I've seen claims made that solar energy is cost-competitive for at least 10 years. They have all had obvious, glaring holes in the logic or calculations that undermined the conclusions, so I am perhaps more skeptical of such claims than I should be. However, this case seems quite weak.
I can't see the workings of the simulator tool, so I can't evaluate how it works, or if the calculations make sense. However, I see some obvious issues:
1. Why do gas generators and solar have different WACC, and why is the WACC so low? I'd expect it would be at least 10%, and the WACC for solar should be at least as high as the WACC for gas.
2. Why does the model include gas prices as GBP per MWh? I've always seen these prices in terms of $ per MMCF or $ per therm. Does the model intend the price to be GBP per therm? If the price really is GBP per MWh, how does the gas turbine's efficiency affect the calculation?
3. Why do you base your calculations on a gas turbine efficiency of 45%? This seems very low for a baseload application - even 25 years ago, combined cycle generators exceeded 55% total efficiency.
4. Why do you assume that gas turbines last 25 years? When I worked in the industry, I was able to find only one large power generation gas turbine that had been retired, and that was because the of an uncontained failure of a turbine blade. Gas turbine peakers installed in the early 1970s were still operating normally in the early 2000s. Adjusting this parameter doesn't seem to change the levelized cost, so I don't know whether or how it affects the calculations.
5. Why do you assume that solar generators will last 35 years? I've never seen an estimate this high.
6. What assumption do you make for battery life? If batteries are routinely charged and discharged daily, I'd expect them to last 3-5 years. Perhaps more if batteries are sized to frequently hold more than a night's worth of demand.
7. You say that "For battery storage, a cost of £200/kWh is assumed." What is the source for this assumption? The US National Renewable Energy Laboratory reported that costs were $2080 in 2023 (£1612 at today's exchange rate), optimistically going down to to $762 (£590) by 2050.
8. Why do you assume constant demand at 1GW? Electricity demand fluctuates during the day, and from day to day within a week, and from month to month during a year. If you include this demand variability, it might make solar look better, because highest demand typically comes in late afternoon, on workdays, and in the summer - the best hours for solar generation. Assuming, of course, that electricity usage remains similar to today, and we don't switch to electrification for heating or transportation.
If I address the three issues that seem most obvious to me (raising battery cost to £1612, increasing solar WACC to 7.5%, and increasing gas turbine efficiency to 55%), your benchmark goes down to £64/MWh, and your final gas/solar battery combination goes up to £226/MWh.
Out of curiosity, did you consult anyone who works in financing, building, and operating powerplants when developing the model and writing this post?
Brian, the battery pricing you mentioned must have been for smaller residential sized batteries, not grid scale 12GWh systems. At that scale new batteries today are being installed at the price he used, and as he noted, in China these systems are already under $100/kWh.
I agree with you regarding using WACCs that are closer together. I'd probably use 6.5% for the solar and 7.5% for the CCGT because the solar plant is simpler to install. One key note is that the cost of the CCGT is understated in my mind. Based on recent costs we should assume at least $2000/kW install cost, and also a 55-60% efficiency rate.
Thanks for the note, Aurelian. The prices I quoted were for utility-scale storage batteries, from this site: https://atb.nrel.gov/electricity/2024/utility-scale_battery_storage This information is now 2 years old, so the world may have changed, but I doubt it's changed that much.
You say that new batteries today are being installed at a price of £200 per kWh. I assume by "at that scale", you mean smaller residential sized systems. I know such systems get credits and subsidies in many places - are you saying that battery storage systems are available now, without subsidies? Do you have any sources for this?
As far as China, unless I know of clear evidence to the contrary, I assume that prices and capital allocation decisions are based primarily on political, not economic, considerations.
Why would you think that solar systems should accept a lower WACC? How does simpler installation affect the required return from whoever is providing financing?
I hadn't really investigated gas turbine costs, but not that you mention it, I think Daan was too high, not too low. I haven't worked in this industry for a while, but Gas Turbine World was usually considered the best data source. For 2024, they quote an installed cost for a simple-cycle F-class engine of $713/kW; based on the power output of 237 mW, I assume this is for a GE Vernova 9FA. (https://gasturbineworld.com/gas-turbine-costs-kw/#:~:text=Gas%20turbine%20Combined%20Cycle%20Plant,for%201%2C680MW%20power%20output.) With a few minutes' search I was able to find 2 9FA combined-cycle units (750 mW each) available on the secondary market for US$287.5M each, or $383/kW. (https://www.uspeglobal.com/listings/523103-1-500-mw-2011-new-ge-frame-9fa-03-natural-gas-generator) These are zero-time engines (never run), but built in 2011, and don't include installation costs (or presumably transportation from wherever they're being stored), so I doubt you could get a newly built engine for anything like this price. But still, I don't see any reason to expect $2000/kW installed, for a large turbine like this.
GTW does quote installed price of $1175/kW for a set of two simple-cycle aeroderivative engines, but this would hardly be the appropriate technology for the theoretical 1GW baseload plant modeled.
I believe these prices are probably heavily influenced by US costs; installation might be more (or less) expensive in other countries.
Regarding the battery pricing, if you scroll down to figure 1 on the NREL link, you'll see that they showed the estimated pricing for a 60MW/240MWh (4hr battery) as $1906/kW, $477/kWh in 2023. You were simply using the price per kW, which doesn't give much info without knowing the kWh energy capacity of the battery. With that confirmed, NRELs estimates were absolutely in the ballpark for 2023 costs, and since we've seen pricing for the same system cut by at least 50%, so the £200 per kWh is absolutely in the ballpark.
Here's an example of a newly announced massive natural gas plant being built leveraging existing infrastructure near Pittsburgh. Its going to cost $10B for 4.5GW, about $2,200/kW.
I agree that costs should be lower in other countries, but I'm not familiar enough with them to speak intelligently.
Regarding WACC, I can only say that at least here in the US, investors have shown that they are happy to receive lower returns on renewable assets like solar versus fossil generation. Given the minimal operating costs of solar, its safe to assume the plants will continue generating revenue their entire lifetime, whereas a natural gas plant might be mothballed early if natgas prices went up too much.
Thanks very much for your response. I regret misreading the NREL chart - you are correct about the cost per kWh. Thanks for the correction.
For GT installed cost, you seem to be correct about full plant costs. I assume that GT World's costs don't include building, connection, and other BOP costs, so $2000/kW may be a good figure, at least for the US. Again, thanks for the correction.
Regarding WACC, there does seem to be some willingness to accept lower returns for renewables (or demand higher returns to penalize fossil fuels) due to influence from ESG investment funds and similar efforts. But there's been a public retreat from ESG investment focus in the last few years, so this may not be true any more. Have you seen any changes recently?
To fully benefit from renewables in the power generation mix we need to replace fossil fuel consumption in homes and businesses. That's why heat pumps are so beneficial. They are about four times as efficient as natural gas for heating and in an increasingly warm world are available for cooling in regions that haven't needed air-conditioning.
As this is for solar-poor UK, worthwhile thinking about what this means for the global south. Pretty much solar and batteries is all that’s required for sun-bathed countries.
You’re gonna get 35 year life out of your solar panels and batteries? You get a 2.5% better wacc on solar? And you run a gas fired plant at 70% turndown with no expected increase in fixed and maintenance or life shortening. Numbers look really different if those are modified. The model is highly sensitive to those kind of parameters given such high up front cost yet no clear explanation in your assumption? Can you elucidate thinking there?
Numbers come from DESNZ; I’d check there for deeper reading on the numbers. And feel free to rerun the numbers in the online tool; you can run a more pessimistic case for solar if you want. You may not get to 70% but maybe to like 50% solar gen at similar cost to 100% gas if you are very pessimistic. Not insignificant but it doesn’t change the central point here.
Well, being that this is coming from an article who is vastly sure the case is made, I'd have thought you'd have combed through those to make sure there weren't any big gotcha's.
I'm sure you could run those numbers too, and see that it actually is material.
Just those 3 numbers rolled back to more realistic estimates I got from a quick search, pumps the levelizded cost almost close to $100.
I used to do this sort of analysis for a living, with real investment money on the line, (in chemicals rather than energy, but the considerations for long term, large capital investment are similar.)
