Electricity Costs at High Global Shares of Solar & Wind Power
A massive use of solar and wind power is a common feature in the pathways proposed for a low carbon energy future¹. According to the energy transition proposal by the International Energy Agency, the electricity output from solar and wind power will need to increase from 4000 TWh today to 55,000 TWh. For reference, the electricity output from all sources today is 30,000 TWh.
Costs of solar and wind power have decreased markedly over the last decade. A common speculation is that the electricity costs associated with solar and wind power will continue to decrease rapidly. Many believe that the costs will drop to the extent that the future cost of electricity will be lower than today.
But is that true? Can solar and wind power provide cheaper electricity in a decarbonized future compared to current costs from fossil fuel power?
Speculative assumptions are often used to estimate the future costs of electricity from solar and wind power. For examples, assumptions are required about:
a) Future cost of solar, wind power and supporting technologies,
b) Size and complexity of the required electrical grid infrastructure, and
c) Level of redundancy required to balance the electricity supply and demand over the long term.
These assumptions require substantial guesswork about unprecedented issues. The estimates are not credible because of the need for such assumptions. Such speculative estimates have led to major confusion. This confusion can be avoided by focusing on basic science.
Basic science involves basic knowledge or facts that do not change with new findings. It does not involve speculative assumptions. In this article, the focus will only be on basic science to discuss the energy costs.
Key Requirement for Comparing Costs
A key requirement for comparing costs between different power technologies is that the costs must be compared on an apples-to-apples basis. To meet this requirement, the technologies must be compared on an equivalent basis in terms of meeting the electricity demand.
The global society requires 24X7 on-demand electricity². Solar and wind power cannot provide such 24X7 electricity on a standalone basis. But they can do so by via the use of supporting technologies. For example, solar and wind power can provide 24X7 electricity by adding long duration energy storage, backup power and extending the grids. These supporting technologies have an associated cost.
Consequently, the costs of the power technologies must be compared for the same final product, i.e., 24X7 electricity. Details are included in a previous article.
Cost Comparison Using a Basic Science Approach
The true cost of any technology is determined by its resource requirements, i.e., resource intensity. A higher resource intensity equals a higher cost and vice versa³. Examples of the required resources include labor, materials, land, water, and energy.
But it is not straightforward to compare the resource intensities of the power technologies. Why? Because the power technologies need a range of resources in varying amounts⁴. Fossil fuel power technologies require very large amounts of fuel. On the other hand, solar and wind power technologies require far more materials and land⁵. The resource intensity of the technologies cannot be compared by a simple addition of the different resources because of the varied nature of the resources.
So, how to compare the resource intensity of the power technologies? We can achieve this by using a basic science approach. Specifically, we can compare the resource intensities of the power technologies by comparing the help received from nature by each technology to provide 24X7 electricity. The details are discussed below.
Solar, wind, and fossil fuel power technologies have two key similarities. From basic science, we know that solar energy is the primary source of energy for solar, wind and fossil fuel power⁶. Also, they must provide the same final product, i.e., 24X7 on-demand electricity. The power technologies have the same primary energy source and must deliver the same final product. Thus, they are a part of the same basic energy system.
This tells us that we can compare the resource intensities of the power technologies by comparing the help received by nature to provide 24X7 electricity. More help from nature equals a lower resource intensity for options which are a part of the same basic system.
For example, consider a flight from New York to London. Less time and fuel are required for the flight when there is a strong tailwind, i.e., favorable wind direction. This favorable wind direction is help provided by nature. The resource intensity-and thereby the cost-is lower when nature provides a helping hand. So, the option which receives large help from nature has a lower resource intensity.
Nature provides different amounts of help to the different power technologies. How to evaluate the relative help received by the power technologies?
To do so, we must first consider the basic challenges associated with their primary energy source, i.e., solar energy.
Solar energy has two major challenges from the viewpoint of converting it to 24X7 electricity.
· First, solar energy is extremely dilute⁷𝄒⁸. While earth receives gigantic amounts of solar energy, the amount of energy received per unit area is small⁹. So, it is challenging to capture solar energy-which is a required step to convert it to electrical energy. It is difficult to harness energy from an extremely dilute source. For example, consider the challenges related to fishing in a large lake that only has a few fish.
· Second, solar energy is intermittent. Therefore, providing 24X7 electricity using solar energy is a major challenge.
A helping hand from nature can lower the level of challenge of the task of providing 24X7 electricity. The technology that receives higher help from nature will have a lower challenge and thereby a lower resource intensity.
How much help is received by each technology?
