The Sum of All Costs: Counting the True Costs of Intermittent Wind & Solar Power

Researchers have been underestimating the cost of wind and solar
Our Finite World
Gail Tverberg
22 July 2017

How should electricity from wind turbines and solar panels be evaluated? Should it be evaluated as if these devices are stand-alone devices? Or do these devices provide electricity that is of such low quality, because of its intermittency and other factors, that we should recognize the need for supporting services associated with actually putting the electricity on the grid? This question comes up in many types of evaluations, including Levelized Cost of Energy (LCOE), Energy Return on Energy Invested (EROI), Life Cycle Analysis (LCA), and Energy Payback Period (EPP).

I recently gave a talk called The Problem of Properly Evaluating Intermittent Renewable Resources (PDF) at a BioPhysical Economics Conference in Montana. As many of you know, this is the group that is concerned about Energy Returned on Energy Invested (EROI).

As you might guess, my conclusion is that the current methodology is quite misleading. Wind and solar are not really stand-alone devices when it comes to providing the kind of electricity that is needed by the grid. Grid operators, utilities, and backup electricity providers must provide hidden subsidies to make the system really work.

This problem is currently not being recognized by any of the groups evaluating wind and solar, using techniques such as LCOE, EROI, LCA, and EPP. As a result, published results suggest that wind and solar are much more beneficial than they really are. The distortion affects both pricing and the amount of supposed CO2 savings.

One of the questions that came up at the conference was, “Is this distortion actually important when only a small amount of intermittent electricity is added to the grid?” For that reason, I have included discussion of this issue as well. My conclusion is that the problem of intermittency and the pricing distortions it causes is important, even at low grid penetrations. There may be some cases where intermittent renewables are helpful additions without buffering (especially when the current fuel is oil, and wind or solar can help reduce fuel usage), but there are likely to be many other instances where the costs involved greatly exceed the benefits gained. We need to be doing much more thoughtful analyses of costs and benefits in particular situations to understand exactly where intermittent resources might be helpful.

A big part of our problem is that we are dealing with variables that are “not independent.” If we add subsidized wind and solar, that act, by itself, changes the needed pricing for all of the other types of electricity. The price per kWh of supporting types of electricity needs to rise, because their EROIs fall as they are used in a less efficient manner. This same problem affects all of the other pricing approaches as well, including LCOE. Thus, our current pricing approaches make intermittent wind and solar look much more beneficial than they really are.

A clear workaround for this non-independence problem is to look primarily at the cost (in terms of EROI or LCOE) in which wind and solar are part of overall “packages” that produce grid-quality electricity, at the locations where they are needed. If we can find solutions on this basis, there would seem to be much more of a chance that wind and solar could be ramped up to a significant share of total electricity. The “problem” is that there is a lower bound on an acceptable EROI (probably 10:1, but possibly as low as 3:1 based on the work of Charles Hall). This is somewhat equivalent to an upper bound on the affordable cost of electricity using LCOE.

This means that if we really expect to scale wind and solar, we probably need to be creating packages of grid-quality electricity (wind or solar, supplemented by various devices to create grid quality electricity) at an acceptably high EROI. This is very similar to a requirement that wind or solar energy, including all of the necessary adjustments to bring them to grid quality, be available at a suitably low dollar cost–probably not too different from today’s wholesale cost of electricity. EROI theory would strongly suggest that energy costs for an economy cannot rise dramatically, without a huge problem for the economy. Hiding rising energy costs with government subsidies cannot fix this problem.

Distortions Become Material Very Early

If we look at recently published information about how much intermittent electricity is being added to the electric grid, the amounts are surprisingly small. Overall, worldwide, the amount of electricity generated by a combination of wind and solar (nearly all of it intermittent) was 5.2% in 2016. On an area by area basis, the percentages of wind and solar are as shown in Figure 1.

Figure 1. Wind and solar as a share of 2016 electricity generation, based on BP Statistical Review of World Energy 2017. World total is not shown, but is very close to the percentage shown for China.


There are two reasons why these percentages are lower than a person might expect. One reason is that the figures usually quoted are the amounts of “generating capacity” added by wind and solar, and these are nearly always higher than the amount of actual electricity supply added, because wind and solar “capacity” tend to be lightly used.

The other reason that the percentages on Figure 1 are lower than we might expect is because the places that have unusually high concentrations of wind and solar generation (examples: Germany, Denmark, and California) tend to depend on a combination of (a) generous subsidy programs, (b) the availability of inexpensive balancing power from elsewhere and (c) the generosity of neighbors in taking unwanted electricity and adding it to their electric grids at low prices.

