Renewables vs. Fossil Fuels: The True Cost of Energy

Summary

Dieses Video skizziert die Kosten der verschiedenen Energiequellen, indem es den Levelized Cost of Energy (LCOE) berechnet und durch einen Rennwagen-Analogien erklärt. Es vergleicht erneuerbare Energien wie Solar- und Windenergie mit fossilen Brennstoffen wie Kohle und Gas. Es zeigt, dass trotz der niedrigen LCOE-Werte von Solar und Wind für fossile Brennstoffe wie Kohle und Gas zusätzliche Kosten wie Finanzierungs- und Brennstoffkosten die Gesamtkosten erhöhen können. Der Fokus liegt auf der Wichtigkeit, die Verfügbarkeit und der tatsächlichen Nutzungszeit der Energie zu berücksichtigen, um ein vollständiges Bild der Kosten zu erhalten.

Takeaways

• 🔋 Die günstigste Energiequelle hängt nicht von einem Faktor allein ab, sondern muss durch den Levelized Cost of Energy (LCOE) berechnet werden, um die Gesamtkosten zu vergleichen.
• 💰 Der LCOE berücksichtigt die gesamten Kosten, einschließlich der Anlage- und Betriebskosten, sowie die Lebensdauer der Energieanlage.
• 🏭 Die Kapitalkosten für 500 Megawatt nameplate-Kapazität sind für Solarpanelanlagen am günstigsten, gefolgt von Verbundgas und Windkraft, wobei Kohlekraftwerke am teuersten sind.
• ⚡ Die Leistungsfaktoren variieren je nach Energiequelle: Kohle hat den höchsten, Solar den niedrigsten, während Gas und Windkraft mittlere Werte aufweisen.
• 🌞 Solarenergie erfordert im Vergleich mehr Kapazität, um den gleichen Energieertrag wie Kohle zu erreichen, insbesondere wenn man die Lebensdauer und den Leistungsfaktor berücksichtigt.
• 🏁 Nach Berücksichtigung von Kapitalkosten und Leistungsfaktor liegt Solarenergie immer noch als kostengünstigste Option vor, gefolgt von Gas und Windkraft, wobei Kohle sich durch höheren Leistungsfaktor und längere Lebensdauer verbessert.
• 💸 Finanzierungskosten sind entscheidend für den LCOE und können die Kosten verdoppeln. Erneuerbare Projekte haben oft bessere Finanzierungsbedingungen als Kohleprojekte.
• 🛢 Die Brennstoffkosten für fossile Brennstoffe wie Gas und Kohle sind ein wichtiger Faktor im LCOE und können stark schwanken, insbesondere bei Gas, das an Preisschwankungen betroffen ist.
• 🛠 Betriebs- und Wartungskosten variieren ebenfalls und haben einen Einfluss auf den LCOE. Solarenergie hat hier die geringsten Kosten, gefolgt von Gas, während Wind- und Kohlekraftwerke höhere Kosten haben.
• 🏁 Nach Einbeziehung aller Kostenfaktoren liegen 2021 Solarenergie und Windenergie als kostengünstigste Energiequellen vor, während fossile Brennstoffe deutlich hinterherhinken.
• 📉 Der LCOE ist ein wertvolles Instrument zur Kostenvergleichbarkeit verschiedener Technologien, aber er kann die Verfügbarkeit und den tatsächlichen Wert der Energie zu bestimmten Zeiten nicht vollständig berücksichtigen.
• 🔄 Die zunehmende Integration von erneuerbaren Energien in das Stromnetz macht die Verfügbarkeit der Energie zu einem wichtigeren Faktor, und der Value Adjusted LCOE (VALCOE) könnte ein besseres Bild der tatsächlichen Wertschöpfung liefern.

Q & A

Was ist der Hauptgrund, warum einige Menschen sagen, dass die Effizienz von Windkraftanlagen weniger wichtig ist?

Einige Menschen argumentieren, dass die Effizienz von Windkraftanlagen weniger wichtig ist, weil der Wind kostenlos ist und die Kosten für die Stromerzeugung daher nicht direkt von der Effizienz abhängen.

Was ist der Levelized Cost of Energy (LCOE) und warum ist er wichtig?

