Don’t deceive the poor world with an expensive green illusion
Let’s face it: Renewable energy’s promise of lower electricity bills has a long way to go before it can be met. Fossil fuel power remains cheaper and changing that will take heavy R&D spending—in nuclear power and battery technologies, for example.
Ask families in Germany and the UK what happens when more and more supposedly cheap solar and wind power is added to the national mix, and they will tell you by looking at their utility bills: power gets far more expensive. This defies everything we’re being told. Green energy is supposed to be incredibly cheap. But we’re not hearing the real story.
The idea that power should get cheaper as we get more green energy is only true if we exclusively use electricity when the sun is shining and the wind is blowing. But modern societies need power round-the-clock. When there is no sun and wind, green energy needs plenty of back-up, often powered by fossil fuels. This means that we pay for not one, but two power systems. And as the back-up fossil fuel power sources are used less, they need to earn their capital costs back in fewer hours, which can raise the cost of power further.
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This means the real costs of solar and wind energy are far higher. One study in China showed that the real cost of solar power on average was twice as high as coal, while a peer-reviewed study of Germany and Texas showed solar and wind power to be many times more expensive than fossil fuels.
Germany and the UK now have so much low-cost solar and wind that their electricity costs have become among the world’s most expensive. The latest data from the International Energy Agency makes it clear that there is a strong correlation between more solar and wind and much higher energy prices for households and industries.
In a country with little or no solar and wind, the average electricity cost is a bit over 11 US cents per kWh. For every 10 percentage points of solar and wind, the cost increases by more than 4 cents. The results are similar for 2019, before any impact of covid and the Ukraine war.
Look at Germany, where 34 cents per kWh means over twice the US cost and nearly four times the Chinese price. Germany has installed so much solar and wind capacity that at full pep, it could produce twice its electricity demand. In reality, on days with plenty of wind and sun, renewable energy produces close to 70% of Germany’s needs. Such days attract excited media attention. The press hardly mentions the days that are dark and still, when solar and wind deliver almost nothing. Twice this past winter, when all of Europe was cloudy and nearly windless, solar and wind delivered less than 4% of the daily power Germany needed.
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Battery technology can’t cope: Germany’s entire battery storage runs out in about 20 minutes. That leaves more than 23 hours of energy that needs to be powered mostly by fossil fuels. The result: during these lulls, Germany saw some of the costliest power prices, with wholesale prices reaching a phenomenal $1 per kWh.
At least climate-enthused governments in Europe are generally honest about these costs because electricity prices include most of the solar and wind costs, so consumers feel the impact of green energy policies. However, in the US, solar and wind costs are paid indirectly through tax deductions, implying that the actual cost of electricity with solar and wind is perhaps 25% higher than stated prices.
Poor countries are especially hurt by false claims of cheap green energy. Rich countries now refuse to help poor countries with fossil fuel projects. If solar and wind really were cheaper, the world’s poorer countries would have an inexpensive way to leapfrog from today’s energy poverty to abundance. New energy infrastructure would all be solar and wind. Yet, this only happens in rich countries, where electricity consumption is declining, while generous green subsidies and the established fossil-fuel-based backup infrastructure make solar and wind deception possible.
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Across poorer countries, where electricity consumption rose almost 5% in 2023, most of the addition came from fossil fuels, with coal contributing more than all solar and wind additions. China has put up more new coal capacity than solar and wind. Bangladesh added 13 times more coal than solar and wind. Despite India’s ambitious renewable targets, its coal additions were three times larger than solar and wind.
We will only fix climate change and make a transition once green energy truly becomes cheaper than fossil fuels. Investment in green energy research and development—for example, to develop fourth-generation nuclear plants and much cheaper batteries—should be our priority. But we first need to face the truth. The claim that cheap solar and wind is taking over from fossil fuels is a troubling and expensive lie.
The author is visiting fellow at Stanford University’s Hoover Institution.
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