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« The new hiatus | Main | A new forum »
Friday
May092014

Levelised costs claim another victim

Science writer Martin Robbins has written about the Koch Brothers today, telling us how the new-found "grid parity" of solar energy in some parts of the world is going to give them and other fossil fuel barons a "kick in the balls".

Last year, a small solar revolution happened across Europe, as Spain, Italy and Germany reached "grid parity’" – the point at which the cost of producing electricity from solar energy becomes cheaper than the cost of buying it from the national grid. Just a few years ago, solar installations needed massive government subsidies to be cost effective. Now – in three countries, at least – they can compete on equal terms with their dirtier cousins.

And this spells trouble for big oil:

For Big Energy, it’s a nightmare. Slow to innovate, lumbered with vast national infrastructures to maintain, and selling a product that gets more expensive to produce each year, fossil fuel companies are facing what could be a massive disruption to their market – one that they look set to be on the wrong side of.

The problem is that Robbins hasn't really understood the maths. You see, grid parity is defined (by Wiki) as:

...when an alternative energy source can generate electricity at a levelized cost (LCoE) that is less than or equal to the price of purchasing power from the electricity grid.

And as readers at BH know, you should never ever use levelised costs for intermittent energy sources because it's grossly misleading to do so. (In essence, solar generators earn money for at best 12 hours out of 24, so they are completely outcompeted by dispatchable generators, which can earn for 24 hours a day, even if their levelised costs are the same).

Nobody even tries to argue that levelised costs are not misleading - the maths is so trivial that it would be suicide to do so. The best they seem to be able to come up with is to say that "everybody uses it".

So contrary to Robbins' expectations, solar is not about to assault the Koch brothers. And as if you needed any proof, take a look at this recent report from Spain, one of the countries about which Robbins is so excited. There, the government has had the temerity to suggest cutting subsidies to solar power operators.

The squawking is something to behold.

So just whose balls is it that are being kicked?

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Reader Comments (111)

Spain...thought they got caught fiddling the SP output figures using diesels? Couple of years back.

May 9, 2014 at 2:41 PM | Unregistered CommenterEx-expat Colin

If peak demand occurs during the afternoon on sunny days, solar seems to be competitive, quick to install and the sensible option. Whether it is competitive across the whole 24 hours doesn't matter. It is being installed for these reasons in sunny places in the US and Oz. Why would anyone oppose that.

If renewables are so bad an idea, why is China installing as fast as it can manage?

May 9, 2014 at 2:55 PM | Unregistered CommenterChandra

Kock brothers?
[Done, thanks. BH]

May 9, 2014 at 2:56 PM | Unregistered Commentersteveta_uk

So just whose balls is it that are being kicked?

solar-powered soccer balls

May 9, 2014 at 2:57 PM | Registered CommenterMartin A

If parity has been achieved, then there should be no objection to repealing the Feed-in Tariff for solar energy, correct?

May 9, 2014 at 2:58 PM | Registered CommenterHaroldW

Chandra,

If coal-fired power stations are so bad an idea, why is China installing as fast as it can manage?

Discuss.

May 9, 2014 at 3:08 PM | Unregistered CommenterJames Evans

An excellent insight into the physics, mechanics, and economics of solar is this report:-

http://www.wire1002.ch/fileadmin/user_upload/Documents/Reports/110403_How_much_net_energy_does_the_Spain_s_Solar_PV_program_deliver.pdf


Specifically about Spanish market which is the best irradiated country in Europe, it does however mention other countries.

May 9, 2014 at 3:11 PM | Unregistered CommenterJoe Public

If renewables are so bad an idea, why is China installing as fast as it can manage?
May 9, 2014 at 2:55 PM Chandra

They can't build coal fired power stations as fast as they'd like?

May 9, 2014 at 3:12 PM | Unregistered Commentersplitpin

Ex-expat Colin on May 9, 2014 at 2:41 PM
"Spain...thought they got caught fiddling the SP output figures using diesels? Couple of years back."

They were running them at night ..... ::)

May 9, 2014 at 3:13 PM | Registered CommenterRobert Christopher

If you artificially inflate the price of hydrocarbon-generated grid electricity far enough then you can make even a hamster wheel look like a good investment.