Der Levelized Cost of Energy (LCOE) ist eine Methode zur Berechnung der Gesamtkosten der Energieerzeugung über die Lebensdauer eines Generators. Er ist wichtig, weil er verschiedene Faktoren wie Installationskosten, Wartungskosten und Brennstoffkosten kombiniert und so einen Vergleich zwischen verschiedenen Energietechnologien ermöglicht.

Welche Energietechnologie hat laut dem Skript die niedrigsten Anfangsinvestitionskosten für 500 Megawatt Kapazität?

Laut dem Skript haben Solarpaneele die niedrigsten Anfangsinvestitionskosten für 500 Megawatt Kapazität.

Warum können Solaranlagen trotz niedrigerer Investitionskosten eine höhere Gesamtlebensdauerkosten haben als Kohlekraftwerke?

Solaranlagen haben eine niedrigere Kapazitätsfaktorrate und eine kürzere Lebensdauer als Kohlekraftwerke, was bedeutet, dass mehr Solaranlagen installiert werden müssen, um die gleiche Gesamtenergiemenge über ihre Lebensdauer zu erzeugen.

Wie beeinflussen Finanzierungskosten den LCOE von Energietechnologien?

Finanzierungskosten können den LCOE erheblich beeinflussen, da sie die Gesamtkosten eines Projekts verdoppeln können. Erneuerbare Energieprojekte erhalten oft günstigere Finanzierungskonditionen als fossile Brennstoffe, was ihre Kosten weiter senkt.

Welche zusätzlichen Kosten haben fossile Brennstoffe, die erneuerbare Energien nicht haben?

Fossile Brennstoffe haben zusätzliche Brennstoffkosten, die bei der Berechnung des LCOE berücksichtigt werden müssen. Diese Kosten können je nach Marktpreisen stark schwanken.

Warum sind Betriebs- und Wartungskosten (O&M) bei der Berechnung des LCOE wichtig?

Betriebs- und Wartungskosten (O&M) sind wichtig, weil sie jährliche Fixkosten darstellen, die unabhängig von der erzeugten Energiemenge anfallen. Diese Kosten müssen zur Berechnung des Gesamtkosten pro Megawattstunde hinzugefügt werden.

Was ist das Value Adjusted LCOE (VALCOE) und wie unterscheidet es sich vom traditionellen LCOE?

Das Value Adjusted LCOE (VALCOE) berücksichtigt nicht nur die Kosten der Energieerzeugung, sondern auch den Wert der Energie zum Zeitpunkt der Erzeugung. Es reflektiert die Marktpreise und die Verfügbarkeit der Energie und bietet somit eine realistischere Bewertung der Energietechnologien.

Wie beeinflusst die steigende Nutzung von erneuerbaren Energien wie Solar und Wind die Energiepreise und -verfügbarkeit?

Die steigende Nutzung von erneuerbaren Energien kann zu einem Überangebot zu bestimmten Zeiten führen, was die Energiepreise senkt oder sogar zu negativen Preisen führt. Dies erhöht den Bedarf an Energiespeichern, um die Versorgungssicherheit zu gewährleisten.

Welche anderen Werte neben den Kosten sollten bei der Auswahl von Energietechnologien berücksichtigt werden?

Neben den Kosten sollten auch Faktoren wie CO2-Emissionen, Biodiversität, Landschaftsbeeinträchtigung, lokale Arbeitsplätze und gesundheitliche Auswirkungen durch Partikelverschmutzung berücksichtigt werden.

Outlines

00:00

🌟 Energiekostenvergleich

Dieses Absatz behandelt die Frage nach der günstigsten Energiequelle, indem es verschiedene Faktoren wie Installationskosten, Betriebsstetigkeit und Wartungskosten vergleicht. Es wird auf die Levelized Cost of Energy (LCOE) eingegangen, eine Methode, um die Gesamtkosten der Energieproduktion zu berechnen. Der Autor verwendet eine Rennwagen-Metapher, um die LCOE-Formel zu erklären und vergleicht verschiedene Technologien wie Kohle, Gas, Solar und Windenergie. Die Ausgangspositionen basieren auf den Kapitalkosten für 500 Megawatt Nameplate-Kapazität.