Levelized cost is sort of any easy way to dismiss capital intensity and financing barriers, but no financieer whose wants a return would ever invest in a project with similar WACC (not even the gracious discounted WACC you gave yourself) with ALL of the CAPITAL UP FRONT.
These project essentially say, "It's costs us $X/W to run a fossil fuel power plant, let's take all the capex for a project like that, and let's buy all the fuel ahead of time for that project, and all the operating costs as well, and let's liquidate it and sink all that money in up front to get radically lower cost/unit run costs." You would never do a project where the leveled costs is parity, EVER. If the levelized cost is actually higher (which it always is to anyone who is intellectually honest with todays solar tech), then it also says "...and let's take 2 or 3x the fuel costs *ALL UP FRONT* and build this solar project instead."
Solar/battery is not ready for prime time grid access, not in any meaningful way. Lots of great niche applications for it. Maybe next gen, or 2 or 3 gens away, but the hurdles it has to clear are pretty clear. We need to wait until the technology is ready for primetime.
Don’t worry Kendall; I did. I’m just encouraging you to do the same.
“Solar/battery is not ready for prime time grid access, not in any meaningful way.” — this is a very confusing thing to say about the two technologies that make up the lion’s share of global capacity additions today. And has more money going into it than any other generation technology. Maybe investors don’t quite agree with your view?
TO your other comment about curren projects. I’d be super interested to see how that stacks up when you filter for every project that has had a subsidy, grant, or mandate associated with it. Common way to distort the incentives. It’s sort of like stepping on the scale and claiming youre a heavy weight.
Completely understandable why you’d say that. And that’s why the WACC actually matters. And the WACC changes. All of your leveled costs are highly sensitive to any of the financing parameters. Which is why I suspect after being very thorough about al the assumptions, you happened to leave those out.
I’m just skating to where the puck is going to be. We’ve been living in a cheap money, stimulus from hell era.
I'm always surprised at the notion that saving money is a good thing. It probably is if one wants to continue unsustainably growing the economy but not if one wants to stop damage to our biosphere. If money is saved on one thing, it gets spent on other things. These other things are bound to include greenhouse emissions but will also grow the economy, pushing out other species who want to share this planet with us. Now, the latter may not be a goal for some (I place no judgement on that) but it should be stated explicitly.
Agree. Something I never hear from people is - why does anyone think it shouldn't cost humans anything to fix what we have immensely screwed up?
In a worst case climate change scenario we'd be lucky to even have an economy.
I think climate sensitivity estimates of 3C warming for doubling CO2 are too conservative.
We were warned to avoid passing 1.5C warming by 2050. Last year was 1.55C, and 2023 was over 1.4C. warming. Not a trend yet, but likely will be long before 2050.
A recent European study estimated that 3.6C is the tipping point for total loss of Greenland ice sheet. At the current rate of CO2 increase (2.8ppm/yr), we will have doubled CO2 by the early 2070s. The Greenland ice sheet represents 23 feet of sea level rise.
The International Energy Agency found that going all renewables would save the world $71 trillion by 2050. $44 trillion spend on energy transition, while saving $115 trillion on fuel not paid for.
When all is said and done, you are still relying on gas to provide 30% of the energy and you have cut your CO2 emission by 70%. It is well known that if you push this 30% down, the cost rises rapidly so that a zero emission scenario is unachievable at any reasonable price. So you could build a 1 GW nuclear reactor instead and that could be cheaper depending on the social cost of carbon.
And get rid of Fossil Fuel for good decoupled from weather. With stable, reliable low cost generation (NPP should be the least variable in price- since fuel is inexpensive, available and plentiful) go into replacing heating/cooling with Heat pumps. If the goal is to get the world to decarbonize and not build, suck subsidies.
Batteries are to precious for mass storage of electricity when every kg of Uranium/Thorium/Plutonium is perfect storage. Even modest size battery in PHEV get rids of lots of gasoline/diesel (10kWh in my car gets rid of 75% of gasoline on average and that is in very cold climate). I (or environment) would not benefit from having such battery at home.
This is a fantastic explanation of the issue. When I talk about energy, I always make the point that electricity from natural gas is expensive because you have to buy the natural gas, not because the turbine is expensive.
First of all, thank you for your model which is fascinating. Unfortunately, after using it to plot some graphs and trends I have come to the conclusion it contains an error.