As greater amounts of intermittent electricity are added, the availability of inexpensive balancing capacity (for example, from hydroelectric from Norway and Sweden) quickly gets exhausted, and neighbors become more and more unhappy with the amounts of unwanted excess generation being dumped on their grids. Denmark has found that the dollar amount of subsidies needs to rise, year after year, if it is to continue its intermittent renewables program.

One of the major issues with adding intermittent renewables to the electric grid is that doing so distorts wholesale electricity pricing. Solar energy tends to cut mid-day peaks in electricity price, making it less economic for “peaking plants” (natural gas electricity plants that provide electricity only when prices are very high) to stay open.

At times, prices may turn negative, if the total amount of wind and solar produced at a given time is greater than the overall amount of electricity required by customers. This happens because intermittent electricity is generally given priority on the grid, whether price signals indicate that it is needed or not. A combination of these problems tends to make backup generation unprofitable unless subsidies are provided. If peaking plants and other backup are still required, but need to operate fewer hours, subsidies must be provided so that the plants can afford to hire year-around staff, and pay their ongoing fixed expenses.

If we think of the new electricity demand as being “normal” demand, adjusted by the actual, fairly random, wind and solar generation, the new demand pattern ends up having many anomalies. One of the anomalies is that required prices become negative at times when wind and solar generation are high, but the grid has no need for them. This tends to happen first on weekends in the spring and fall, when electricity demand is low. As the share of intermittent electricity grows, the problem with negative prices becomes greater and greater.

The other major anomaly is the need for a lot of quick “ramp up” and “ramp down” capacity. One time this typically happens is at sunset, when demand is high (people cooking their dinners) but a large amount of solar electricity disappears because of the setting of the sun. For wind, rapid ramp ups and downs seem to be related to thunderstorms and other storm conditions. California and Australia are both adding big battery systems, built by Tesla, to help deal with rapid ramp-up and ramp-down problems.

There is a lot of work on “smart grids” being done, but this work does not address the particular problems brought on by adding wind and solar. In particular, smart grids do not move demand from summer and winter (when demand is normally high) to spring and fall (when demand is normally low). Smart grids and time of day pricing aren’t very good at fixing the rapid ramping problem, either, especially when these problems are weather related.

The one place where time of day pricing can perhaps be somewhat helpful is in lessening the rapid ramping problem of solar at sunset. One fix that is currently being tried is offering the highest wholesale electricity prices in the evening (6:00 pm to 9:00 pm), rather than earlier in the day. This approach encourages those adding new solar energy generation to add their panels facing west, rather than south, so as to better match demand. Doing this is less efficient from the point of view of the total electricity generated by the panels (and thus lowers EROIs of the solar panels), but helps prevent some of the rapid ramping problem at sunset. It also gets some of the generation moved from the middle of day to the evening, when it better matches “demand.”

In theory, the high prices from 6:00 pm to 9:00 pm might encourage consumers to move some of their electricity usage (cooking dinner, watching television, running air conditioning) until after 9:00 pm. But, as a practical matter, it is difficult to move very much of residential demand to the desired time slots based on price. In theory, demand could also be moved from summer and winter to spring and fall based on electricity price, but it is hard to think of changes that families could easily make that would allow this change to happen.

With the strange demand pattern that occurs when intermittent renewables are added, standard pricing approaches (based on marginal costs) tend to produce wholesale electricity prices that are too low for electricity produced by natural gas, coal, and nuclear providers. In fact, wholesale electricity rates for supporting providers tend to diverge further and further from what is needed, as more and more intermittent electricity is added. The dotted line on Figure 2 illustrates the falling wholesale electricity prices that have been occurring in Europe, even as retail residential electricity prices are rising.

Figure 2. European residential electricity prices have risen, even as wholesale electricity prices (dotted line) have fallen.


The marginal pricing scheme gives little guidance as to how much backup generation is really needed. It is therefore left up to governments and local electricity oversight groups to figure out how to compensate for the known pricing problem. Some provide subsidies to non-intermittent producers; others do not.

To complicate matters further, electricity consumption has been falling rapidly in countries whose economies are depressed. Adding wind and solar further reduces needed natural gas, coal, and nuclear generation. Some countries may let these producers collapse; others may subsidize them, as a jobs-creation program, whether this backup generation is needed or not.

Of course, if a single payer is responsible for both intermittent and other electricity programs, a combined rate can be set that is high enough for the costs of both intermittent electricity and backup generation, eliminating the pricing problem, from the point of view of electricity providers. The question then becomes, “Will the new higher electricity prices be affordable by consumers?”

The recently published IEA World Energy Investment Report 2017 provides information on a number of developing problems:

“Network investment remains robust for now, but worries have emerged in several regions about the prospect of a ‘utility death spiral’ as the long-term economic viability of grid investments diminishes. The still widespread regulatory practice of remunerating fixed network assets on the basis of a variable per kWh charge is poorly suited for a power system with a large amount of decentralised solar PV and storage capacity.”