I'm tempted to say that Mr Robbins is one of those people who know the price of everything, and the cost of nothing. And I'm not sure about the price bit. An obsession with the Koch brothers is a complete give-away. Should be a Lewandowsky project.

May 9, 2014 at 3:25 PM | Unregistered Commentermichael hart

Chandra

"Why would anyone oppose that?"

Why would anyone subsidise it?

May 9, 2014 at 3:32 PM | Registered Commenterjamesp

"If peak demand occurs during the afternoon on sunny days, solar seems to be competitive, quick to install and the sensible option..... Why would anyone oppose that. "

Because hospitals also need electricity during the night.

?

May 9, 2014 at 3:38 PM | Unregistered CommenterNial

The argument made by the Bish is no doubt the best one but also why would it make sense to have two systems of producing energy running side by side, doubling the cost? We have gas fired production in mothballs because the climate change act demands that renewable energy is always preferred to fossil fuels. Answer is to mothball your plant until the government gets some sense and reason into its policies again.

May 9, 2014 at 3:39 PM | Registered CommenterDung

It's a running joke in Germany how "big" solar electricity generation is supposed to be, in a place where they it is customary to sum up the year by saying "we've had summer, and it was on a Tuesday".

May 9, 2014 at 3:40 PM | Registered Commenteromnologos

"Grid parity" when wind mills are not even earning their replacment costs, and are completely dependent on tax payer operating subsidies.
Mr. Robbins is either ignorant or deluded.
Probably both.

May 9, 2014 at 3:45 PM | Unregistered Commenterhunter

BTW...is it wrong to assume that Mr Robbins has little or no science background?

May 9, 2014 at 3:45 PM | Registered Commenteromnologos

This post on quora.com is very interesting about German solar power titled Should other nations follow Germany's lead on promoting solar power?

Read the first answer by Ryan Carlyle. He starts off by saying "The answer is the most forceful possible no." and then gets into the horrible details.

May 9, 2014 at 3:48 PM | Unregistered CommenterSimon S

Curious as it might seem, I would argue that there are few on this site who would argue that a personal (or company) decision to install solar or wind power should be opposed. What most DO oppose is these schemes being installed at great cost to those who have no say AT ALL in the installation – the tax-payer. I doubt anyone here would object to money being spent researching the many various ways to maximise the returns on energy from alternative sources, the most obvious being from that big, inexhaustible (for our needs) furnace in the sky; say, a few million spread over several years. What raises the most objections is the BILLIONS being poured into the bottomless pit of no return, which is what “renewables” is, at present. But then, there are always some who are quite wilfully blind to what is staring them in the face.

May 9, 2014 at 3:52 PM | Registered CommenterRadical Rodent

RR - I get quite miffed about the fact that these schemes are partly taxpayer funded, but I get absolutely furious when they are funded specifically by other peoples energy bills. The former is at least spread across those (one assumes) most able to pay (i.e. they pay tax) but the latter is a direct hit to those most vulnerable and least able to sustain the extra cost.

By all means install solar/tidal/wind/bioyoghurt or whatever floats one's boat, but do it without a subsidy from the poor.

May 9, 2014 at 4:01 PM | Unregistered CommenterCumbrian Lad

I have friends with solar heating panels installed on their roof in the 70's. These are quite efficient at transferring the incident heat to their water tank, which is nicely preheated with only a simple water pump to assist it (although thermo-syphon will work with bigger pipes). The idea was popular at the time, and installed quite widely round here (southern UK) with no subsidies. When solar PV can say the same, I might sit up and take notice.

By the way, did George Monbiot ever claim his winnings from Jeremy Leggett?

May 9, 2014 at 4:04 PM | Registered Commenterjamesp

it's a fallacy that renewables will get cheaper than fossil fuels.
Bottomline is fossil fuels don't get more expensive so renewables are cheaper, but rather since most fossil fuels are free , yep the Arabs just take it out the ground,, then the price of fossil fuels will drop to match if renewables got close to becaming a viable competitor

May 9, 2014 at 4:22 PM | Registered Commenterstewgreen

I suggest they look at who Soris , Graham , green billionaires, are investing it before they make this claim.
Meanwhile the IPCC, CRU etc have never had any issue with taken 'dirty oil money ' in fact their proud of it .

