There is an article circulating on Twitter. I'm sure it's selling ink for Forbes. It plays into the politics of providing additional government supports for higher-priced coal and nuclear. But it's based on faulty analysis.

There is no debate among industry participants. Wind and solar have had a significant impact on power markets (energy markets). Market-clearing prices in Europe, United Kingdom, the United States have declined. As more wind and solar resources are added, prices decline further. This phenomenon explains why independent power producers struggle for margin. It also explains why coal and nuclear plants are seeking additional government supports to stay in business. They will tell anyone willing to listen, coal and nuclear are not competitive without new subsidies (their initial capital costs were fully subsidized).

Here's the author's trickery. He completely ignores power market dynamics. He jumps to the end of the utility value chain, focuses on the final retail price of electricity, and falsely concludes the villains are wind and solar.

What the author doesn't tell readers is that electricity prices (not energy prices) are heavily regulated all over the world, including Europe and the United States. When deciding on the price of electricity, regulators include the market price of energy and add much more (state and local taxes, fees, reliability costs, infrastructure costs, bad debt, line maintenance, operations, management costs, union costs, pension costs, guaranteed utility margins, and so on). While energy prices have been declining, regulated costs have been increasing.

It turns out the villain is not the market; it's the regulators. The other villain is the publication of faulty analysis.





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1 Comment so far

  1. FTR on May 2, 2018 12:52 am

    That Forbes article is within the bounds are reasonably correct. Certainly in California. Retail rates are rising as high cost RPS driven PPAs move into ratebase. T&D costs are going up because of interconnects from renewables as well. Do you blame the regulators? Fine, I guess but they aren’t randomly raising rates: they’re raising them because costs are going up because the ratebase is increasing.

    I don’t know why you continue blaming renewables for coal and nukes failure. Gas being $2.80 is far, far more relevant. If gas stays cheap, Exelon et al will either need ever more bailouts or go bankrupt even if not a single more panel or turbine is built.


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