Let us first consider fossil fuel power. We know how fossil fuels were formed. The solar energy captured by ancient plants and organisms has been converted to fossil fuels¹⁰. Nature has enabled this conversion process by applying heat and pressure on the plants and organisms in the earth’s crust over millions of years (Figure 1). Specifically, nature has transformed the dilute, and intermittent solar energy into high-energy-density fossil fuels that are available 24X7 for energy production. Properties such as energy density and power density provide information about how dilute the energy source is. Based on any reasonable metric, solar energy is more than a thousand times dilute compared to fossil fuels¹¹𝄒¹².
Nature has drastically lowered the resource intensity in the case of fossil fuel technologies by easing the two critical challenges of solar energy. Because of the massive help from nature, fossil fuels are abundant, and easy to access, transport, store, and convert to usable energy. For example, fossil fuels are found in concentrated deposits in many regions globally. This has allowed an efficient extraction of fossil fuels in amounts that are necessary to meet the massive global energy demand. Clearly, nature has enabled an easy path to 24X7 electricity for fossil fuel power.
What about solar power? Solar energy is the direct source of energy for solar power. Nature does not help with the dilute nature and intermittency of solar energy. Thus, solar power has a far more challenging path to 24X7 electricity compared to fossil fuels. Consequently, it requires a much higher resource intensity. This translates into a markedly higher cost to provide 24X7 electricity.
What about wind power? From basic science, we know that nature acts upon solar energy to generate wind. But wind is also very dilute and intermittent¹³𝄒¹⁴. This means that nature does not provide substantial help to wind power. Thus, wind power also has a far more difficult path to 24X7 electricity compared to fossil fuels. It requires a much higher resource intensity. This translates into a markedly higher cost to provide 24X7 electricity.
A net zero world will require overbuilding of solar and wind power, massive electrical grids and long duration energy storage to provide 24X7 electricity¹⁵. Long duration storage, which can extend from days to weeks, is currently very expensive. For example, the upfront cost of solar power with just 12 hours energy storage is currently five times higher than natural gas power to provide the same amount of annual electricity¹⁶𝄒¹⁷𝄒¹⁸. Technologies for long duration energy storage are still in the demonstration stages¹⁹.
Costs of long duration energy storage will decline with technology advances and higher deployment levels. But that will not change the basic conclusion. The cost of solar and wind to produce 24X7 electricity will remain markedly higher than fossil fuel power. Why? Because they have a much higher resource intensity. The costs cannot drop below the level defined by the resource intensity. A high resource intensity is intrinsic to solar and wind power because of the lack of help from nature. Basic science dictates a markedly higher cost for electricity in a net zero world, which will be dominated by solar and wind power.
Why is There So Much Confusion About This Topic?
This is because of some recent studies which claim that solar and wind power will provide cheaper electricity than fossil fuels in a decarbonized future²⁰𝄒²¹. These studies use several speculative assumptions in their estimation.
For example, major assumptions are made about the required grid expansions, redundancies and the future technology costs of solar, wind and energy storage. These assumptions have large uncertainties. Moreover, the conclusions are very sensitive to these assumptions. Most importantly, these studies ignore basic science. Such speculative studies are not credible.
Another issue is that researchers have mostly focused on isolated metrics to compare fossil fuel power with solar and wind power. Examples of such metrics are materials intensity, energy efficiency, land use, and energy return on investment (EROI). Fossil fuels are superior based on some metrics, while solar and wind power on others. That is why such an approach has increased confusion.
Concluding Remarks
A holistic comparison between the power technologies is not possible via speculative assumptions. A comparison of the total resource intensity is crucial for holistic answers. The power technologies require a varied nature of resources such as materials, fuel, land, labor, and water. So, the resource intensity for a technology cannot be estimated by simply adding up the resources.
An easier task has a lower resource intensity. In case of solar and wind power, the task is far more difficult. It involves the use of dilute and intermittent sunlight or wind to provide 24X7 on-demand energy. In case of fossil fuel power, the task is much easier because of the massive help from nature. It involves the use of high density fossil fuels, which are available 24X7, to meet the electricity demand. Since the task is much easier in case of fossil fuel power, the resource intensity is much lower.
This tells us that electricity costs will be much higher in the future. This is inevitable because nature has provided massive help to fossil fuel power technologies and such help is not available for solar and wind power.
Some would like to believe that the massive use of fossil fuels in recent centuries has been mainly because of some greedy entities who disallowed the rise of other technologies. In reality, fossil fuels have been the dominant energy source because of the massive help from nature. The recent interest in other energy sources has mainly been driven by the concern related to climate change.
