Renewables vs. Fossil Fuels: The True Cost of Energy

You can compare different kinds of energy generation using a metric called the Levelised Cost of Energy, LCOE.

This includes the cost of equipment, transport, installation and grid connection; the cost of finance which can vary depending on the type of projects (it's getting harder to finance coal projects for example); fuel costs for fossil fuel generators; operations and maintenance including land lease costs.

If the generator is located somewhere with a price on carbon that would be included too. But even without a carbon tax, solar and wind are cheaper than gas and coal generation since 2015.

In this video we talk through all of the components that make up the cost of energy from various sources, and we talk about other values beyond just the cost. What happens when the sun goes down and we still want to use electricity?

What will the future look like with more wind and solar in the grid? And further beyond when we have a lot more batteries and other energy storage available?

Bookmarks:
00:00 Intro
01:40 Cost of 500MW nameplate capacity
02:27 Difference between power and energy
02:55 Capacity factor
05:09 Financing costs
06:07 Fuel costs
06:24 Heat rate
07:11 Efficiency comparison coal, gas, wind , solar
07:32 Fuel costs and the European gas crisis
08:35 Operations and maintenance
09:27 Solar is the cheapest energy source in 2021
10:40 Marginal cost of fossil fuels vs new build wind and solar
11:31 Moving beyond cost of energy to value
12:18 Value adjusted LCOE - VALCOE
14:30 Future energy value
15:51 Other values besides $$
16:36 Getting real about energy tech tradeoffs
17:02 Thanks John Poljak!

Sources:
Lazard's LCOE v.15 is here:

For more on VALCOE including for other sources not included in the figure I showed here (nuclear, coal, offshore wind) check out these links:

Thanks for watching the video Renewables vs. Fossil Fuels: The True Cost of Energy

[casparheyl]

A more useful comparison might be to compare the cost that it takes to meet a realistic power demand curve for a certain geographical area using a certain power source or combination of sources. Ideally, the demand curve spans enough time to include rare events such as heat waves or winter storms where peak demand is much higher than the average daily peak.

[pierrefenoll]

Concentrated Solar Power towers have thermal storage built in, sometimes for up to 15 hours.
Could you do an episode on why CSP towers are around as expensive today as they were ten years ago? Thanks for your work :)

[GregHassler]

Your BTU conversion is backwards at 6:45 - there are 3412 BTUs in one kilowatt-hour.

[BillMSmith]

Rosie, I really enjoy your videos. I know there are a lot of people calling for more depth, but from what I've seen you tend to get to the depth by creating follow on videos on topics. I think it's a good approach because it keeps your video length reasonable and I share your videos because I think they don't overwhelm people. That's important for those strange people who aren't energy nerds.

BTW, speaking of strange people, what kind of person is it who doesn't love a good equation?
Thanks for all you do.

[andymacleod]

It would be really good if you could go a follow-up on the relative price of energy storage with different systems for example battery storage, pumped hydro or something simple as heating sand or bricks??

[Tmaster]

Some reasons I don't like renewables.
1. Short service life.
2. Unreliability (low capacity factor)
3. Vulnerability to natural disasters
4. Need for expensive power connections, which usually isn't talked about
5. need for expensive energy storage
6. poor recyclability and disposal options at end of life
7. social and environmental costs of raw materials
8. Land use and NIMBY issues
9. Grid instability due to lack of predictability
10. Difficulty of maintenance for offshore wind and wave power
11. stubbornness of renewable zealots and their dislike of nuclear

[lowrads]

Energy use avoidance usually trumps any other form of investment in terms of returns. Window and wall shading, or insulation are simple examples. Modifying zoning to allow residents to access services without cars is another at a larger, though still very human scale.

[clanmeademagruder]

This was very interesting and helped put the economics in perspective as well as the differences. I would be interested to see a video about how nuclear energy compares to renewables and fossil fuels.

[wyldrushorchard]

Is it possible to include energy storage costs of renewables to LCOE to improve the accuracy of equivalence?