05:03

🏁 Die Auswirkungen von Kapital- und Finanzierungskosten

In diesem Absatz werden die Auswirkungen von Kapital- und Finanzierungskosten auf die LCOE diskutiert. Es wird betont, dass die Kapitalkosten verdoppelt werden können, wenn man die Kapitalrückgewinnung über 20 Jahre berücksichtigt. Es wird auch darauf hingewiesen, dass erneuerbare Energieprojekte im Vergleich zu Kohleprojekten günstigere Finanzierungsbedingungen erhalten, was die LCOE für Kohle erhöht. Nach dem Einbeziehen dieser Kosten überholt Gas die Solarenergie im Rennen.

10:06

💨 Die Rolle von Brennstoffkosten

Der Absatz konzentriert sich auf die Bedeutung der Brennstoffkosten für fossile Brennstoffe im Vergleich zu erneuerbaren Energien, bei denen der 'Brennstoff' kostenlos ist. Es wird erklärt, wie man die Brennstoffkosten in die LCOE-Formel einbezieht und wie die Schwankungen von Brennstoffpreisen, insbesondere für Gas, die LCOE beeinflussen können. Nach dem Einbeziehen dieser Kosten führen Solar- und Windenergie im Rennen, während Kohle und Gas hinterherliegen.

15:08

🛠 Betriebs- und Wartungskosten

In diesem Absatz werden die Betriebs- und Wartungskosten (O&M) für verschiedene Energiegeneratoren erörtert. Es wird hervorgehoben, dass Solarenergie die geringsten Kosten in dieser Kategorie hat, gefolgt von Gas, während Wind- und Kohlekraft mehr Wartung erfordern und somit höhere Kosten verursachen. Nach dem Einbeziehen dieser Kosten als letztendlichen LCOE-Bestandteil zeigt sich, dass Solarenergie und Windenergie vor fossilen Brennstoffen liegen.

🔄 Herausforderungen der Energieübergang und Werte

Der letzte Absatz reflektiert über die Herausforderungen des Energieübergangs hinaus über die reinen Kostenaspekte. Es wird betont, dass die Verfügbarkeit von Energie und die Integration von erneuerbaren Energien in das Netz wichtig sind, insbesondere als der Anteil an veränderlichen erneuerbaren Energien zunimmt. Der Begriff des value adjusted LCOE (VALCOE) wird eingeführt, der den Wert der Energie in Abhängigkeit zu ihrer Produktionszeit berücksichtigt. Es wird auch auf die Bedeutung anderer Werte wie CO2-Emissionen, Biodiversität, lokale Arbeitsplätze und Gesundheit hingewiesen, die bei der Entscheidung über die bevorzugte Energiequelle berücksichtigt werden sollten.

Keywords

💡Energiequelle

Eine Energiequelle ist ein Material oder eine Naturkraft, die zur Erzeugung von Energie verwendet wird. Im Video wird diskutiert, dass die günstigste Energiequelle diejenige ist, die am wenigsten Kosten verursacht. Beispielsweise werden im Skript verschiedene Energiequellen wie Solarenergie, Windenergie, Kohle und Gas verglichen.

💡Levelized Cost of Energy (LCOE)

LCOE ist eine Methode zur Berechnung des durchschnittlichen Kostens pro Megawattstunde, die von einer Energiequelle erzeugt wird. Es berücksichtigt alle Kosten, von der Installation bis zum Betrieb und zur Wartung. Im Video wird LCOE als Standard zur Bewertung der Kosteneffizienz verschiedener Energiequellen verwendet.

💡Kohlekraftwerk

Ein Kohlekraftwerk ist ein Energieerzeugungswerk, das Kohle als Brennstoff verwendet. Im Video wird darauf hingewiesen, dass Kohlekraftwerke eine der teuersten Optionen sind, insbesondere wenn man die Gesamtkosten im Laufe des Betriebslebens berücksichtigt.

💡Gaskraftwerk

Ein Gaskraftwerk nutzt Erdgas als Brennstoff, um Energie zu erzeugen. Im Video wird betont, dass Gaskraftwerke im Vergleich zu Kohlekraftwerken niedrigere Investitionskosten haben, jedoch auch an die Verfügbarkeit und Kosten des Brennstoffs gekoppelt sind.

💡Solarpanel

Solarpanel ist eine Anordnung von Solarzellen, die Sonnenenergie in elektrische Energie umwandelt. