Just One More Reason Why Fossil Fuels Suck Tailpipe — The Cost of Wind and Solar is Now Lower Than Pretty Much Everything Else

During October, in Australia, something rather strange and hopeful happened. Grid prices for electricity rose. Power customers, fed up with this, en masse decided to purchase 100 megawatts of rooftop solar in a single month.

How and why did this come to pass?

Conservative allies of fossil fuel based utilities are currently in control of the Australian federal government. And they have been working to provide captive grid-tied energy consumers for their political backers — polluting power system owners. Because these systems are more expensive than their renewable energy counterparts, the price of electricity went up.

The Australian public, who generally supports renewables and who likes to pay less for electricity, wouldn’t have any of it. They didn’t like being forced to purchase more expensive, polluting energy. So more than 15,000 of them decided to tell fossil fuel backers to go suck tailpipe and went on ahead and bought solar energy directly.

(Guess what? That green glass you see on the school in this image comes from hundreds of solar panels. Solar is versatile and increasingly inexpensive. You can put it on rooftops, building sides, car roofs, fuel station overheads, build it in traditional utility arrays, construct it on co-generating farms, or float it on reservoir surfaces. Image source: Inhabitat and EPFL.)

This choice, enabled by falling renewable energy prices, is one that people around the world will be more and more able to make as time moves forward. And it’s the case even in instances where national governments of western democracies are heavily influenced by fossil fuel special interests — as is presently the case in Australia. The primary reason is that when conservative governments support fossil fuels and nuclear over renewables, power prices to society rise.

The cost of both wind and solar energy are now less than every traditional power source even in more mature markets like the United States. In this major market, according to Lazard, the levelized price of nuclear is 14.8 cents per kWh, coal is 10.2 cents per kWh, gas is 6 cents per kWh, solar is 5 cents per kWh, and wind is 4.5 cents per kWh. That’s right. Renewables are about 1/3 the price of nuclear, half that of coal, and 10-20 percent less than gas in the U.S.


(The levelized cost of wind and solar energy keeps falling. This is making continued fossil fuel development an expensive and untenable prospect. Image source: Lazard.)

But in places like Australia and in the developing world, this price difference is even greater. In the developing world, there are less legacy fossil fuel power systems — which makes it a no-brainer just to go ahead and build less expensive renewables. And islands like Australia traditionally suffer from higher import costs for fossil fuels and clunky or inefficient fossil fuel energy system components.

Levelized cost is a way of measuring total life-cycle costs. It includes such costs as fuel, transmission and construction. Because renewables do not require fuel and because they are based on technologies that benefit from both advancement and economies of scale, they are able to continuously increase efficiency and reduce cost over time. Fossil fuel based power systems are mated to very inefficient combustion and to mining and extraction of fuels that grow more scarce over time. As such, the power systems they are based on tend to have difficulty reducing costs  and are subject to market shocks and scarcity of feedstocks.

These simple economic facts put the political backers of fossil fuels at a disadvantage on the issue of base economics. But these direct cost related factors don’t even begin to count in the terrible external costs of fossil fuels ranging from ramping damages due to climate change and direct health impacts by adding toxic particles to the air and water. As such, fossil fuels are both economically and morally untenable. But such simple and easy to understand facts haven’t stopped republicans like Trump in the U.S. and LNP members like Turnbull in Australia from trying to ram these harmful and expensive energy sources down the throat of an increasingly outraged public.

Leave a comment


  1. Jim

     /  November 27, 2017

    Great article Robert. Lazard’s summary of LCOE is highly respected, but I’ve noticed that lately fossil fuel advocates have taken to criticizing Lazard for such things as “not including externalities”! Of course, we all know that makes the case for renewables immeasurably stronger.

    Still we hear the constant old refrain of “clean, affordable, abundant” [insert fossil fuel of choice here] argument. In reality, you can’t get cleaner, more affordable, nor more abundant than sunshine and wind.

    And generating costs for wind and solar keep plummeting with each month. The latest is a 3TWh proposal for Cenace in Mexico that was bid out at an average cost of under $21/MWh for wind + some PV (There was erroneous reporting a couple of weeks ago that suggested PV solar won the entire bid at 1.77 c/kWh. This has since been corrected).

    Meanwhile back in the USA, Rick Perry is proposing that Americans pay more for dirty coal energy, and the east cost electrical interconnect PJM seems to be going along with the idea. SAD!



    • Wind tenders keep falling in price. Just reading yesterday how one in Europe had dropped ten percent. Also worth noting that India is on track for 175 GW of renewable energy by 2022. Yet one more big deal.