As we move ahead with the energy transition to address climate change, a realistic understanding of electricity costs is crucial for robust planning and to avoid unpleasant surprises. This is especially important because the cost of electricity has a large impact on the cost of electrification, which is a key step in the low carbon energy transition.
A realistic understanding of all crucial issues is essential to develop a robust path forward, i.e, to give us the best shot at addressing our climate challenge. I will discuss one such proposal in a future article.
References & Notes
[1] IEA Report. Net zero Roadmap 2023 update. https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach
[2] OECD NEA report (2019): System costs with high share of nuclear energy and renewables. https://www.oecd-nea.org/jcms/pl_15000/the-costs-of-decarbonisation-system-costs-with-high-shares-of-nuclear-and-renewables?details=true
[3] This is a well-established principle. For example, the cost of building a home at a given location depends on the resource intensity. A home that requires more labor, materials and other resources will be more expensive.
[4] Certain technologies require a continuous supply of fossil fuels. Others require large amount of land and materials. Also, the technologies require different types of materials for the construction of power plants. The resources are not directly comparable. They cannot be directly added.
[5] IEA Report. Net zero Roadmap 2023 update. https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach
[6] Solar energy is the direct source for solar power. Solar energy unevenly heats earth, which leads to wind generation. Fossil fuels have formed from the remains of dead organisms, i.e., stored solar energy.
[7] Energy policy, 123, 83, 2018. https://www.researchgate.net/publication/327239302_The_spatial_extent_of_renewable_and_non-renewable_power_generation_A_review_and_meta-analysis_of_power_densities_and_their_application_in_the_US
[8] International journal of Green Energy, 5,438, 2008. https://www.researchgate.net/publication/233231163_A_Comparison_of_Energy_Densities_of_Prevalent_Energy_Sources_in_Units_of_Joules_Per_Cubic_Meter
[9] U.S. EIA: Solar explained. https://www.eia.gov/energyexplained/solar/
[10] U.S. EIA: Natural gas explained. https://www.eia.gov/energyexplained/natural-gas/
[11] Energy policy, 123, 83, 2018. https://www.researchgate.net/publication/327239302_The_spatial_extent_of_renewable_and_non-renewable_power_generation_A_review_and_meta-analysis_of_power_densities_and_their_application_in_the_US
[12] International journal of Green Energy, 5,438, 2008. https://www.researchgate.net/publication/233231163_A_Comparison_of_Energy_Densities_of_Prevalent_Energy_Sources_in_Units_of_Joules_Per_Cubic_Meter
[13] Energy policy, 123, 83, 2018. https://www.researchgate.net/publication/327239302_The_spatial_extent_of_renewable_and_non-renewable_power_generation_A_review_and_meta-analysis_of_power_densities_and_their_application_in_the_US
[14] International journal of Green Energy, 5,438, 2008. https://www.researchgate.net/publication/233231163_A_Comparison_of_Energy_Densities_of_Prevalent_Energy_Sources_in_Units_of_Joules_Per_Cubic_Meter
[15] Long duration storage is not required currently because the electrical grids are dominated by dispatchable technologies. Solar and wind power only provide a small fraction of electricity. This will change in a net zero world. All the proposals suggest that solar and wind power will dominate the electrical grids in a net zero world.
[16] Currently, the project cost of solar and wind power plant with just 12 hours of battery storage is five times more than the cost of a natural gas power plant to provide the same amount of annual electricity. The practical energy storage needs for most regions will be few to many days. Thus, the project costs with current technology will be extremely high. Data for costs is from the following references. https://www.eia.gov/outlooks/aeo/assumptions/pdf/elec_cost_perf.pdf https://www.nrel.gov/docs/fy23osti/85332.pdfGreen hydrogen is even more costly.
[17] T. V. Choudhary. Critical Comparison of Low Carbon Technologies (October 2020). https://www.amazon.com/dp/B08LP8TRLP
[18] Upfront cost of concentrated solar with thermal for only 12 hours of storage is also about five times more than natural gas power plants. This is the low-end cost. Energy storage that is substantially longer than 12 hours would be required for providing 24x7 electricity. https://www.iea.org/reports/projected-costs-of-generating-electricity-2020
[19] U.S. Department of Energy. The pathway to long duration energy storage commercial lift off. https://liftoff.energy.gov/long-duration-energy-storage/
[20] Energy and Environmental Science (2022). Low-cost solutions to global warming, air pollution and energy security for 145 countries. https://pubs.rsc.org/en/content/articlelanding/2022/ee/d2ee00722c
[21] Joule (2022). Empirically grounded technology forecasts and the energy transition. https://doi.org/10.1016/j.joule.2022.08.009