Given the key factor that stop solar from working is the rotation of the planet , have they yet work out how to overcome this ?

May 9, 2014 at 4:35 PM | Unregistered CommenterKnR

At best solar panels produce for about 6hours a day in summer when demand is low. The average annual capacity factor in the UK when last DECC published the data was 6.7%. For big solar farms, the average in the sunny SW is about 10%. A f******g useless technology in the UK.

May 9, 2014 at 4:40 PM | Registered CommenterPhillip Bratby

It's simple. Stop all green subsidies, special priveleges and other support and all the national grids europe wide to buy the cheapest energy.

Proof positive that green energy is cheapest. LoL

May 9, 2014 at 4:41 PM | Unregistered Commenterstephen richards

Some of you are rather confused about electricity supply. Have you ever seen a demand curve that peaks at night? So why is the daytime only nature of solar a problem? Solar is available when power is most needed and can offset peaking conventional plants. Utilties most profitable periods seem to be during these periods of peak demand (and price) so they might be expected to suffer from increasing solar. Whether that translates to a hit against Big Oil is doubtful, as oil is not much used for generation, I think.

May 9, 2014 at 4:54 PM | Unregistered CommenterChandra

Even DECC's latest strategy for solar acknowledges that there are going to be huge grid problems when all the solar they are planning is operational. Smart meters to encourage all people to switch on their appliances on sunny Sunday lunchtimes in summer - yes, sure. Smart inverters to turn off solar panels on sunny days - why bother to install solar in that case? Vast storage schemes - no technology available. Grid interconnectors - yes another crazy plan. They have no idea of how to get out of the mess they are creating with vast amounts of wind and solar.

May 9, 2014 at 4:56 PM | Registered CommenterPhillip Bratby

Chandra - you are clueless. Peak demand is in winter when it is dark and cold. Solar peaks when demand is low - in summer when it is sunny. The grid can't maintain stability in summer when there is little demand and lots of intermittent solar or wind.

May 9, 2014 at 4:59 PM | Registered CommenterPhillip Bratby

@Chandra

You must pay for the grid, solar or not. If your bill is ill-designed and the cost of the grid is a variable part of it and depend of the Wh you are consuming, then solar make sense. But this is a mistake, consumer should pay a fixed price for the grid (and some commercial cost to). Solar must be competitive with the variable part of your bill, this mean the production cost of the electricity (1/3 of my bill in France, a little more I presume in your country).

May 9, 2014 at 5:19 PM | Unregistered CommenterNicias

Surely the high cost of having conventional energy plants idling away waiting to kick in quickly when the sun doesn't shine should be added to the cost of solar?
Ditto wind.

May 9, 2014 at 5:20 PM | Unregistered Commenterartwest

Chandra on a tiny phone but Google points at a new scientist article saying December early evenings is peak due to home and office lighting being on. Article on lighting efficiency. Also remember heating is massively fossil fuel provided and not from electricity that much in the UK

May 9, 2014 at 5:25 PM | Unregistered CommenterRob Burton

Phillip Bratby, I may well be clueless. You on the other hand are a biased and unreliable source (for example your incorrect statements regarding the May 2008 incident), whatever your supposed prior expertise. UK demand does peak in winter but a quick check of GridWatch tells me that daily peaks are during the day throughout the year. Demand swings about 10-15GW between night and day. Solar fits that profile, as I said before.

Demand in sunny countries with lots of air conditioning is even more biased towards the day (which is when the sun shines).

Nicias, are you saying the grid cost is 2/3 of your bill?

May 9, 2014 at 5:30 PM | Unregistered CommenterChandra

Is it not true that ALL power is totally or partly provided by the sun? Even wind power is derived from the combination of the sun's heat and the spin of the Earth. Fossil fuels recover energy from plants which have been converted by the sun into stored carbon.

May 9, 2014 at 5:34 PM | Registered CommenterDung

If renewables are so bad an idea, why is China installing as fast as it can manage?
May 9, 2014 at 2:55 PM | Unregistered CommenterChandra

Because China bet on the rest of us mugs buying more and more solar and wind turbines like our govt's promised, they subsidised their own industry by a large margin over the ROW and bankrupted a load of US and Euro solar panel makers in the process. The rate of installation outside of China is well below forecasts.