The IEA investment report notes that in China, 10% of solar PV and 17% of wind generation were curtailed in 2016, even though previous problems with lack of transmission had been fixed. Figure 1 shows China’s electricity from wind and solar amounts to only 5.0% of its total electricity consumption in 2016.

Regarding India, the IEA report says, “More flexible conventional capacity, including gas-fired plants, better connections with hydro resources and investment in battery storage will be needed to support continued growth in solar power.” India’s intermittent electricity amounted to only 4.1% of total electricity supply in 2016.

In Europe, a spike in electricity prices to a 10-year high took place in January 2017, when both wind and solar output were low, and the temperature was unusually cold. And as previously mentioned, California and South Australia have found it necessary to add Tesla batteries to handle rapid ramp-ups and ramp-downs. Australia is also adding large amounts of transmission that would not have been needed, if coal generating plants had continued to provide services in South Australia.

None of the costs related to intermittency workarounds are currently being included in EROI analyses. They are generally not being included in analyses of other kinds, either, such as LCOE. In my opinion, the time has already arrived when analyses need to be performed on a much broader basis than in the past, so as to better capture the true cost of adding intermittent electricity.
Our Finite World

See Gail’s full presentation and speaker’s notes here

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.


  1. Any estimation should start with a simple model. So here we go.
    Required: 1 unit constant power, 24×365
    Means: Windmill with 1 unit output power (optimal wind condition)
    Lets say wind is optimal half of the time. (else no wind)
    Assume we pick pumped storage for backup when no wind.
    Windmill 2 is needed to pump to storage for backup.
    Assume turbine, pump and dam equals one windmill in price.
    Total price: 3 x price of windmill.

  2. Each nation on a renewable treadmill has ever increasing electricity prices alongside decreasing wholesale prices and consumption. We know this is also inevitably occurring in Australia. How will the Australian Government manage to lower our electricity prices when no other nation is able to?
    Why, why, oh bloody why follow foolishly in their disastrous footsteps and keep building more useless turbines. Destroying more rural landscapes, impacting like a spreading plague on more and more homes, devaluing them and making people sick. 36000 people and rising disconnected from the grid because they can’t afford the bills. How do they manage without it; with no fridge, washing machine, charging their mobile, or keeping house etc.? When the renewable electricity generator is also the retailer, with fixed purchase agreements and subsidies how will the scales be reversed so people and business can return to their usual expectations of cheap reliable energy? The unrenewable/green mob don’t care for the economic, social and environmental hardships, don’t seem to question this profiting at others expense and survival, and fail to realise wind turbines add far greater risks to whole nations. There’s a huge gap between wholesale prices and what we pay, dependant on what the weather is doing. What exactly is sustainable or renewable about wind farms? They will never prevent climate change. It is misuse of agricultural land and impractical to disrupt Australian rural life in such a way. The concrete and wires will never be removed from the soil and towers may rust and rot as far as the eye can see. It would be of more benefit to the environment if all city drivers stopped using their vehicles, stopped drinking excessive amounts of coffee and turned off lights in empty office buildings. Heck just turn them off and rather than turn off the power to Bendigo or Ballarat when the providers can’t meet demand, turn it off at Canberra.

  3. ERRATIC as well as intermittent wind and solar “Requires fossil fuel backup”.

  4. Terry Conn says:

    The author of this article has a very understated approach, but the analysis is excellent – a major problem being that the points raised appear to be way beyond the comprehension levels of those in power in Australia (and beyond). There would appear to be no point in bringing the article to the attention of Josh Frydenberg (lack of energy and environment minister) or any other of the witless individuals in charge of our current federal government who seemed to be obsessed with sex, provided it is with someone of the same sex – meanwhile the nation continues on its inevitable rush down the gurglar of economic ruin. Frydenberg now thinks our electricity crisis is all the fault of electricity retailers and big Malcolm is going to sort them out – the problem is way beyond being a farce and now manifests itself in the reality of people unable to afford electricity to keep wam, keep cool or cook a meal – yet these pampered pussies keep seeing only the unicorns.

    • One would have to agree with the commentary about witless politicians in this country. I have followed Gail’s work for quite a few years now and can recommend it to readers here.
      The main thrust of the Our Finite World blog has been peak oil and the existential threat that this poses for humanity . If folks think higher electricity prices are a concern ( and they are) then there will be much knashing of teeth when they become aware of this thermodynamic reality.
      So yes, get these dolts in parliament to study this stuff and some reality might set in. Pigs might fly.

  5. Frank Campbell says:

    Send Tverberg to Adelaide now.
    This would immediately double the average IQ of the state.

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