From Watts Up With That?

Douglas Pollock

The Renewable Capital Cost Green Trick

(On Linnea Lueken’s article “Right, OilPrice.com, Wind Power is Unprofitable”).

In her excellent and clarifying article in WUWT, Linnea Lueken states: “…renewables advocates frequently cite the claim that wind power (…) is cheaper than fossil fuels, but the reality is different.” Then she continues explaining the cost of backup generation or the need of a thermal generation source forced to operate inefficiently to ensure grid stability, using an increasing fraction of its capacity to keep pace with weather-dependent renewables at all times, and even doing nothing but to burn fuel at rotating reserve without generating electricity, waiting there to wake up (ramp up) when the sun or wind decide to go away.

But there is still more, there is a very well hidden green trick.

Renewables advocates (the same doomsday mantra preachers on man-made climate change) are very smart when using the renewable investment cost premise which —they claim—have dramatically dropped in the last decade, trying to prove with this an alleged reduction in electricity prices. Sorry, but they are right on this, yet only in the premise, because the renewable industry has moved to China due to Western high costs of energy, among other beauties, having caused in this industry a sharp reduction in manufacturing costs. However, they are grossly wrong in the conclusion for the system or grid electricity cost inevitably increases as the renewable penetration expands.

The trick.

The investment cost (that which its promoters refer to) is the installed capacity investment cost (a.k.a. rated or nameplate capacity) in US$/MW, that is, in dollars per unit of power which is not an electricity cost. The capital cost, in US$/MWh, that is, in dollars per unit of energy is what actually goes in the levelized cost of electricity (LCOE) and this cost includes the project lifetime, WACC (weighted average capital cost), investment cost and capacity factor. While the capital cost is proportional to the investment cost, the first is inversely proportional to its capacity factor which, for renewables, can range between 2 to 6 times higher than that of a combined cycle gas turbine power plant (the only efficient thermal generation source for backup purposes by which a grid could eventually ‘see’, although negligibly, a drop in CO₂ emissions when increasing the renewable generation fraction), meaning that, at an equal thermal-renewable investment cost, the renewable capital cost will double, triple, or even more than quadruple that of the thermal source (graph below).

Relative investment and capital cost between a renewable and a thermal technology. V_R and V_T are the renewable and thermal investment costs in US$/MW. C_R and C_T are the renewable and thermal capital costs in TS$/MWh. V_R/V_T = 1 (horizontal axis) is when the renewable investment cost equals the thermal investment cost, while the renewable capital cost, with a capacity factor of Z_R = 0.3, almost triples that of the thermal technology and more than quadruples it for a renewable capacity factor of Z_R = 0.2 (vertical axis).

As with climate change, this is the cute old magician’s hat rabbit trick that everyone believes in, yet nobody enjoys.

Douglas Pollock

Douglas Pollock is a Chilean Civil Industrial Engineer from the University of Chile. For the last eight years he has dedicated to study the science and economics of Climate Change and for the last three mainly in investigating the impact of renewables penetration in power grids, both in in costs and in CO₂ emissions.

He has attended to and spoken at world-class conferences and has been interviewed in the US, Spain, UK, Germany, Mexico, Colombia, Argentina, Brazil, Paraguay and Chile. In 2019 he was appointed Ambassador for Chile of the CLINTEL Foundation (Climate Intelligence Foundation).

At present, his activities are centered on warning and advising on the fundamentals of climate change and the negative economic consequences of mitigation measures that Western governments are imposing, both in Chile and abroad. In Chile, his efforts are aimed at companies that are being most affected, the government and political figures, including deputies and a presidential candidate.