The levelized cost of energy reporting

I’ve never seen a job ad for an energy reporter that lists as the desired qualifications a complete lack of curiosity and scrutiny. Yet that is a pretty accurate description of many energy reporters. 

Case in point is the oft repeated claim that renewables are the cheapest form of energy. No amount of widely available evidence contradicting this claim will arouse even the slightest curiosity in reporters who trumpet this myth. A report released this week by a pro-renewable intergovernmental agency granted these reporters yet another opportunity to make this claim without any critical thinking. 

Reuters energy reporter Nina Chestney reported: 

Over three-quarters of new renewable energy capacity added last year was cheaper than fossil fuels, showing the competitiveness of solar, wind and other sources, a report by the International Renewable Energy Agency (IRENA) showed on Tuesday.

Also…

New renewable power capacity last year reached a record of 473 gigawatts (GW), of which 382 GW or 81% of newly-commissioned, utility-scale renewables projects had lower costs than fossil fuel alternatives, the report showed.

Forbes senior contributor Jeff McMahon, who prides himself on reporting about the “climate crisis,” reported: 

The added capacity, roughly equivalent to 473 nuclear plants, produces electricity at prices most fossil plants can’t match and that the nuclear industry can only dream of: The global average cost of electricity from onshore wind fell to 3.3 cents per kilowatt-hour, 3 percent less than the year before, and utility-scale solar photovoltaic fell to 4.4 cents/kWh, 12% less than the year before.

Every month there are dozens of articles on utilities in the U.S. requesting rate increases from state regulatory regulatory bodies. U.S. electricity prices are rising faster than inflation. Comparisons of energy costs across nations and states show a correlation between the amount of renewable energy in a state or nation’s energy portfolio and how much its residents and industries pay for electricity. 

Energy reporters will gush about the growth of renewables and see no contradiction between the growth of this supposedly cheap industry and rising electricity prices. It’s hard to believe they are simply unaware of the data, which means they are deliberately ignoring this data because it’s inconvenient to a narrative. When they do acknowledge rising energy prices, they blame fossil fuels via the “all bad things are caused by climate change” argument. 

If rising energy costs don’t raise suspicion, the fact this amazingly cheap industry can’t seem to operate without perpetual public support should.

As energy expert Alex Epstein explains:

If these so-called energy reporters were more committed to honesty than advancing the energy transition political agenda, they would dig a bit further into this report, as I did.

Fransesco La Camera, director-general of IRENA explains in the report’s foreword:

Solar PV, wind and hydropower experienced the most considerable cost decreases in 2023. The global average cost of electricity (LCOE) from solar PV fell by 12%, offshore wind and hydropower by 7%, and onshore wind by 3%, with China once again dominating new capacity additions. The global average cost of electricity from utility-scale solar PV fell to USD 0.044 per kilowatt-hour (kWh) and onshore wind to USD 0.033/kWh.

The curious and honest reporter might zoom in on “LCOE” and wonder what the hell that is. This mysterious LCOE analysis is the basis of the entire report’s conclusion that wind and solar are cheaper than fossil fuels. If you asked 10 energy reporters to explain what LCOE is, I doubt eight of them would provide a thorough answer. 

LCOE stands for levelized cost of energy, and I’ve yet to talk to a single engineer working in the electricity industry who says it’s a good way to compare costs across generation sources. One grid expert I interviewed called it “fraudulent.” As the wise green chicken Doomberg explains, LCOE just pretends away intermittency. It creates a fantasy in which people only use electricity when the wind is blowing or the sun is shining. If that were the case, wind and solar would be amazingly cheap. The reality is that electricity demand doesn’t correlate well with periods of good sunshine and wind. 

Electricity is not a product. It’s a service. What is an unreliable service worth? B.F. Randall has the perfect analogy for this — Random Uber. Instead of having a ride show up at your location on demand, the driver shows up a day later — or three cars show up two days before your need a trip. What use would that service be? 

Transforming random generators into a reliable service requires the overbuilding of wind and solar farms, investments in storage systems, and construction of power lines, among many other extra costs. As Lee Cordner, a power-grid consultant with 50 years experience, once told me, wind and solar are the cheapest form of energy 30% of the time. The other 70% of the time, they’re very expensive.