The problem occurs in the calculation of the levelised CAPEX component of the GAS plant. Teh calculations below were carried out using your default assumptions.
A: In a GAS only scenario, the gas plant produces 8760 GWh with a levelised CAPEX of 8.193 £/MWh.
B: If one adds 1 GW of solar, the gas plant produces only 7388 GWh but the levelised CAPEX remains the same 8.193 £/MWh. I think this is wrong.
In my understanding, the levelised CAPEX is the Capital cost - which is unchanged between the two scenarios - divided by the total number of GWh produced by the plant. In Scenario B the gas plant has produced ~16% less electricity and so the levelised CAPEX should have risen by 16%.
The levelized cost numbers in the tool are over the *total generation*, not just the generation of each source individually. So it is basically the total gas + solar + battery capex over 8760 hours per year for about 25 years.
One could levelize gas capex just over gas gen and indeed get higher levelized cost but then still at project level you get the same total cost — as your levelized capex for gas will rise exactly proportional to how much less you use it; hence on the net project cost contribution (generation x levelized cost) you get the same number.
Here's a surprising observation about the linked model. If WACC is the discount rate in the simulation model, why does increasing the WACC yield a higher levelized cost of electricity production? Applying a higher discount rate should yield a lower present worth value for future years, not a higher present worth value, for the overall levelized cost.
It would be interesting to see similar cost analysis using values that are valid in the USA. Natural
gas is much cheaper in the US than in the UK. Also, as someone else has pointed out below, natural gas plants can be expected to operate for 30-50 years whereas Lithium Ion batteries must be replaced about every 10 years.
What discount rate was used in these levelization calculations? I did not see a value called out in the narrative nor did I see it as a variable in the online calculator. In my experience, electrical power industry discount rates used for levelization calculations are typically around 10-12%.
By the way, a useful reference book that I often go to, for background on estimating levelized electricity production costs, is "Making Technology Work - Applications in Energy and the Environment" by John M Deutch and Richard K Lester. The book was published in 2004, so it could benefit from an update that includes a broader treatment of power generation technologies, including energy storage, but the economic fundamentals should still be pretty good. I would be interested in hearing what books others recommend along this line.
How exactly do we build renewables without fossil fuels? Wind turbines and vast acres of solar arrays rely on mining (contributions to overshoot destruction in and of themselves) and vast amounts of water use in an increasingly drought stricken world. Oil is getting more expensive to extract and approaching the point when EROI will make it impossible to get out of the ground. How do we mine, process, forge steel and deploy and maintain this tech without diesel? We don't. It's an obvious Catch-22. The green energy revolution is bullshit top to bottom. Sorry, yeah that sucks, it's the truth.
The entre energy transition requires less mining and extraction than the fossil fuels industry does every year. And will use less land.
Wind farms are a perfect fit with farming. Because of the long blades, turbines are spread hundreds of feet apart. Farmers grow crops and graze livestock all around the turbines.
They are also paid well for it, increasing income per acre.
Solar and farming can also be combined successfully, a rising trend around the world.
It's called Agrivoltaics. Panel arrays are mounted higher. They give partial shade during the day as the Sun moves across the sky. Soil and plant moisture losses are greatly reduced and plant heat stress, especially in drier areas. Crop yields actually increase.
It's also being used with sheep ranching. The sheep get a little shade while keeping underbrush controlled under the solar arrays.
Great article, and interesting model. Thank you!
I've seen claims made that solar energy is cost-competitive for at least 10 years. They have all had obvious, glaring holes in the logic or calculations that undermined the conclusions, so I am perhaps more skeptical of such claims than I should be. However, this case seems quite weak.
I can't see the workings of the simulator tool, so I can't evaluate how it works, or if the calculations make sense. However, I see some obvious issues:
1. Why do gas generators and solar have different WACC, and why is the WACC so low? I'd expect it would be at least 10%, and the WACC for solar should be at least as high as the WACC for gas.
2. Why does the model include gas prices as GBP per MWh? I've always seen these prices in terms of $ per MMCF or $ per therm. Does the model intend the price to be GBP per therm? If the price really is GBP per MWh, how does the gas turbine's efficiency affect the calculation?
