The "clean, reliable and cheap" fraud

“We continue to see significant investment in coal-fired power generation in countries with high rates of energy poverty. These countries need affordable, reliable and clean energy to support their socio-economic development and to mitigate climate change. Financing new coal projects is inconsistent with these objectives and holds back the energy transition.”

This is a quote from an official from Sustainable Energy for All on a report that found $42 billion was invested in new coal-fired generation capacity for 18 South Asian and sub-Saharan African countries between 2013 and 2019. In itself, the quote is neither surprising nor original. But it includes a mantra that has become central to the energy transition narrative and as such needs to be addressed.

“Affordable, reliable and clean” is the Holy Trinity of the energy transition, repeated as often as possible until it has got to the point of becoming an unquestionable truth in the public mind, dogma. Of course, it is nowhere near unquestionable or a truth.

Anyone who even an ounce of experience in any industry is probably familiar with the good, cheap and fast conundrum. A perfect product or service would be all three. However, we don’t live in a perfect world, so for any product or service you can only have two of the three at the same time.

This is certainly true for energy. Fossil fuels are cheap and fast, in that a fossil-fuel power plant can be restarted relatively quickly should the need for it arise. Renewable energy, on the other hand is good emission-wise and fast in the sense that construction and deployment of solar and wind farms don’t take years. But cheap it is not just as fossil fuels are not good emission-wise. The Holy Trinity is an impossibility. In a sense, it is worse than an impossibility. It’s a fraud.

Here is a definition of fraud in order to make my choice of a words as clear as possible: “Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.”

Renewable energy is being presented as the singular solution to the world’s emissions problem. Solar and wind are being sold as cheap, reliable, and clean. Indeed, solar panel technology and wind power technology has become a lot more affordable over the past ten years. This has brought down the production costs of solar and wind farms, there is no doubt about that. But the net-zero scheme requires ever-bigger solar and wind farms, which means a lot more money will be spent on building them.

Take the United States, for example. The Energy Department has said in a study the country could generate as much as 45 percent of its electricity from solar farms. To do this, however, the U.S. would need to build more than 1,000 GW, possibly up to 1,600 GW of new solar capacity. The higher end of the range is more than the total U.S. power generation capacity right now: it stood at 1,200 GW as of this February. Of this, solar constitutes some 4 percent or a little over 100 GW.

These figures should provide some idea of the scale of the solar undertaking the DoE is envisioning. The fact that a megawatt of solar capacity needs about 8 acres of land — and land is not free, let alone limitlessly available for solar farms — should add some detail to that idea. Then there is the issue of raw material inflation, which seems to be going nowhere, and the issue of recycling, which has been ignored for quite long enough. Warnings that the cost of recycling solar panels needs to be calculated in the price tag of solar farms are getting louder. So, with all this considered, solar stops looking as cheap as many would like us to see it.

The reliability aspect of the mantra is the easiest to challenge. By definition, solar farms only produce energy when the sun is shining and stop producing it when it doesn’t. Solar panel performance is also affected by high temperatures, when the efficiency factor drops, as it does when sunshine is not strong enough, compromised by clouds. This sensitivity to the weather is the reason solar farms cannot be built just anywhere, just like wind farms. And this same sensitivity makes wind and solar the opposite of reliable. Incidentally, the efficiency factor for wind and solar is not all that great, either, as Terry Etam brilliantly and bluntly explains here.

There is, of course, battery energy storage that is being touted as the solution to the reliability problem. Yet it is an expensive solution. The cost of battery energy storage has fallen significantly over the last years and currently stands at around $137 per kWh, expected to fall further to $100 per kWh by 2023 by BloombergNEF. This, however, does not make it cheap.

For truly reliable energy storage in a net-zero environment, installations would need to be utility-scale to match utility-scale solar and wind farms. Let’s take a real-life example. Tesla is currently building the largest energy storage installation in the UK. It will have a capacity of 198 MWh. That’s 198,000 kWh multiplied by the industry average $137 per kWh for a total cost of $27.126 million.

To be fair, using the industry average may not be the best option. Tesla priced its Megapack at $1 million as a starting price earlier this year. One Megapack has a capacity of 3 MWh. So, the 198 MWh capacity of the UK facility divided by the capacity of a single Megapack gives us 66 Megapacks in total. That’s $66 million for the whole installation based on Tesla’s own starting price. Reliability does not come cheap.

Reliability is, however, increasingly necessary given the renewable energy agenda of the EU and the Biden administration. Based on this agenda, the EIA recently reported that U.S. utilities had plans to install more than 13,000 MW of battery storage capacity by 2024. That’s a lot of storage, even if prices continue to fall. Utilities will be relying on government incentives to shoulder part of the financial burden. They would also be expecting their storage facilities to be profitable because energy is, after all, a business, even when it is low-carbon and emission-free (post-installation).

So, it seems that wind and solar can be either clean and reliable but not cheap, or clean and cheap but unreliable. Fossil fuels, on the other hand, can be cheap and reliable (though they often run the risk of being expensive though reliable based on demand and supply dynamics) but they cannot be clean in the sense of emission-free. It is a difficult choice, by all means. And while I’m not in the habit of using cliffhangers to pique readers’ interest, I will make an exception because of numerous comments I’ve received on my recent posts: There is a third option.