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A little point about the costs of renewables

Summary:
The International Energy Authority says that the solution to not having enough power from renewables is to build more renewables:Electricity prices and carbon emissions will keep rising unless more money is invested in renewables, the International Energy Agency has warned.Well, yes, although we’re not sure how having more windmills produces more electricity when there’s still no wind. However, snark aside, there is an important point here. One solution to the intermittency problem is said to be deliberately overbuilding. Say, sometimes solar only produces one third of rated power. Cloudy days say, or short winter daylight hours. So, overbuild by a factor of three.We have seen this seriously suggested. But here’s the problem. Rather the point of renewables is that near the entire cost is

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The International Energy Authority says that the solution to not having enough power from renewables is to build more renewables:

Electricity prices and carbon emissions will keep rising unless more money is invested in renewables, the International Energy Agency has warned.

Well, yes, although we’re not sure how having more windmills produces more electricity when there’s still no wind.

However, snark aside, there is an important point here. One solution to the intermittency problem is said to be deliberately overbuilding. Say, sometimes solar only produces one third of rated power. Cloudy days say, or short winter daylight hours. So, overbuild by a factor of three.

We have seen this seriously suggested.

But here’s the problem. Rather the point of renewables is that near the entire cost is in the capital, construction. Once built the energy comes - near enough - for free. So, building 3x the renewables capacity means that the system costs 3x.

So, imagine that solar power costs £50 MWh just to use some number or other. That’s the cost of electricity from one set of panels. But if our system, in order to deal with cloudy days, requires 3x capacity then actually the cost is £150 MWh. No, we can’t use just the cost of the electricity we actually use at peak performance because all of the cost is in the building out of the system itself. Therefore all electricity from the system as a whole has to be priced at the cost of the system as a whole.

Marginal cost isn’t something that really works with a renewables system that is because there aren’t, to a useful level of accuracy, marginal costs as they’re all fixed. In this it is very like nuclear - once you’ve built and fed the reactor that’s pretty much all of the costs involved, actually operating the thing costs next to nothing.

Now of course benevolent and omniscient planners would have already incorporated this into all discussions of the system. Our problem here is that we just don’t feel lucky, today or any other day, about the omniscience nor even benevolence of those planning the energy system. Our proof being that if either were even vaguely true then we’d not be right where we are, would we?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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