sunk cost of legacy fossil fuel distribution and storage infrastructure holds back the renewables transition.
Its the great myth that Renewables are cheaper, and here's why from someone with 35 years in the industry from Grid Control, to gas, magnox and AGR generation.
You need a number of things to balance the grid.
1. Balance in generation and demand in real time
2. You need to balance reactive load MVAR's)
3. You need local voltage support in certain area's
4. You need a DIVERSE SUPPLY to prevent common mode, common cause, and price stability
If you have 100% gas generation and the gas price shoots up, so does your electricity price, worse still, high prices indicate supply shortage, so not only is it expensive, you might not actually get the gas.
Equally, you can have 100% renewables, but it suffers from common cause failure, if you get a long term blocking high (can be upto 4 weeks) in the middle of winter temperatures plummet, demand soars and you have minimal to no solar or wind - Result blackout of the grid.
To have storage to cover that period with peak demand, would be so expensive your eyes would water at your bills.
Equally renewables are "capacitative" while synchronous generators are inductive, that means the grid is set up for inductive generation and not to handle capacitative renewables.
Equally large generators have "inertia" a capability to hold rotating mass for short term frequency fluctuations and they have "AVR's" Automatic voltage regulators to provide voltage support, and large generator transformers capable of providing reactive load adjustments (essential to grid stability).
Now lets look at the grid, its currently constructed of Nuclear base load, then renewables depending on how much it can produce, and then the variable supply of renewables is made up with either gas or coal generation as the only large scale, variable supply capable of that function and supplying voltage support and reactive load management and then hydro as pumped storage for short term supply surges.
There's a limited amount of hydro, it can produce a lot but not for long.
Economics - if you have a 10GW gas station you'd like to run it flat out to maximise your income and minimise your fixed costs. If, because of renewables you can't generate 10GW a year but only 5GW your fixed costs become a higher percentage of your revenue, therefore, rising renewables means less gas generation and to keep gas profitable you have to increase your prices.
Equally, load varying causes metal fatigue and shortens the life of gas power stations, again increasing fixed costs by shortening plant life.
Therefore renewables forces up the price of gas generation, and as the article shows, gas sets the price.
Are renewables cheaper? The latest BEIS report put renewables (Onshore wind £44/MWH, Offshore £44/MWH, Solar £41/MWH) So cheaper right?
Except after putting out those prices it got ZERO bids in AR5 and the government had to ramp up offer prices to £73/MWH for renewables, but still cheaper right?
Well it priced gas at £114/MWH, but £60 of the cost breakdown was carbon taxes giving a clean cost of £54/MWH, far cheaper than any renewables now.
But is the cost of renewables true? No its not, it the cost at the output of the wind or solar farm, its not the cost to your house.
To connect in those renewables requires £58bn of grid upgrades required which will require 5 TIMES the pylons and cabling and as a result 5 TIMES the ongoing maintenance all going on your bills as a result.
Does the costs of renewables end there? Absolutely not, if you want to replace gas and coal, you'll need to find the voltage and reactive load management support they produce, where's that coming from.
On top of that you'll need to make renewables reliable, or as its known "dispatchable" which means storage, all the costs of that are directly attributable to renewables.
Now here's the really interesting and costly bit.
If you have a winter blocking high that can last for upto a month (think Feb 2010) where temperatures plummeted to -17C at night and was never above zero for over a three weeks, and add in electric cars and air source heat pumps which can draw 7KW and 3KW respectively per household where peak demand could hit between 135 - 150GW (currently 55-60GW) and no gas, no coal and very little renewables.
To supply that grid through either batteries (on current minimum prices of £120/kwh storage) and an average load of 90GW per day for three weks would cost 6.4 TRILLION (UK total debt is 2.7 TRILLION)
To do it with hydrogen (and IGNORING THE HUGE CAPITAL COSTS of the infrastructure) to use renewables at say £60/MWH through an electrolysis then to storage to then burn in a gas fired power station is 20% efficient, so renewables at £60/MWH would reconstituted to electricity again would be £60/0.2 = £300/MWH, nearly three times the price of gas.
Now to effect that you need to have several gas power stations sitting idle and staffed most of the year doing nothing but paid for and the whole hydrogen system built, now at a BEST guess that would add another £100 to £150/MWH to the hydrogen cost taking it to £400 - £450/MWH now at least 4 times the price of gas.
All that will have to go on your bills, so renewables are not reliable and the price of making them reliable is prohibitive.
Your bills on a net zero grid will mean just that, you'll have net zero in your bank account after paying your bills.
Hi Hannah,
Do you have any favourite studies into a 100% renewable UK? Are these taking an integrated European super-grid approach where heaps of power can be exported and imported as needed? With HVDC only losing 3% power per 1000 km, there are papers that suggest a super-grid would do a lot better. EG: This paper on Germany-as-an-island seems to suggest they would need 12 WEEKS storage! I'm not sure what the motivation was to look at Germany alone - but 12 WEEKS!
https://www.econstor.eu/bitstream/10419/236723/1/Ruhnau-and-Qvist-2021-Storage-requirements-in-a-100-renewable-electricity-system-EconStor.pdf
But this next study shows inter-connectors between countries can reduce storage 30%
In a 100% renewable energy scenario of 12 central European countries, we investigate how geographical balancing between countries reduces the need for electricity storage. Our principal contribution is to separate and quantify the different factors at play. Applying a capacity expansion model and a factorization method, we disentangle the effect of interconnection on optimal storage capacities through distinct factors: differences in countries’ solar PV and wind power availability patterns, load profiles, as well as hydropower and bioenergy capacity portfolios. Results indicate that interconnection reduces storage needs by around 30% in contrast to a scenario without interconnection. Differences in wind power profiles between countries explain around 80% of that effect.
Keywords: Applied sciences; Engineering; Energy sustainability
https://www.sciencedirect.com/science/article/pii/S2589004223011513
Should we INCREASE fuel prices with a big tax? That would reduce consumption, which is what we want. It can all be made tax neutral by disturbing the fuel tax revenues to everyone on an equal basis. Result: Green and Equal.
Answered more comprehensively here:
https://davidturver.substack.com/p/renewables-increase-electricity-bills
Thanks for the post. Great summary. If you want to get more into details, check out my posts where I dive into these topics https://gemenergyanalytics.substack.com/p/solar-cannibalization-more-details?utm_source=share&utm_medium=android&r=1iiiut