The cost of Renewables vs Nuclear

Why Averaging is a crime

The International Energy Agency recently released its latest report regarding the expansion of renewable energy titled “Renewables 2023 - Analysis and forecasts to 2028”.

As is usual with these publications, a few colleagues and friends of mine who are true believers in renewables sent it to me with everyone asking “have you seen how well we are doing?”. My answer is yes, on average you are doing better, but do you know that “averaging is a crime”?

As the graph below shows, renewables are clearly cheaper “on average” than nuclear. But the prices span over a wider range than nuclear power.

• The black line shows the average cost of electricity generated by solar and wind around the world.

• I added the actual cost of Nuclear Power in the USA, France, Finland and Asia on the graph.

• Amortized Nuclear Power Plants are as low as $25/MWH on the graph.

So what exactly are we comparing when we say that renewables on average is cheaper than nuclear on average? Nothing, because it tells you nothing of the individual data points, the financing conditions and the value of that plant to the consumer or community. This is why averaging is a crime. In addition the above curve tells you nothing of the full system cost or full cost of electricity.

The IEA has finally made the distinction between the levelized cost of electricity (LCOE) and the value adjusted levelized cost of electricity (VaLCOE), because again, electricity is a service and not a commodity. The latter metric also has shortcomings, but it is a bit more sensible, because it aims to integrate value for money.

Engineers often struggle to understand the difference between cost and value.

The least cost doesn’t necessarily deprive the highest value, and I always explain this by showing how the mormons do tenders for their churches. They send out 5 tenders to the contractors.

• The top one gets eliminated because he is greedy.

• The bottom one gets eliminated because he is shady.

• They take the average of the remaining three

• The one that bids closest to the average wins.

This is how the mormons guarantee both quality and affordability. Nobody wants to pray in a “least cost” church that struggles to be open during a time when you need The Lord the most.

With this lesson in mind let’s look at the performance of renewables during periods when you need them the most. Yesterday was quite cold in Alberta and the “cheap wind” dropped to 0.3% at night (when there was no sun available).

Natural gas provided a good value for money during this period, while the wind power’s value was at zero. Without gas backing up the entire grid, it would have collapsed.

WECC-Alberta issued a warning saying that there was a “loss of baseload”. That’s the term that some now consider as “an outdated concept”?

Now imagine if only there were products on the market that might have been on average a bit more expensive, but could still be affordable. What if that product could provide a higher value during an emergency period?

Let’s look at Texas (that also experienced a cold snap) with the wind power dropping as low as to a point of 11% of its installed capacity.

• Which product derived the highest value for money during the emergency? Could it be “dirty” king coal?

• Or could it be the environmentally friendly Nuclear Power that was at 97% of its installed capacity?