Reconciling claims with reality

I do a lot of consulting in the energy sector and consequently am constantly startled by the claims I frequently encounter, not just among ESG advocates, but from government agencies and the like, that renewable energy (wind, solar, tidal, biomass) is cost-competitive with traditional sources (nuclear, coal, gas, and hydro).  

This just isn't true.  There is, of course, a wrinkle.

There is the straight forward comparison of cost of production.  It is quite hard to determine what the exact number is because of so many regulations and hidden subsidies of one sort or another.  All energy sources receive subsidies and all pay taxes and absorb government costs.  You have to disentangle them and arrive at definitions everyone can agree on.

An example from transportation.  In comparing the costs of various forms of transportations, should one consider construction and maintenance of roads as a form of subsidy to the auto industry.  In some regards that is a nonsense position, though frequently taken by anti-car advocates.  On the other hand it is a fair question.  

In that example it really comes down to the will and choice of the people.  Anti-car advocates wish to use the regulatory and coercive power of government to limit people's choices and welfare.  When given the choice, people always choose the freedom, efficiency, and adaptability of the car over any other alternative.  In which case, building and maintaining roads is not a subsidy butt he provision of a collective good.  But you do need to consider the definitions and think it through.

With energy there is a similar issue.  The objective is the provision of clean, safe, cheap and reliable energy when and where it is needed in the quantities required.  There are a further two aspects of that provision, base load and peak.  The cost profiles differ between base and peak loads.

Base load is the minimum necessary MW necessary to meet the lowest demand in a period of time.  Base load plants are usually highly efficient both in terms of cost and energy conversion.  Historically the traditional sources of energy serve as base load units by their very nature.  The one drawback is that other than natural gas, base load generators take a while to prepare and be brought online.  And even gas is not a mere matter of turning a dial.  Traditional energy generation (other than hydro) can be located wherever it is needed.  

By their very nature, renewables (wind, solar, biomass, tidal) can not be located where they are most needed, nor can they be relied upon to serve as base load.  So do you compare the costs of solar generated power in peak terms against coal at peak, coal at base, or coal at average?

Because of these definitional issues as well as regulatory complexity and obscurity all further complicated by cost accounting practices which would impress Hollywood studio executives, the claims that renewable energy costs have seemed grossly suspect but not easily disprovable.

I just came across one source that indirectly helps clarify the claims.  From Federal Financial Interventions and Subsidies in Energy in Fiscal Years 2016–2022 by the US Energy Information Administration.  

They ignore the distinction between base and peak, going with average.  They focus only on federal subsidies and not State or Local subsidies which can be huge.  There are definitional arguments to be had about what counts as a subsidy but they are pretty clear in each case what they are defining as in and out.  They provide the data but not really much interpretation.  We want to know the relative cost of each energy source.  They provide the data to determine that but don't do the analysis to give us that information.

Fortunately, we have Biden admin quietly released study showing green energy receives far more subsidies than fossil fuels by Thomas Catenacci.  The subheading is Solar should be competing for sales in the marketplace, not for subsidies in Washington,' top Republican senator tells Fox News Digital.  The reporting is pugnacious but it does give the answers.

The report calculates that there were $183.3 billion in Federal subsidies between 2016 and 2022 which seems quite low to me.  We are running an average of $26 billion in subsidies for the different categories of energy generation.  

Over the seven years, energy production is up 21% across all sources.  Where do we stand today in terms of energy generation?  Where do we get the energy for the electricity we generate?  For 2022, the answers are, in order of importance.  Bold are our traditional sources and italic are the supposed waves of the future.  

Natural Gas - 43% of our energy generation (average of 41% over the seven years)

Oil - 24% of our energy generation (average of 24% over the seven years)

Coal - 12% of our energy generation (average of 15% over the seven years)

Nuclear - 8% of our energy generation (average of 9% over the seven years)

Biomass - 5% of our energy generation (average of 5% over the seven years)

Wind - 4% of our energy generation (average of 3% over the seven years)

Hydro - 2% of our energy generation (average of 3% over the seven years)

Solar - 2% of our energy generation (average of 1% over the seven years)

Geothermal - 0% of our energy generation (average of 0% over the seven years)

A couple of striking things in contrast to the general impression from headlines.  

Our source structure is very stable over the seven years.  A couple of percent up or down, here or there, but not much movement.  

For all the hoopla and subsidies, wind and solar have only gone from a cumulative 3% to 6%.  Yes, a doubling, but a doubling of nearly nothing.  There really isn't much there, there.  

That's where we get our energy from.  Now, where do the subsidies go?  If, as is often claimed, Solar and Wind are now competitive or cheaper than other sources of energy, they ought in theory not be receiving any subsidies.  In this analysis, natural gas a liquid petroleum products are combined.  For 2022.

Natural Gas & Oil - 67% of our energy generation; 15% of subsidies

Coal - 12% of our energy generation; 6% of subsidies

Nuclear - 8% of our energy generation; 3% of subsidies

Biomass - 5% of our energy generation: 2% of subsidies

Wind - 4% of our energy generation; 23% of subsidies

Hydro - 2% of our energy generation; 0% of subsidies

Solar - 2% of our energy generation; 49% of subsidies

Geothermal - 0% of our energy generation; 2% of subsidies

Our main sources of traditional energy (gas, oil, coal and nuclear), supplying 87% of all energy, receive only 24% of the subsidies on offer.  

Wind and Solar, providing 6% of our energy, still receive 72% of all subsidies.

The evidence suggests that Wind and Solar are still not viable.  And, given that they are receiving large subsidies while covering only a small percentage of energy needs, it seems unlikely that they will ever be viable under existing technology and engineering constraints.  

What we really want is an EIA report that provides the real cost, net of subsidies, for each of our energy sources.  I have not yet come across such a report.  There are older studies but we need something up to date.  

But this one from August certainly lends credence to my supposition that what is reported in the mainstream media versus what I glean from inside the industry are mismatched and that it is the mainstream media version which is not aligned with reality.

You could argue that solar and wind are cheaper than traditional energy but that the subsidies are still needed to accelerate the transition.  But we have been in heavy duty transition for fifteen years or more (who can forget the half billion dollar loss from Solyndra in 2010?)  This should be the period of picking low hanging transition fruit.  If in fifteen years and all the easy opportunities, we have a=only gone from 3% of energy to 6%, it does not bode well for the cost structure in the future.