[fjalics]

The tools we are going to balance the renewables grid with are as you mentioned storage, transmission, demand/load shifting, overbuild, and maybe a little dispatchable generation, like gas, which could be bio gas if it's used very little. My problem is, I have a dumb meter that can't measure when I produce or consume electricity. I should be charging my car when it's cheap. Some thermal storage is really cheap, like having a smart thermostat lower the temperature in your home in hot weather 2 extra degrees when the sun is up, then turn it up 4 degrees during the evening peak. Overbuild will compete with storage some, particularly with wind. If there are large swaths of time, somebody might find something with low capital costs, that can do something useful with cheap electricity. Also, have you ever watched Tony Seba?

[reecechambers]

Great video and content! As a generation resource engineer for a utility, this is extremely helpful. I like that you touched on VALCOE, but I would like to see this exact analysis, but include storage (12 hour?) with the wind and solar. Use something like ESS or EOS as storage products because I see those as leaders in non-Li-Ion technology, where Li-Ion isn't typically economical for over 4 hour durations.

[martinfoster]

I Own and build small hydro and noticed you didn't include it in your race ...WHY. Bizarrely hydro is the most expensive technology and the cheapest so it would have been good to include especially as its the largest source of renewable electricity in the world.
Currently we are building 4 schemes subsidy free and its quite a challenge to raise the large amount of cash required for a UK (Scottish) build,
Great video... Thank you for taking the time to do it so well.

[DEtchells]

This was a great video, it laid out the various factors very clearly!

A big missing piece though, is the value of grid stability and the cost of maintaining it in the face of the wide swings in the availability of renewable energy, and the potential for low periods coinciding with each other (no wind and no solar at the same time).

Rather than looking at the expense per KWh of gas generation on its own, some amount (I suspect a fair bit) of the cost of gas peaker plants should be tallied on the renewables side of the ledger. Without the extreme variability of renewables, I doubt the Aussie government would have needed to build a gas peaker plant with a projected 2% capacity factor.

Another cost that’s not accounted for is that for transmission. While solar can be distributed fairly easily, in practice it usually isn’t, so transmission capacity may need to be added to accommodate it. This is a much bigger issue for wind power, because wind farms must typically be located far from population centers. (Everyone loves cheap wind power, as long as the windmill is in someone else’s back yard :-)

I also question the assumed lifetime of wind generators. I haven’t made a study of the area like you have, but my impression is that wind turbines have been experiencing much shorter lifetimes than initially projected. What’s the most recent data looking like on thar?

Finally, there’s the financial and environmental cost of decommissioning. Again I don’t know the specifics, but wind turbine components (especially the blades) are troublesome to dispose of in an environmentally responsible manner, and solar panels have toxicity issues when consigned to landfills as well.

I don’t want to seem too negative though; this was an excellent and very clear presentation of a lot of complicated concepts; well done!

[WiggyB]

First time watching your channel - superb video, and by far the happiest presenter of this type of content! Speaking as someone who has worked in renewables for quite some time, it is very encouraging to see this type of analysis given an engaging and accessible makeover. I'll be back for sure.

[mytoolworld]

You do need to factor in energy storage technology costs (battery, flywheel, ect) that solar and wind do require if you are going to count them as totally green. Alternatively, lacking some sort of storage method, there is the fossil fuel approach to backup power (coal and natural gas). Add in these factors and you will get a much more realistic and accurate cost of renewables. Most analysis of renewables seem to always leave these factors out for some reason, as if they do not matter, but the reality is they do represent a very major part of the equation and any discussion that leaves them out is useless.

[charlesashurst]

This is just the kind of analysis that Logan Power and Light of Logan, Utah, along with every other electric utility in the world, needs to make in shopping for new capacity. I see a time when the role of the electric utility will be less of a service of connecting many consumers to a few big produces and more of a brokerage service and a smart grid that will connect multiple producer/consumers with other producer/consumers.

[theknifedude]

Thank you for the video (s). I’m one of the tiny fraction of your viewers who is not a fan of formulas. My formal education was too brief. So thanks for including me.

[KyleErb]

I'm curious about LCOE of molten salt reactors as well as solar with energy storage.

[ZirothTech]

Great video Rosie! Loved the analogy and glad to see the video is doing so well given all the time this must have taken :D

[jasonwidegren]

One of the greatest YouTube videos of all time. Interesting, authoritative, educational. Thank you!!