3. Why do you base your calculations on a gas turbine efficiency of 45%? This seems very low for a baseload application - even 25 years ago, combined cycle generators exceeded 55% total efficiency.
4. Why do you assume that gas turbines last 25 years? When I worked in the industry, I was able to find only one large power generation gas turbine that had been retired, and that was because the of an uncontained failure of a turbine blade. Gas turbine peakers installed in the early 1970s were still operating normally in the early 2000s. Adjusting this parameter doesn't seem to change the levelized cost, so I don't know whether or how it affects the calculations.
5. Why do you assume that solar generators will last 35 years? I've never seen an estimate this high.
6. What assumption do you make for battery life? If batteries are routinely charged and discharged daily, I'd expect them to last 3-5 years. Perhaps more if batteries are sized to frequently hold more than a night's worth of demand.
7. You say that "For battery storage, a cost of £200/kWh is assumed." What is the source for this assumption? The US National Renewable Energy Laboratory reported that costs were $2080 in 2023 (£1612 at today's exchange rate), optimistically going down to to $762 (£590) by 2050.
8. Why do you assume constant demand at 1GW? Electricity demand fluctuates during the day, and from day to day within a week, and from month to month during a year. If you include this demand variability, it might make solar look better, because highest demand typically comes in late afternoon, on workdays, and in the summer - the best hours for solar generation. Assuming, of course, that electricity usage remains similar to today, and we don't switch to electrification for heating or transportation.
If I address the three issues that seem most obvious to me (raising battery cost to £1612, increasing solar WACC to 7.5%, and increasing gas turbine efficiency to 55%), your benchmark goes down to £64/MWh, and your final gas/solar battery combination goes up to £226/MWh.
Out of curiosity, did you consult anyone who works in financing, building, and operating powerplants when developing the model and writing this post?
Brian, the battery pricing you mentioned must have been for smaller residential sized batteries, not grid scale 12GWh systems. At that scale new batteries today are being installed at the price he used, and as he noted, in China these systems are already under $100/kWh.
I agree with you regarding using WACCs that are closer together. I'd probably use 6.5% for the solar and 7.5% for the CCGT because the solar plant is simpler to install. One key note is that the cost of the CCGT is understated in my mind. Based on recent costs we should assume at least $2000/kW install cost, and also a 55-60% efficiency rate.
Thanks for the note, Aurelian. The prices I quoted were for utility-scale storage batteries, from this site: https://atb.nrel.gov/electricity/2024/utility-scale_battery_storage This information is now 2 years old, so the world may have changed, but I doubt it's changed that much.
You say that new batteries today are being installed at a price of £200 per kWh. I assume by "at that scale", you mean smaller residential sized systems. I know such systems get credits and subsidies in many places - are you saying that battery storage systems are available now, without subsidies? Do you have any sources for this?
As far as China, unless I know of clear evidence to the contrary, I assume that prices and capital allocation decisions are based primarily on political, not economic, considerations.
Why would you think that solar systems should accept a lower WACC? How does simpler installation affect the required return from whoever is providing financing?
I hadn't really investigated gas turbine costs, but not that you mention it, I think Daan was too high, not too low. I haven't worked in this industry for a while, but Gas Turbine World was usually considered the best data source. For 2024, they quote an installed cost for a simple-cycle F-class engine of $713/kW; based on the power output of 237 mW, I assume this is for a GE Vernova 9FA. (https://gasturbineworld.com/gas-turbine-costs-kw/#:~:text=Gas%20turbine%20Combined%20Cycle%20Plant,for%201%2C680MW%20power%20output.) With a few minutes' search I was able to find 2 9FA combined-cycle units (750 mW each) available on the secondary market for US$287.5M each, or $383/kW. (https://www.uspeglobal.com/listings/523103-1-500-mw-2011-new-ge-frame-9fa-03-natural-gas-generator) These are zero-time engines (never run), but built in 2011, and don't include installation costs (or presumably transportation from wherever they're being stored), so I doubt you could get a newly built engine for anything like this price. But still, I don't see any reason to expect $2000/kW installed, for a large turbine like this.
GTW does quote installed price of $1175/kW for a set of two simple-cycle aeroderivative engines, but this would hardly be the appropriate technology for the theoretical 1GW baseload plant modeled.
