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forbes.com

If Solar And Wind Are So Cheap, Why


Are They Making Electricity So
Expensive?
Michael Shellenberger
6-8 minutos

Clipper yacht Liverpool 2018 passes the Burbo Bank Wind Farm on
August 14, 2017, off Liverpool, England.  (Photo by Christopher
Furlong/Getty Images)

Over the last year, the media have published story after story after
story about the declining price of solar panels and wind turbines.

People who read these stories are understandably left with the
impression that the more solar and wind energy we produce, the
lower electricity prices will become.

And yet that’s not what’s happening. In fact, it’s the opposite.

Between 2009 and 2017, the price of solar panels per watt declined
by 75 percent while the price of wind turbines per watt declined by

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50 percent.

And yet — during the same period — the price of electricity in


places that deployed significant quantities of renewables increased
dramatically.

Electricity prices increased by:

51 percent in Germany during its expansion of solar and wind


energy from 2006 to 2016;

24 percent in California during its solar energy build-out from 2011


to 2017;

over 100 percent in Denmark since 1995 when it began deploying


renewables (mostly wind) in earnest.

What gives? If solar panels and wind turbines became so much


cheaper, why did the price of electricity rise instead of decline?

EP

Electricity prices increased by 51 percent in Germany during its


expansion of solar and wind energy.

One hypothesis might be that while electricity from solar and wind
became cheaper, other energy sources like coal, nuclear, and
natural gas became more expensive, eliminating any savings, and
raising the overall price of electricity.

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But, again, that’s not what happened.

The price of natural gas declined by 72 percent in the U.S. between


2009 and 2016 due to the fracking revolution. In Europe, natural
gas prices dropped by a little less than half over the same period.

The price of nuclear and coal in those place during the same period
was mostly flat.

EP

Electricity prices increased 24 percent in California during its solar


energy build-out from 2011 to 2017.

Another hypothesis might be that the closure of nuclear plants


resulted in higher energy prices.

Evidence for this hypothesis comes from the fact that nuclear
energy leaders Illinois, France, Sweden and South Korea enjoy
some of the cheapest electricity in the world.

Since 2010, California closed one nuclear plant (2,140 MW installed


capacity) while Germany closed 5 nuclear plants and 4 other
reactors at currently-operating plants (10,980 MW in total).

Electricity in Illinois is 42 percent cheaper than electricity in


California while electricity in France is 45 percent cheaper than
electricity in Germany.

But this hypothesis is undermined by the fact that the price of the
main replacement fuels, natural gas and coal, remained low,

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despite increased demand for those two fuels in California and


Germany.

That leaves us with solar and wind as the key suspects behind
higher electricity prices. But why would cheaper solar panels and
wind turbines make electricity more expensive?

The main reason appears to have been predicted by a young


German economist in 2013.

In a paper for Energy Policy, Leon Hirth estimated that the


economic value of wind and solar would decline significantly as
they become a larger part of electricity supply.

The reason? Their fundamentally unreliable nature. Both solar and


wind produce too much energy when societies don’t need it, and
not enough when they do.

Solar and wind thus require that natural gas plants, hydro-electric


dams, batteries or some other form of reliable power be ready at a
moment’s notice to start churning out electricity when the wind
stops blowing and the sun stops shining.

And unreliability requires solar- and/or wind-heavy places like


Germany, California and Denmark to pay neighboring nations or
states to take their solar and wind energy when they are producing
too much of it.

Hirth predicted that the economic value of wind on the European


grid would decline 40 percent once it becomes 30 percent of
electricity while the value of solar would drop by 50 percent when it
got to just 15 percent.

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EP

Hirth predicted that the economic value of wind would decline 40%
once it reached 30% of electricity, and that the value of solar would
drop by 50% when it reached 15% of electricity.

In 2017, the share of electricity coming from wind and solar was 53
percent in Denmark, 26 percent in Germany, and 23 percent in
California. Denmark and Germany have the first and second most
expensive electricity in Europe.

By reporting on the declining costs of solar panels and wind


turbines but not on how they increase electricity prices, journalists
are — intentionally or unintentionally — misleading policymakers
and the public about those two technologies.  

The Los Angeles Times last year reported that California’s


electricity prices were rising, but failed to connect the price rise to
renewables, provoking a sharp rebuttal from UC Berkeley
economist James Bushnell.  

“The story of how California’s electric system got to its current state
is a long and gory one,” Bushnell wrote, but “the dominant policy
driver in the electricity sector has unquestionably been a focus on
developing renewable sources of electricity generation.”

Part of the problem is that many reporters don’t understand


electricity. They think of electricity as a commodity when it is, in
fact, a service — like eating at a restaurant.

The price we pay for the luxury of eating out isn’t just the cost of the
ingredients most of which which, like solar panels and wind
turbines, have declined for decades.

Rather, the price of services like eating out and electricity reflect the
cost not only of a few ingredients but also their preparation and
delivery.

This is a problem of bias, not just energy illiteracy. Normally


skeptical journalists routinely give renewables a pass. The
reason isn’t because they don’t know how to report critically on
energy — they do regularly when it comes to non-renewable energy
sources — but rather because they don’t want to.

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That could — and should — change. Reporters have an obligation


to report accurately and fairly on all issues they cover, especially
ones as important as energy and the environment.

A good start would be for them to investigate why, if solar and wind
are so cheap, they are making electricity so expensive.

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