Back in 2023 I noted that it is easy to find claims that the LCOE (levelized cost of energy) such as solar and wind are lower than, say, natural gas. However, that assessment depends upon what is included and what is left out.
An older OECD report found that when including grid costs such as connecting to the grid, backup storage and intermittency the US costs at 30% penetration levels looked like this:
USD/MWhr
Nuclear 1.67
Coal 1.03
Nat gas 0.51
Onshore wind 14.31
Offshore wind 22.10
Solar 18.87
A more recent paper (2022) by Idel looked at what he called LFSCOE, the Levelized full-system cost of electricity.
For comparison purposes Idel calculated the system costs, including intermittency and storage, for a given technology in a market supplied solely by that technology plus storage. Real world systems would obviously be a blend of sources.
Because location plays a large role, calculations are presented for two locations, Germany and Texas. Table 2 gives the costs in $/MWh.
Germany Texas
Solar 1548 413
Wind 504 291
Wind/Solar 454 225
combo
Nuclear 106 122
Biomass 104 117
Coal 78 90
Gas CT 39 42
Gas CC 35 40
Think of automobiles. Much more efficient than horses in principle, but only after enormous resources were spent improving roads and other infrastructure.
Same is happening with renewables. LCOE is telling us that renewables are in principle far more efficient and cost effective than fossil fuels. But one needs to improve the grid and storage infrastructure.
At the same time, it didn’t take six automobiles to replace one horse.
Rather and Mahalik did an economic study of energy production in 73 countries from 1990 to 2020. They write that:
“More specifically, the coefficient of renewable energy generation is − 0.157, indicating that more than 6 units of alternative energy are necessary for displacing one unit of fossil fuel energy at the global level.”
In addition they looked at factors that increased the use of non-renewable energy. A “1% increase in globalization, economic growth, and crude oil prices increases the non-renewable energy generation by 0.88%, 0.75%, and 0.03%, respectively.”
In a report out this month from Energy UK we read that:
“Many of the costs of transition to a clean energy system are being levied on energy bills, rather than being paid for through general taxation. This includes increases in existing schemes such as Contracts for Difference (CfD) and the Capacity Market, as well as new charges to fund investment in technologies such as nuclear, hydrogen, and carbon capture and storage.”
So, all these extra costs are showing up on energy bills. Perhaps they think it is better to pretend – to fund the costs through general taxation (which everyone pays anyway) and to pretend that energy bills are cheap.
…a displacement of 1% of fossil fuel necessitates 1.07% of renewable electricity. More precisely, a one-to-one displacement of fossil fuels occurs with hydropower and biomass. Further examination focusing on variable RE, utilizing panel data from 23 OECD countries, reveals that an average increase of 1.9% of variable renewable electricity is required to displace 1% of fossil fuel generation capacity. Decarbonizing energy: Evaluating fossil fuel displacement by renewables in OECD countries - PMC
So about 1-2 units of wind/solar replaces 1 unit of fossil fuels with the technology from a couple of years ago. As battery storage gets cheaper, the displacement equation will keep improving in favor of renewables.
Don’t really need these esoteric studies to figure out whether renewables are economically viable. Just need to look at the great red state of Texas.
Texas increased its energy supply by 35% over the last four years, Abbott said in his State of the State address in February. A whopping 92% of that new supply, according to energy consultant Doug Lewin, came from solar, wind and battery storage. As energy demand soars, Texas lawmakers face big decisions | The Texas Tribune
Solar, wind and battery storage are the future and the present even in a state full of oil, and unlike with fossil fuels, the technological advances in all three are still accelerating.
In that paper it seems they looked at solar and wind displacing coal and oil for electricity generation. However, the elephant in the room is natural gas.
Unless I’m reading that wrong, they found it took twice as much variable renewables to displace one unit of fossil fuel generation. Better than six to one, but not a strong argument.
If we look at total generation per year divided by the installed capacity, we can see how many gigawatt-hours of electricity each technology produces per megawatt of capacity.
Installed Capacity, December 2024, megawatts
Utility Scale Solar 122,568 MW
Utility Scale Wind 152,711
Natural Gas Combined Cycle 292,642
Coal 173,905
Nuclear 96,771
Nuclear capacity is the smallest in the list above, but that doesn’t mean nuclear produces the smallest amount of electricity.
Actual Generation, 2024, gigawatt-hours
Utility Scale Solar 218,537 GWh
Utility Scale Wind 453,454
Natural Gas Combined Cycle 1,539,727
Coal 652,760
Nuclear 781,979
Generation per installed megawatt of capacity
Utility Scale Solar 1.78 GWh/MW
Utility Scale Wind 2.97
NGCC 5.26
Coal 3.75
Nuclear 8.08
One study said 1:1 and the other said 1.9:1. The argument is that the difference isn’t much and the big tech advances are happening with renewables and battery storage, not fossil fuels.
Look, the big issue is modernizing the grid. What you fail to realize is that that will happen anyway (and pretty quickly) independent of renewable energy. The power demands of data centers and AI overlap the needs of variable renewable energy and there is an enormous amount of money behind data centers and AI.
