Key Takeaways
Enormous subsidies for solar and wind generation technologies are proving much more expensive than advertised. They also carry hidden costs and burdens on the grid, most recently seen in the Spain blackout.
An analysis of the “full system costs” of wind and solar generation in Texas shows them to be seven times and ten times as expensive, respectively, as natural gas generation.
Ontario’s experience closing thermal plants and replacing them with subsidized wind and solar doubled consumer rates over time while substantially increasing government debt.
Across the globe, countries with the highest reliance on wind and solar also typically see the highest consumer rates for electricity.
Congress is currently debating the fate of costly renewable subsidies within the Inflation Reduction Act, which would increase wind and solar power, causing utility rates to increase, and requiring additional costly grid expenses.
With the recent blackout in Spain and numerous studies demonstrating that the real costs of solar and wind are many times more than conventional technology, it is time for Congress to carefully consider whether Biden’s climate bill is a good investment of taxpayer money.
Spain and Portugal’s blackout should be a warning to U.S. lawmakers, who decide the future of the massive renewable tax credits in President Biden’s climate bill, the Democrat-passed Inflation Reduction Act (IRA). Spain, whose generation mix on April 28 was 59% solar and 12% wind, with only 22% coming from nuclear and gas, went into a major blackout as 15 gigawatts of solar power went off-line because there was not enough inertia in the system from traditional generating sources (gas, coal and nuclear) to keep the grid from collapsing. Conventional power generators take a while to stop spinning, allowing time to balance electricity supply and demand. At the same time, output goes to zero instantly when a solar or wind plant goes offline.
Besides the instability these intermittent sources create with the grid, they are far more expensive than the media and promoters report. A Heartland study of the Levelized Full System Costs of Electricity, using the relatively wind-friendly and solar-friendly geography of Texas as a baseline, estimates solar generation at $413 per megawatt hour—10 times more than natural gas, and wind generation at $291 per megawatt hour—7 times more than natural gas. Along with wind and solar, the study considered gas, coal, biomass, and nuclear generating technologies, which were all less expensive than wind and solar on a complete system basis.
One of the reasons for these high full system costs is that the grid needs back-up power when the wind does not blow and the sun does not shine. The back-up power can come from conventional technology or very expensive batteries that store excess electricity from wind and solar, when available, and release that energy when solar and/or wind cannot perform. Neither of these costs is added to the capital and operating costs of wind and solar power, so they become “hidden” from the actual costs of the intermittent generators, but they still must be paid by consumers.
The situation makes consumers pay twice–once for either wind or solar capacity and then again for the backup. Further, the conventional technologies could have operated in lieu of the wind and solar generation, so they are essentially duplicative. Because conventional technologies are used less in back-up mode, they spread their costs over fewer hours of operation, and, as a result, they cost more per kilowatt-hour than if they were run at full capacity. Wind and solar, therefore, force inefficiencies in generation, which drive costs up.
In 2005, the Ontario government in Canada began phasing out coal generation and subsidizing wind and solar generation, resulting in a significant increase in electricity prices. From 2005 to 2020, the average, inflation-adjusted cost of electricity doubled from 7.7 cents to 15.3 cents per kilowatt-hour. Since 2019, the Ontario government has subsidized these intermittent technologies through programs such as the “Renewable Cost Shift,” lowering the cost to ratepayers but moving the increasing costs onto the government. That policy now costs Ontario more than $6 billion annually—four times what was spent in 2018. (Costs are in Canadian dollars.) Subsidies through tax credits within the climate bill will accelerate in the United States, as well, if steps are not taken to reduce them.
Similar Results from Other Studies
Other studies show similar results to the Heartland study mentioned above. In China, when including the cost of backup power, the cost of solar power becomes twice as high as that of coal, helping to explain China’s enormous consumption of coal. A peer-reviewed study of generating technologies in Germany and Texas shows that the real costs of solar and wind are many times more expensive than the cost of fossil fuels. Germany, the U.K., and Spain, which increasingly rely on solar and wind power, have some of the world’s most expensive electricity.
Using 2022 data from the International Energy Agency from around 70 countries shows a correlation between more solar and wind and higher average household and business energy prices. In a country with little or no solar and wind, the average electricity cost is about 16 cents per kilowatt-hour. For every 10% increase in solar and wind share, the electricity cost increases by nearly 8 cents per kilowatt-hour. The results are similar using 2019 data, before the impacts of COVID and the Ukraine war. The graph below and the electricity costs are in 2024 Canadian dollars.
In Germany, electricity costs 43 cents per kilowatt-hour—much more than twice the Canadian cost, and more than three times the Chinese price. On sunny and windy days, renewable energy satisfies close to 70% of Germany’s demand. But on several cloudy and nearly windless days, solar and wind delivered less than 4% of Germany’s demand. Germany’s industrial customers are somewhat shielded from the rising cost of wind and solar power by having households pay a renewable fee. Over 50% of residential electricity bills in Germany are made up of taxes and fees, most of which support the transition away from coal, natural gas, and nuclear power through subsidies and mandates. Germany’s Energiewende—the mandated transition to renewable energy—was and continues to be expensive, making the country’s residential electricity prices one of the highest in Europe and costing the country billions in grid costs, as well as exposing the country to energy supply shortfalls that put it at risk for blackouts.
U.S. Halt on Wind Projects
President Trump has put a temporary halt on wind projects on federal lands and waters through his executive order, “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects.” Offshore wind is an extremely expensive technology, even without all the hidden costs mentioned above. In April, Interior Secretary Burgum did New York ratepayers a favor by halting the construction of Norwegian company Equinor’s Empire Wind project southeast of Long Island, indicating that the Biden administration rushed its approval.
Regardless, attorneys general from New York and 16 other states and Washington, D.C., are challenging Trump’s executive order pausing approvals, permits, and loans for all wind energy projects on federal lands, both onshore and offshore. They claim that Trump does not have the authority to unilaterally shut down the permitting process, and he is jeopardizing development of a power source critical to the states’ economic vitality, energy mix, public health, and climate goals.
Conclusion
Wind and solar power now provide 16% of the electricity in the United States, so the U.S. grid is not yet to the point that Spain’s dependency was on April 28th when the blackout occurred. However, some U.S. states are well beyond that average generation number, and two of them have had past issues dealing with intermittent renewable energy. An incident in Texas occurred in 2021 when wind and solar power were generating around 50% of the state’s power. California also has had a number of brownouts and blackouts, with a generating grid about 40% dependent on wind and solar power. The North American Electric Reliability Corp. has repeatedly warned about the instability of these technologies on the grid during its reliability assessments. As U.S. Energy Secretary Chris Wright said regarding the blackout in Spain and Portugal, “But you know, when you hitch your wagon to the weather, it’s just a risky endeavor.” Consumers are paying for that risky endeavor because U.S. lawmakers are having trouble getting rid of the giant slush fund in Biden’s climate bill that promotes these technologies.