They are left with a huge over capacity and workers that they do not want to be idle and protest, so the surplus is being used within China.

As the remote parts of eastern of China have little in the way of power infrastructure it does make sense in some areas as an alternative to putting a new power grid in but not enough to justify the size of the industry they created.

More a lesson in how not to do things, but just looks at the surface not what lies hidden like in the Yellow Brick roads wizard.

May 9, 2014 at 5:35 PM | Registered CommenterBreath of Fresh Air

Chandra

Do you really believe that running two systems of producing electricity is cost effective when you accept that one of them is not available for at least half the time?

May 9, 2014 at 5:37 PM | Registered CommenterDung

Safe, secure and cost effective energy generation and supply is the basis of our society. We should all be concerned when base load generators post profit warnings, irrespective of the reasons/excuses they give the market. Our society needs them to be profitable, secure and capable of producing returns that will ensure future investment. :-

Drax warns on FY

"....... The group says that since publishing its preliminary results on 18 February, power prices have fallen further, with mild weather across Europe resulting in weaker gas markets.

In addition, the group currently anticipates some further weakness in ROC prices this year, exacerbated by abnormally high wind generation.......... "

May 9, 2014 at 5:42 PM | Registered CommenterGreen Sand

Chandra, your rapid response to Phillip Bratby @ 4:59 is noted.

So is the fact you've ignored every other earlier reasonable question about your 2:55 posting.

Cherry picking again?

May 9, 2014 at 5:51 PM | Unregistered CommenterJoe Public

chandra nobody say solar can't be in some case competitive...if if and if...

May 9, 2014 at 6:01 PM | Unregistered Commenterlemiere

Joe Public, the thread is about levellised costs, solar only being available during daytime and problems for conventional generation. I have no interest in making the effort to reply to comments that lead away from that and then being snipped for being off topic.

May 9, 2014 at 6:09 PM | Unregistered CommenterChandra

Bish - you misunderstand levelized costing. If (say) I have a solar panel that cost me $1,000 to install (and assume nothing to run), and that will produce 1 MWh annually over 15 years, the levelized cost is (assuming a real discount rate of 5%) $96.34/MWh. It doesn't matter whether that energy arrives at 1.5 KWh/hr (ie, I have a 1.5KW panel) from 2:00 pm to 4:00 pm every day, or if it comes in an enormous lump of 1MWh/hr in one hour on June 5 every year.

Those delivery patterns would play hob with the grid, but they don't affect the levelized cost of the energy (in practice, the evaluation should reflect the costs to the transmission system, as well as the dispatchability, or cost to provide equivalent service). It is the same if I had a (no cost to operate) hydro dam with the same cost and energy characteristics, or if I had a gas plant with the same PV of costs (capital, O&M, and capital) and availability of energy.

The fact that one plant needs more or less time to deliver the energy is immaterial - the economics are based on the energy delivered, not the time the plant is active. IF (and I don't believe they are) developers and promoters are calcualting levelized costs on the basis of assumed future 24x7 output (less turnaround time, etc) from solar or other renewables, then the problem is not that levelized cost is a bad comparator - it is that they are lying.

None of this contradicts the fundamental point that no mater the (allegedly) low cost of solar (I have my doubts, but they are due to the optimistic life-expectancies), it is a significantly less valuable product than coal, hydro, or nuclear-derived electricity, because of the non-dispatchability and uncontrollable variability of delivery (the same goes for the other renewables, too). Unless the cost to turn that low-value product into the high value electricity that is required to run a modern economy is borne by the renewables producers, we are transferring wealth for either ratepayers or the general public (where they are not the same) to the promoters of these cockamamie schemes.

Cheers,

Dean

May 9, 2014 at 6:15 PM | Unregistered Commenterdcardno

Some of you are rather confused about electricity supply. Have you ever seen a demand curve that peaks at night?
May 9, 2014 at 4:54 PM Chandra

Yes.

9 dec 2013, the peak demand was at 17:05 (52793 MW). Sunset was at 15:52 in London.

