Critical Thinking
What’s Holding Renewables Back

Renewables are on the rise. Here in the United States, wind and solar are making up the bulk of new power generation, and globally they’re growing faster than their fossil fuel competitors. But while renewables’ stature might be impressive when you consider that relative improvement, on absolute terms wind and solar power are still far behind coal, natural gas, and nuclear. In America, wind makes up just 4.7 percent of the total power mix, and solar—our country’s fastest rising energy source—still commands just 0.6 percent of the power market.

But everything has to start somewhere, and the uptick in renewable power generation in recent years is enough reason to start looking seriously at what a world dominated by renewables might look like. It is not, as many armchair environmentalists would have you believe, bereft of challenges. Wind and solar power might not emit greenhouse gas emissions, but they do bring with them a number of new problems—and in their quest to push renewables at any cost, policymakers around the world are failing to address these issues. The Economist writes:

[T]he pressure to decarbonise power supply has brought the state creeping back into markets. This is disruptive for three reasons…

First, the splurge of public subsidy, of about $800bn since 2008, has distorted the market. It came about for noble reasons—to counter climate change and prime the pump for new, costly technologies, including wind turbines and solar panels. But subsidies hit just as electricity consumption in the rich world was stagnating because of growing energy efficiency and the financial crisis. The result was a glut of power-generating capacity that has slashed the revenues utilities earn from wholesale power markets and hence deterred investment.

Second, green power is intermittent. The vagaries of wind and sun—especially in countries without favourable weather—mean that turbines and solar panels generate electricity only part of the time. To keep power flowing, the system relies on conventional power plants, such as coal, gas or nuclear, to kick in when renewables falter. But because they are idle for long periods, they find it harder to attract private investors. So, to keep the lights on, they require public funds.

Everyone is affected by a third factor: renewable energy has negligible or zero marginal running costs—because the wind and the sun are free. In a market that prefers energy produced at the lowest short-term cost, wind and solar take business from providers that are more expensive to run, such as coal plants, depressing power prices, and hence revenues for all.

Those three problems are already being borne out in places where renewables are gaining a greater foothold in energy markets. They are especially evident in Europe, and specifically in Germany, where renewables boosters are at their most manic. Germany’s energiewende—a green makeover of the country’s energy mix, incentivized by government subsidies—has pushed renewables’ share of the national energy mix above 30 percent. That may sound impressive, but remember that it’s being paid for by German citizens, who are burdened by some of Europe’s highest electricity prices.

The larger market share there has exacerbated problems that any country with significant renewables holdings is already intimately familiar with. When the sun doesn’t shine and the wind doesn’t blow, Germany still needs to generate electricity, and therefore must rely on back-ups (most often in the form of coal-fired power plants). But as renewable energy expands its reach, it’s becoming harder and harder for those back-up “baseload” generators to stay profitable—though the importance of their ability to step in when needed hasn’t faded one bit. As the Economist notes, the state is therefore forced to step in and prop up those non-renewable alternatives.

Of course, a battery storage breakthrough could effectively nix this problem overnight, and enable renewables to seize a much larger slice of the global energy mix. Until then, though, this and many other problems are going to persist, and it’s clear that greens haven’t thought through these issues enough to have reasonable solutions to any of them.

Do yourself a favor and read the whole thing at the Economist, if you haven’t already. It’s an excellent example of the sort of sober analysis renewable energy requires, now more than ever. It’s possible to critique these upstart technologies and their deployment without being ideologically opposed to them. A world efficiently and economically powered by renewable energy would undoubtedly be better than the one in which we current live, but there are a vast array of hurdles between here and that hypothetical place, and no amount of well wishing or willful ignorance will change that.

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