      Under Trump, it looks like the U.S. might go through a process similar to what we’ve seen in Australia with people ultimately possibly just throwing up their hands and moving away from utilities. That’s what Perry’s policy will risk for utilities. Do they really want to go along with that?


      • Jim

         /  November 27, 2017

        I think you are spot on. In the US, Investor Owned Utilities have been adding capital to transmission and distribution resources. The effect has been muted by drops in gas prices, and to a lesser extent, coal prices, so the change has been largely invisible to consumers. But, that will change once fuel prices inevitably rebound.

        Some utilities seem to be more than happy to go along with running old inefficient coal plants, and under Trump that action is being rewarded. They’re in essence guaranteeing that they’ll be in the least competitive position as power markets – both generation and storage – are going through the greatest shift of the last 100 years.

        There’s 250 MWh of battery storage capacity coming on line between now and 2020, and with a 22% annual decline in LiIon battery costs, it won’t be too long before we see batteries in homes and businesses which is just starting to be the case now in Australia.


        • Jim

           /  November 28, 2017

          Make that 250 GWh of storage….


        • So those investments can pay off if there’s enough ongoing growth investment in renewables and related infrastructure. There’s a lot of vehicles, for example, who will be getting power from the grid. Of course, if it’s fossil fuel based, then there’s a good number of disincentives for EV owners to use grid tied recharging. Utilities should realize that the people who will be buying these things in droves, at first, will tend to be more emissions conscious than regular society. That they will see the EV as a tool to help them reduce carbon emissions and that they’ll tend to use it in that way.

          Thanks for the well informed commentary here, Jim. Learned quite a bit.


        • One more comment RE storage —

          It doesn’t have to be huge to have an impact. 10-25 percent base storage is usually enough to cover intermittency from combined wind and solar with hydro and biofuels also added. The wind is often blowing when the sun isn’t shining and vice versa and the larger the grid connected resource web, the less intermittency problems you tend to have.

          The batteries are also competing with coal, nuclear, and gas. And though price is now x2 that of nuclear, it’s easier to turn the batteries on and off to take advantage during times of scarcity or abundance which allows battery station operators to capitalize better on price. Of course, the battery prices are also going to come down pretty rapidly. And it’s worth noting that most LCOE estimates are for new build battery systems. After market EV batteries for storage systems will further cut costs by 40 percent or more off the base battery price.

          We’ll probably hit parity with nuclear and then coal by the early to mid 2020s. Gas soon to follow.


  2. Spike

     /  November 27, 2017

    Thank heaven that in Queensland the right appear to have been defeated in the election and their renewable target can proceed as planned.


  3. Vic

     /  November 27, 2017

    Another interesting titbit from Australia recently was the revelation that a major Chinese renewable energy company had made a substantial $40,000 donation to the Queensland LNP, presumably in an attempt to grease the wheels of their intended windfarm constructions within the state. Ironically, the Qld Labor party received no such donation because their 50% renewables by 2030 policy would provide zero barriers to further windfarm construction.

    Tactics like these come straight out of the playbook of the big extractive and agricultural industries. This is the first time I’ve ever heard of them being employed by players in the renewables sector. I’ve long suspected that the people who choose to work in the renewables industry would be less ethically inclined to resort to graft and bribery than those who choose to work in fossil fuels. Perhaps now though, with the big money truly beginning to flood into renewables that a political tipping point is being approached.

    It’s an ugly look but at this stage I don’t care. These are the rules of the game and we must play to win. There is no prize for second place.



    • Well, if they can influence conservatives to act in a less harmful manner then that’s hopeful. Part of the game thinking we originally encouraged was to use all the levers of power possible to include attempting to turn the conservative parties away from fossil fuel backers. That’s part of the larger strategy. I think there’s a tipping point somewhere when the influence of renewables funders can outweigh that of fossil fuels. But the net effect now is to put a check on more extreme policy stances in favor of fossil fuels. Which is helpful.

      Yeah, it’s gamesmanship. But we need to live in the real world if we’re going to be successful. That said, one would hope that there would be a movement toward limiting the political power of large donors which have generally been so destructive to democratic systems recently.


  4. Mark in OZ

     /  November 27, 2017

    Australia is also struggling with enormous immigration and the consequent ‘infrastructure’ issues including power generation–especially in the two largest cities of MEL and SYD. For those unaware of how the Westminster style of government operates ( usually to the exclusive benefit of the ruling elite) the following description borrowed from popular economics site ‘Macrobusiness’ may be helpful.