May 9, 2014 at 6:28 PM | Registered CommenterMartin A

Chandra: "If renewables are so bad an idea, why is China installing as fast as it can manage?"

It's true that China is investing substantial sums in renewables. This article for example talks of a planned $294 billion investment between 2013 and 2015. Impressive eh?

But it's quite so impressive when put into context. For example, the article notes that China plans to have 100 GW installed capacity by 2015. That (if it happens) would be 100 GW x 8760 (hours pa) = 876 TWh. Assuming 25% utilisation, that's 219 TWh pa. However, China's electricity output was 4692 TWh in 2011. It's likely to be considerably more by now and more again by 2015. But, even in 2011 terms, 219 TWh is only 4.7% of total generation. Compare that, for example, with the UK which in 2012 generated 5.4% from wind - and no one regards that as at all impressive. Quite the contrary.

In fact the picture is probably rather worse: see this. 61 GW installed in 2012 = only 2% of total generation. Therefore 2015's planned 100 GW would be only 3.3% - little more than pathetic. Furthermore, note the many obstacles referred to - especially grid connection barriers: see this. An extract:

One-quarter of China’s wind farms are not connected to a power grid—a reflection of poor planning, insufficient transmission lines, and technical concerns by regional utilities that the intermittency of wind power can be disruptive to normal operations. Wind-related power failures have caused blackouts in three provinces, while exploding equipment has been blamed in the deaths of several workers, according to local press accounts.

As for solar power, note that the first article cited above mentions 35 GW by 2015. That would be about 1% of total power generation: even less impressive than wind.

If that's the best China can manage, perhaps renewables are not such a good idea after all. Agreed?

May 9, 2014 at 6:36 PM | Registered CommenterRobin Guenier

Is it not true that ALL power is totally or partly provided by the sun? Even wind power is derived from the combination of the sun's heat and the spin of the Earth. Fossil fuels recover energy from plants which have been converted by the sun into stored carbon.
May 9, 2014 at 5:34 PM Dung

Nuclear?

May 9, 2014 at 6:59 PM | Registered CommenterMartin A

Solar for much of anything other than installing them on roofs for charging batteries for low voltage applications is a waste of money.
Solar as a serious supplement to the power grid is ridiculous. The amount of land taken up per megawatt is ridiculous. The habitat disruption for gigawatt applications would be unacceptable if non-greens were doing the disruption.
Solar in northern Europe is best thought of as the punchline to some joke. The climate (in the real definition of the word) means it will never work- long winter nights, lots of clouds, limited land, etc.

May 9, 2014 at 7:05 PM | Unregistered Commenterhunter

Chandra, solar fits the demand curve - ON SUNNY DAYS. When it's not sunny which is a lot of the time, its a waste of space.

May 9, 2014 at 7:31 PM | Unregistered CommenterSadButMadLad

Martin A

et tu Brute hehe. I admit I do not know how radioactive substances are formed ^.^

May 9, 2014 at 7:43 PM | Registered CommenterDung

Dung, Martin A., Radioactive substances found in the earth are thought to have dominantly formed either in supernova (along with most of the periodic table elements) or through the decay of unstable isotopes forming other unstable isotopes (such as radon gas). While not strictly solar (as in our local sun), the source is still astronomical.

May 9, 2014 at 8:38 PM | Unregistered CommenterMikeP

I think is through fusion...in a sun.

May 9, 2014 at 8:45 PM | Unregistered CommenterJay

dcardno: Please read the Bishop's post more carefully. You are actually in full agreement with him. His key point is that levelized cost calculations are not appropriate for intermittent sources (not that the math is wrong).

May 9, 2014 at 9:14 PM | Unregistered CommenterCurt

Em, some of you seem to be wasting time trying to have a rational discussion, with someone who is not rational.

May 9, 2014 at 9:38 PM | Registered Commenterstewgreen

nuclear does not come from the sun (Uranium comes from supernovae?)
I read somewhere there is MORE of it the farther away from the sun , due to centrifugal forces
So Europa planet, for example is radioactive , which means it is an ideal habitat after some terra forming: water, and energy.

May 9, 2014 at 9:42 PM | Unregistered Commenterptw

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