I believe these prices are probably heavily influenced by US costs; installation might be more (or less) expensive in other countries.
Brian,
Thanks for the reply and links.
Regarding the battery pricing, if you scroll down to figure 1 on the NREL link, you'll see that they showed the estimated pricing for a 60MW/240MWh (4hr battery) as $1906/kW, $477/kWh in 2023. You were simply using the price per kW, which doesn't give much info without knowing the kWh energy capacity of the battery. With that confirmed, NRELs estimates were absolutely in the ballpark for 2023 costs, and since we've seen pricing for the same system cut by at least 50%, so the £200 per kWh is absolutely in the ballpark.
Here's an example of a newly announced massive natural gas plant being built leveraging existing infrastructure near Pittsburgh. Its going to cost $10B for 4.5GW, about $2,200/kW.
https://www.msn.com/en-us/money/markets/pennsylvania-coal-plant-to-transform-into-45gw-gas-powered-plant/ar-AA1CeOrb
I agree that costs should be lower in other countries, but I'm not familiar enough with them to speak intelligently.
Regarding WACC, I can only say that at least here in the US, investors have shown that they are happy to receive lower returns on renewable assets like solar versus fossil generation. Given the minimal operating costs of solar, its safe to assume the plants will continue generating revenue their entire lifetime, whereas a natural gas plant might be mothballed early if natgas prices went up too much.
Aurelian,
Thanks very much for your response. I regret misreading the NREL chart - you are correct about the cost per kWh. Thanks for the correction.
For GT installed cost, you seem to be correct about full plant costs. I assume that GT World's costs don't include building, connection, and other BOP costs, so $2000/kW may be a good figure, at least for the US. Again, thanks for the correction.
Regarding WACC, there does seem to be some willingness to accept lower returns for renewables (or demand higher returns to penalize fossil fuels) due to influence from ESG investment funds and similar efforts. But there's been a public retreat from ESG investment focus in the last few years, so this may not be true any more. Have you seen any changes recently?
To fully benefit from renewables in the power generation mix we need to replace fossil fuel consumption in homes and businesses. That's why heat pumps are so beneficial. They are about four times as efficient as natural gas for heating and in an increasingly warm world are available for cooling in regions that haven't needed air-conditioning.
The coldest countries in Europe are the biggest adopters of heat pumps.
Norway, Sweden, Finland.
As this is for solar-poor UK, worthwhile thinking about what this means for the global south. Pretty much solar and batteries is all that’s required for sun-bathed countries.
You’re gonna get 35 year life out of your solar panels and batteries? You get a 2.5% better wacc on solar? And you run a gas fired plant at 70% turndown with no expected increase in fixed and maintenance or life shortening. Numbers look really different if those are modified. The model is highly sensitive to those kind of parameters given such high up front cost yet no clear explanation in your assumption? Can you elucidate thinking there?
Numbers come from DESNZ; I’d check there for deeper reading on the numbers. And feel free to rerun the numbers in the online tool; you can run a more pessimistic case for solar if you want. You may not get to 70% but maybe to like 50% solar gen at similar cost to 100% gas if you are very pessimistic. Not insignificant but it doesn’t change the central point here.
Well, being that this is coming from an article who is vastly sure the case is made, I'd have thought you'd have combed through those to make sure there weren't any big gotcha's.
I'm sure you could run those numbers too, and see that it actually is material.
Just those 3 numbers rolled back to more realistic estimates I got from a quick search, pumps the levelizded cost almost close to $100.
I used to do this sort of analysis for a living, with real investment money on the line, (in chemicals rather than energy, but the considerations for long term, large capital investment are similar.)
Levelized cost is sort of any easy way to dismiss capital intensity and financing barriers, but no financieer whose wants a return would ever invest in a project with similar WACC (not even the gracious discounted WACC you gave yourself) with ALL of the CAPITAL UP FRONT.
These project essentially say, "It's costs us $X/W to run a fossil fuel power plant, let's take all the capex for a project like that, and let's buy all the fuel ahead of time for that project, and all the operating costs as well, and let's liquidate it and sink all that money in up front to get radically lower cost/unit run costs." You would never do a project where the leveled costs is parity, EVER. If the levelized cost is actually higher (which it always is to anyone who is intellectually honest with todays solar tech), then it also says "...and let's take 2 or 3x the fuel costs *ALL UP FRONT* and build this solar project instead."