    Frequent contributor Stephen Morris describes how the myth of larger cities being more ‘productive’ when all that usually occurs is those in control of the economic rents to be harvested join forces and become a near implacable obstacle to innovation as maintaining the status quo is so lucrative. It’s quite astonishing that for a land mass the size of Australia that nearly all immigration lands on the thin strip of the eastern seaboard and mainly in MEL and SYD who have both done little in the past 20 years to deal with the highest per capita immigration in the OECD. It’s no accident and entirely by design for those who benefit directly from more ‘capitas’ i.e. banking, housing, insurance, utilities, retail and the governments themselves who attach ‘stamp’ and GST to nearly all transactions.

    Understanding the organizational structure of what needs to be modified is step 1 in making the move away from fossil fuels and their invested capital and investors who have become entwined with the state and federal governments.

    “The issue is even more interesting because it undermines the whole New Economic Geography that claims to prove cites are more productive.

    SOME cities are more productive, but there is no evidence showing a general relationship between population concentration and productivity. What there IS evidence for is a relationship between population concentration and higher INCOME.

    But net production is not equal to income. It is income less economic rent less deadweight losses of rent-seeking. If cities are simply more efficient at rent-seeking, their net production might be less than a more distributed population.

    Spending to increase the size of cities might actually decrease net production (of social value).

    How might this come to be? In Australia and other Westminster countries, it is a combination of “elective dictatorship” combined with the phenomenon of “proximity bias”.

    Proximity bias is a cognitive bias that causes people to favour and reward those who are physically proximate. See, for example, “Out of sight, out of mind. People who work from home are less likely to be promoted”, The Economist, 13th October 2012. (http://www.economist.com/node/21564581)

    Under the Westminster system the Cabinet has vast discretion to disburse economic rents to the Ministers’ favourites. Combined with the proximity bias this creates a powerful centripetal force drawing people in towards the “Fountainhead of Rents”, the Cabinet. Proximity to Cabinet is a “positional good”.

    This phenomenon has been known to historians (but apparently not economists) for centuries. It is the reason that Courtiers had to remain at Court. Absence from Court was a death sentence.

    With the evolution of Absolute Monarchy into the Elective Dictatorship of the modern Westminster system, this effect has not gone away. Court has simply been replaced by Cabinet. Ministers reward those modern-day courtiers – the “primary rent-seekers” – who are physically proximate. Primary rent-seekers need to live within “lunching distance” of the Cabinet.

    The elevated incomes of the primary rent-seekers draws in a second circle of “secondary rent-seekers”, who in turn draw in further circles, the ripple of rents radiating outwards from the “fountainhead”.

    Under a system of elective government, these rent-seekers form a powerful lobby determined to protect their income thereby entrenching the system. Like the old “military-industrial complex” which perpetuated military spending of minimal social value, Australia [and Britain] has a “financing-housing-infrastructure complex” which perpetuates the concentration of population into capital cities and the expensive retro-fitting of infrastructure to make them habitable.

    It doesn’t necessarily produce anything of net social value.

    This realpolitik model of metropolitan rent-seeking undermines the naive (and transparently self-serving) theories of economists like Ed Glaeser who argue that cities come into being because of agglomeration efficiencies and should even be subsidised to promote that efficiency.

    To be sure, SOME cities will form due to agglomeration efficiencies. The paragon of this type of city is Silicon Valley where the planet’s highest concentration of intelligent individuals – sharing ideas – are literally re-designing the world we live in. And making fortune.

    But the mistake lies in generalising from the particular. Intuitively one might expect that where Executive government has wide discretion (as in the Westminster system) power and wealth would concentrate around that Executive, whereas in those countries with a more powerful Legislature (for example the US) agglomeration efficiencies would prevail.

    We can see the effect in the UK where far-and-away the largest per capita recipient of identifiable public spending (excluding social welfare and agriculture) is not Scotland or Northern Ireland as one might imagine, but London! (https://fullfact.org/news/are-english-paying-lavish-scottish-spending-promises/)

    Of course, the metropolitan apologists argue that Londoners deserve more being spent on them because (as everybody knows; just ask a Londoner) they are the clever, virtuous, hard working (shall we throw in “good looking” as well?) people who “create all the wealth”. Just look at their high incomes!!

    But this is a chicken-and-egg argument. Do Londoners deserve lavish spending because they generate wealth, or are they wealthy because the government lavishes spending on them??

    To give an example, as a child I lived about a mile from Lord’s Bridge Railway Station, the first stop outside Cambridge on the Cambridge-Oxford railway (the so-called “Varsity Line” or “Brain Line Railway”). The Varsity Line was spared the Beeching Axe in 1963 but you won’t find Lord’s Bridge Station on modern maps. That’s because in 1967 the government decreed that money should be dedicated instead to improving the speed of services into and out of the political capital. To go cross country from Oxford (or further south and west) to Cambridge (or further north or east) one would travel to Paddington, cross London by Tube to Liverpool Street, then resume the train journey.

