Every now and again someone poses a question so obvious that you wonder why nobody asked it before. When that happens, it is usually because it reveals an unconscious narrative that you have been following. It is precisely because it jars with what you thought you knew that it is so unsettling. And, of course, most people will seek some means of avoiding the ramifications of the question; such as questioning the motives of the person asking it.
So it is that Time Magazine “Hero of the Environment,” Michael Shellenberger poses just such an apparently innocuous question:
“If solar and wind are so cheap, why are they making electricity so expensive?”
There are clearly merits to this question. The spiralling cost of electricity played a major role in the recent Australian election. In Britain, even the neoliberal Tory government has been obliged to introduce legislation to cap energy prices; while the Labour opposition threatens to dispense with the private energy market altogether. Across the USA prices are spiralling ever upward, making Trump’s pro-fossil fuel stance popular for large numbers of Americans:
“Over the last year, the media have published story after story after story about the declining price of solar panels and wind turbines. People who read these stories are understandably left with the impression that the more solar and wind energy we produce, the lower electricity prices will become.
“And yet that’s not what’s happening. In fact, it’s the opposite.
“Between 2009 and 2017, the price of solar per watt declined by 75 percent while the price of wind declined by 50 percent. And yet — during the same period — the price of electricity in places that deployed significant quantities of renewables increased dramatically.”
According to Shellenberger, countries and states that have led the green energy charge have also led the charge to higher electricity prices. Denmark has seen a 100 percent price increase, Germany 51 percent and California 24 percent. At face value, these electricity price increases flatly contradict the narrative that we – and especially our governments – have been sold: that ever cheaper renewable energy technologies are the solution to our energy security and climate change problems.
Since the price of coal and gas has also fallen, we cannot point to fossil fuels as the cause of increasing energy prices. That is, rushing to replace “dirty” fossil fuel power stations with even more “cheap” wind turbines and solar panels is unlikely to halt the rise in energy prices.
This brings us back to the apparently cheap renewables. Could there be something about them that has caused prices to rise?
Once again, challenging the narrative helps expose the problem. As with the term “renewable” itself, the problem is with our failure to examine the whole picture. While to all intents and purposes, sunlight and wind are inexhaustible sources of energy, the technologies that harness and convert that energy into useful electrical energy are not – both are highly dependent on oil-based global supply chains. In the same way, while the cost of manufacturing and deploying wind turbines and solar panels has dropped sharply in the past 20 years, the opposite is true of the deliverable electricity they generate.
For all the talk about this or that organisation, city or country generating 100 percent of its electricity from renewables, the reality is that the majority of their (and our) electricity is generated from gas together with smaller volumes of nuclear and coal. Just because a company like Apple or Google pays extra for us to pretend that it doesn’t use fossil fuels does not change the reality that without fossil fuels those companies would be out of business. And that isn’t going to change unless someone can find a way of making the sun shine at night and the wind to blow 24/7/365.
The economic problem that Shellenberger points to is simply that the value of renewable electricity is in inverse proportion to its availability. That is, when the wind isn’t blowing and the sun isn’t shining, additional electricity is at a premium. When the sun is blazing and the wind is blowing on the other hand, there is often more electricity than is needed. The result is that the value of that electricity falls. In both circumstances, however, the monetary costs fall on the fossil fuel and nuclear generators that provide baseload and back-up capacity. When there is insufficient renewable electricity, they have to be paid more to increase their output. When there is too much renewable electricity, they have to be paid more to curtail their output. Those additional monetary costs are then added to the energy bills of their consumers.
In these circumstances, the falling cost of the renewable electricity technology is almost irrelevant. According to Shellenberger:
“Part of the problem is that many reporters don’t understand electricity. They think of electricity as a commodity when it is, in fact, a service — like eating at a restaurant.
“The price we pay for the luxury of eating out isn’t just the cost of the ingredients most of which, like solar panels and wind turbines, has declined for decades.
“Rather, the price of services like eating out and electricity reflect the cost not only of a few ingredients but also their preparation and delivery.”
Even if the price of renewable technologies fell to zero, the cost of supplying electricity to end users would continue to rise. Indeed, paradoxically, if the cost fell to zero, the price would spiral out of control precisely because of the impact on the wider system required to move that renewable electricity from where it is generated to where and when it is required. In short, and in the absence of cheap and reliable storage and back-up technologies that have yet to be invented, the more renewable electricity generating technologies we deploy, the higher our electricity bills are going to rise.
This may, of course, be considered (at least among the affluent liberal classes) to be a price worth paying to reduce our carbon emissions (although there is little evidence that this is happening). But it has potentially explosive political consequences. As the UK government’s energy policy reviewer, Dieter Helm pointed out:
“It is not particularly difficult to set out what an efficient energy system might look like which meets the twin objectives of the climate change targets and security of supply. There would, however, remain a binding constraint: the willingness and ability to pay for it. There have to be sufficient resources available, and there has in a democracy to be a majority who are both willing to pay and willing to force the population as a whole to pay. This constraint featured prominently in the last three general elections, and it has not gone away.” (My emphasis)
Energy poverty and discontent is a growing phenomenon across Western states, as stagnating real wages leave millions of families struggling to cover the cost of basics like food and energy that have risen in price far faster than official inflation. This has already translated into the disruptive politics of Brexit, Donald Trump and the rise of the European far right and far left parties. In acknowledging this constraint, Helm points to the true depths of our current trilemma – we have simultaneous crises in our environment, our energy and resource base and our economy.
Thus far, “solutions” put forward to address any one arm of the trilemma – economic growth, renewable energy, hydraulic fracturing – impact negatively on the other arms; ultimately rendering the policy undeliverable. Until we can drop our illusory narratives, grasp the full implications of the trilemma, and begin to develop policy accordingly, like the rising price of supposedly cheaper renewable electricity, things can only go from bad to worse.
As you made it to the end…
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