Solar/battery is not ready for prime time grid access, not in any meaningful way. Lots of great niche applications for it. Maybe next gen, or 2 or 3 gens away, but the hurdles it has to clear are pretty clear. We need to wait until the technology is ready for primetime.
This is science fiction.
Don’t worry Kendall; I did. I’m just encouraging you to do the same.
“Solar/battery is not ready for prime time grid access, not in any meaningful way.” — this is a very confusing thing to say about the two technologies that make up the lion’s share of global capacity additions today. And has more money going into it than any other generation technology. Maybe investors don’t quite agree with your view?
TO your other comment about curren projects. I’d be super interested to see how that stacks up when you filter for every project that has had a subsidy, grant, or mandate associated with it. Common way to distort the incentives. It’s sort of like stepping on the scale and claiming youre a heavy weight.
Investors don’t lie. Scale doesn’t lie. See!
Completely understandable why you’d say that. And that’s why the WACC actually matters. And the WACC changes. All of your leveled costs are highly sensitive to any of the financing parameters. Which is why I suspect after being very thorough about al the assumptions, you happened to leave those out.
I’m just skating to where the puck is going to be. We’ve been living in a cheap money, stimulus from hell era.
Here’s a similar take to may prognosis. https://youtu.be/65EwyO8fVrQ?si=iZicG69MIgznBtU5
This is the problem. Nuclear is such an easy option rather than fiddling with this stuff.
It's almost as if the critics want to maximize profits for fossil fuel companies and don't care about anything else...
I'm always surprised at the notion that saving money is a good thing. It probably is if one wants to continue unsustainably growing the economy but not if one wants to stop damage to our biosphere. If money is saved on one thing, it gets spent on other things. These other things are bound to include greenhouse emissions but will also grow the economy, pushing out other species who want to share this planet with us. Now, the latter may not be a goal for some (I place no judgement on that) but it should be stated explicitly.
Agree. Something I never hear from people is - why does anyone think it shouldn't cost humans anything to fix what we have immensely screwed up?
In a worst case climate change scenario we'd be lucky to even have an economy.
I think climate sensitivity estimates of 3C warming for doubling CO2 are too conservative.
We were warned to avoid passing 1.5C warming by 2050. Last year was 1.55C, and 2023 was over 1.4C. warming. Not a trend yet, but likely will be long before 2050.
A recent European study estimated that 3.6C is the tipping point for total loss of Greenland ice sheet. At the current rate of CO2 increase (2.8ppm/yr), we will have doubled CO2 by the early 2070s. The Greenland ice sheet represents 23 feet of sea level rise.
The International Energy Agency found that going all renewables would save the world $71 trillion by 2050. $44 trillion spend on energy transition, while saving $115 trillion on fuel not paid for.
When all is said and done, you are still relying on gas to provide 30% of the energy and you have cut your CO2 emission by 70%. It is well known that if you push this 30% down, the cost rises rapidly so that a zero emission scenario is unachievable at any reasonable price. So you could build a 1 GW nuclear reactor instead and that could be cheaper depending on the social cost of carbon.
And get rid of Fossil Fuel for good decoupled from weather. With stable, reliable low cost generation (NPP should be the least variable in price- since fuel is inexpensive, available and plentiful) go into replacing heating/cooling with Heat pumps. If the goal is to get the world to decarbonize and not build, suck subsidies.
Batteries are to precious for mass storage of electricity when every kg of Uranium/Thorium/Plutonium is perfect storage. Even modest size battery in PHEV get rids of lots of gasoline/diesel (10kWh in my car gets rid of 75% of gasoline on average and that is in very cold climate). I (or environment) would not benefit from having such battery at home.
This is a fantastic explanation of the issue. When I talk about energy, I always make the point that electricity from natural gas is expensive because you have to buy the natural gas, not because the turbine is expensive.
First of all, thank you for your model which is fascinating. Unfortunately, after using it to plot some graphs and trends I have come to the conclusion it contains an error.