    On 31st December 1967 the Varsity Line was closed, the infrastructure dismantled, and the track bed meticulously ploughed back into the farmland.

    Fifty years later the policy of concentrating traffic through London has necessitated the 18 billion pound Crossrail Project to ease the congestion! [There is also talk of rebuilding the Varsity Line to connect Oxford to the truly productive Silicon Fen, but this is difficult as much of the alignment has been built over.]

    But here we get to the circular argument. That 18 billion pounds increases the incomes of Londoners working directly and indirectly on the Crossrail Project, thereby “proving” how productive they are!

    Meanwhile back in Australia, we have metropolitan rent-seeking at every level:

    a) at the State level, mineral royalties prop up Brisbane and Perth;

    b) top class health and education facilities are concentrated in the capitals;

    c) arts and sports funding is concentrated in the capitals;

    d) lucrative public works contracts are handed out to Mates in the capitals;

    e) at the federal level, company tax on commodity exporters is disbursed – largely per capita – to the capital cities;

    f) special imposts such as fuel excise act as a “tax on distance”, sucking money out of the regions (and even from the poorer outer suburbs which rely more on car transport) to be disbursed to the capitals;

    g) specific industry protections inflate metropolitan incomes. The policy of mandatory superannuation (for example) is now diverting over $30 billion a year into the hands of Sydney and Melbourne funds managers and their support industries. But just because thousands of people are running around in circles complying with the red tape of a needlessly inefficient pensions system does not mean that they’re producing anything of value. It is properly accounted for as part of the deadweight loss of rent-seeking: a pointless mis-allocation of resources that exists only so that politically powerful rent-seekers can divert income into their pockets; and

    h) the acceptance of oligopolies in major (metropolitan) industries – like banking – further increases metropolitan incomes.

    And because of all those people crammed into the metropolis, trying to be within “lunching distance” of the Cabinet, we see projects like the $17 billion WestConnex or the $5.5 billion Westlink or the $16 billion north-east link which cost more to build that a green-fields city somewhere else!

    But that $17 billion increases the incomes of Sydneysiders, and the $20 billion of Melbourne roads increases the incomes f Melbournians thereby “proving” how productive they are!

    Isn’t economics wonderful??”



    • Hah. Well, I think it can be said that cities are more easy to manage sustainably when individual footprints shrink due to smaller living spaces and if public transport/walkable communities are more widely available. Of course, renewable energy has the potential to alter that dynamic.

      I think conflating attempts to capture consumers with some of these general realities creates a bit of confusion. However, it’s certainly true that cities that don’t pursue sustainability will be unsustainable. Particularly those whose economies are based on unsustainable practices such as fossil fuel mining, extraction, and burning.


  5. Robert in New Orleans

     /  November 28, 2017

    Speaking of the Inevitable decline of big coal:


    In light of the negative short term news that this potential power plant closure puts on the Navajo and Hopi Nations economic future. I would hope that Mr. Elon Musk would intervene in some way to alleviate some of the financial sufferings that these First Americans will endure by assisting them in transitioning to a clean energy future.


  6. Robert in New Orleans

     /  November 28, 2017

    I am so furious with rage about how the president treated the Navajo Code talkers today.
    trump = &$%#@!?>&$%*@#!


    • He’s ridiculous. Uses racist speech as a means of political power brokering. It’s tough to imagine something that goes so starkly against American values. And this after spending two days attacking the 1st Amendment.


  7. Robert in New Orleans

     /  November 28, 2017


  8. Energy consumption by wind turbines is something not usually discussed. Here is a link to a recent evaluation fyi:

    Energy consumption in wind facilities

    Large wind turbines require a large amount of energy to operate. Other electricity plants generally use their own electricity, and the difference between the amount they generate and the amount delivered to the grid is readily determined. Wind plants, however, use electricity from the grid, which does not appear to be accounted for in their output figures. At the facility in Searsburg, Vermont, for example, it is apparently not even metered and is completely unknown [click here].* The manufacturers of large turbines — for example, Vestas, GE, and NEG Micon — do not include electricity consumption in the specifications they provide…….


  9. Rob orlov

     /  December 6, 2017

    Be even better for our future when the SEGs are available….free energy from a spacial effect gen. Which Uses Magnetic Wave form Technology. ! Cleanest Greenest Energy Available.
    And to Sdd to that Browns Gas from Water Can Run a 4 stroke motor with No Pollution.!only more water….Proven in 2009 by Japanese man….



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