The fourth industrial revolution is being built on data and will require an enormous amount of electrical power. Fossil fuels are simply too dirty to provide the level of power required because a rising global middle class also demands clean water and clean air.
That old OECD report was made in 2012 using even older data that is no longer applicable to current power generation systems that have reduced electrical systems costs for grid connection, backup storage, balancing and intermittency.
This analysis from 2012 is outdated and is totally ignored by the electrical power generation industry because it is wrong. This is evidenced by the fact that electrical power industry in Texas, California, Florida and US in general are mostly building solar, wind and energy storage facilities as reported in annual reports by EIA and others.
That report is also ignored by the electrical power generation industry as noted by my previous report.
For instance, does the analysis for natural gas include the costs of drilling, piping for gathering from well heads, processing, and final delivery via pipelines and compressor stations to power plants hundreds of miles from the well heads?
Natural gas power plants have capacity factors which vary by type of gas turbine plant, the operational needs, and the economical needs. Some are used base load. Most others are used for load following and peak power needs.
Natural gas-fired generation is versatile to dispatch
Nearly all natural gas-fired power plants are dispatchable, meaning that they can reliably be called on to meet power demand when needed by the grid. The flexibility of natural gas-fired generation is supported by the four different technology types used in these plants: combined-cycle gas turbines (CCGT), simple-cycle gas turbines (SCGT), steam turbines (ST), and internal combustion engines (ICE). In addition to the type of equipment, plant configurations and operating approaches differ among the technology types. In 2022, CCGT plants made up the largest part of the natural gas fleet, followed by SCGT, ST, and ICE.
CCGT plants are highly efficient, which allows them to generate low-cost power over extended periods, and they are configured to provide power to serve base and intermediate load. The three other plant types (SCGT, ST, and ICE) are used mostly to meet peak demand on the electric grid and so run less frequently. These three sources can start and ramp up to full power quickly, which is critical in markets with an increasing concentration of intermittent renewable generation.
In 2023, operators added 9,274 megawatts (MW) of new natural gas turbine generating capacity to the power grid in the United States. This total consisted of 7,376 MW of capacity from CCGT plants, 1,756 MW from SCGT plants, and 142 MW from ICE plants. No capacity from ST was added in 2023.
Natural gas consumption varies by plant type
The different types of natural gas-fired power plants technologies lead the plants themselves to have different operating rates, or capacity factors, among the technologies. A capacity factor is the ratio between the amount of generation over a period of time and the generating capability of a power plant.
CCGT plants, with higher efficiency, typically run more than half of the time and had a fleetwide capacity factor of approximately 56% in 2022. Depending on the age and type of equipment of the plant, capacity factors among the CCGT fleet can vary. The newest CCGT plants (those that entered service between 2014 and the end of 2023 and are using the latest generation of natural gas turbines) recorded the highest average capacity factor in 2022, approximately 66%. CCGT plants that started operating between 1999 and 2013 with an earlier natural gas turbine model reported a slightly lower average capacity factor, about 57%, in 2022. Average capacity factors were lowest, about 36%, for the earliest group of CCGT plants, which began operating in the 1980s and up until 1998.
SCGT, ST, and ICE natural gas-fired generating facilities all had average capacity factors below 20% in 2022 because they usually are only called on to operate when power demand is at its highest or when intermittent renewable energy sources need backup. SCGT plants had an average capacity factor of approximately 13% in 2022, ST plants of about 16%, and ICE plants of 18%.
Based on 2022 data from our Electric Power Annual, regions with the highest capacity factors for CCGT plants are in the eastern half of the United States. SERC, PJM, FRCC, and MISO all recorded capacity factors for their respective CCGT fleets at or greater than the national average of 56%. CCGT plants in the SERC and PJM regions, which are newer and more efficient on average, were operating more than 60% of the time during 2022. PJM and FRCC are home to some of the most modern and highest efficiency natural gas turbines in the United States.
In contrast, average capacity factors for CCGT plants in four regions—the Independent System Operator-New England (ISO-NE), SPP, the Southwest, and the California Independent System Operator (CAISO)—all were less than 50% during 2022. Capacity factors in ISO-NE and SPP were especially low at 41% in 2022, and in CAISO, they were about 47%. The lower percentages mostly were due to more generation from wind and solar sources in SPP and CAISO and constrained winter natural gas supply in ISO-NE.
Capacity factors for SCGT plants regionally were different than that for the CCGT fleet. The SCGT fleet in five regions (ERCOT, the New York Independent System Operator, ISO-NE, MISO, and the Northwest) had average capacity factors greater than the national average of 13% in 2022. Of special note, the SCGT fleet in ERCOT had an average capacity factor of approximately 27% in 2022. This extremely high rate was due to ERCOT’s record-high demand for electricity during both the summer and winter, as well as intermittent operation from the region’s large wind turbine fleet.
Six regions that had lower peak demand on an hourly basis in 2022 relied less on SCGT output than the national average. These regions were SPP, CAISO, SERC, PJM, FRCC, and the Southwest.
Data source: U.S. Energy Information Administration, Electric Power Annual Note: CCGT=combined-cycle gas turbine; SCGT=simple-cycle gas turbine