The problem occurs in the calculation of the levelised CAPEX component of the GAS plant. Teh calculations below were carried out using your default assumptions.
A: In a GAS only scenario, the gas plant produces 8760 GWh with a levelised CAPEX of 8.193 £/MWh.
B: If one adds 1 GW of solar, the gas plant produces only 7388 GWh but the levelised CAPEX remains the same 8.193 £/MWh. I think this is wrong.
In my understanding, the levelised CAPEX is the Capital cost - which is unchanged between the two scenarios - divided by the total number of GWh produced by the plant. In Scenario B the gas plant has produced ~16% less electricity and so the levelised CAPEX should have risen by 16%.
Or have I misunderstood your calculation?
Best wishes
Michael de Podesta
The levelized cost numbers in the tool are over the *total generation*, not just the generation of each source individually. So it is basically the total gas + solar + battery capex over 8760 hours per year for about 25 years.
One could levelize gas capex just over gas gen and indeed get higher levelized cost but then still at project level you get the same total cost — as your levelized capex for gas will rise exactly proportional to how much less you use it; hence on the net project cost contribution (generation x levelized cost) you get the same number.
Here's a surprising observation about the linked model. If WACC is the discount rate in the simulation model, why does increasing the WACC yield a higher levelized cost of electricity production? Applying a higher discount rate should yield a lower present worth value for future years, not a higher present worth value, for the overall levelized cost.
No future in polluted lies.
When are you going to stop flogging the dead horse….
Its clear that many experts disagree with your math
Battery technology is far from ready
The technology is intrisically unrealiable
All existing projects show any movement toward W&S to be far more expensive UK and Germany versus the US India and China etc
https://nigelsouthway.substack.com/p/wind-and-solar-and-evs-are-not-the
WATCH: Gerard Holland lays out the staggering cost of renewable energy at ARC Australia
youtube.com
https://www.youtube.com/watch?v=sRhNOv1Uo4M
More at nigelsouthway.substack.…
It would be interesting to see similar cost analysis using values that are valid in the USA. Natural
gas is much cheaper in the US than in the UK. Also, as someone else has pointed out below, natural gas plants can be expected to operate for 30-50 years whereas Lithium Ion batteries must be replaced about every 10 years.
Lithium ion batteries can be completely recycled, recovering about 95% of the materials.
And there are many kinds of batteries and many kinds of non-battery energy storage.
Those cover many storage duration times, including as much as a month.
Also solid state lithium batteries should last far longer than any now do.
What discount rate was used in these levelization calculations? I did not see a value called out in the narrative nor did I see it as a variable in the online calculator. In my experience, electrical power industry discount rates used for levelization calculations are typically around 10-12%.
By the way, a useful reference book that I often go to, for background on estimating levelized electricity production costs, is "Making Technology Work - Applications in Energy and the Environment" by John M Deutch and Richard K Lester. The book was published in 2004, so it could benefit from an update that includes a broader treatment of power generation technologies, including energy storage, but the economic fundamentals should still be pretty good. I would be interested in hearing what books others recommend along this line.
How exactly do we build renewables without fossil fuels? Wind turbines and vast acres of solar arrays rely on mining (contributions to overshoot destruction in and of themselves) and vast amounts of water use in an increasingly drought stricken world. Oil is getting more expensive to extract and approaching the point when EROI will make it impossible to get out of the ground. How do we mine, process, forge steel and deploy and maintain this tech without diesel? We don't. It's an obvious Catch-22. The green energy revolution is bullshit top to bottom. Sorry, yeah that sucks, it's the truth.
The entre energy transition requires less mining and extraction than the fossil fuels industry does every year. And will use less land.
Wind farms are a perfect fit with farming. Because of the long blades, turbines are spread hundreds of feet apart. Farmers grow crops and graze livestock all around the turbines.
They are also paid well for it, increasing income per acre.
Solar and farming can also be combined successfully, a rising trend around the world.
It's called Agrivoltaics. Panel arrays are mounted higher. They give partial shade during the day as the Sun moves across the sky. Soil and plant moisture losses are greatly reduced and plant heat stress, especially in drier areas. Crop yields actually increase.
It's also being used with sheep ranching. The sheep get a little shade while keeping underbrush controlled under the solar arrays.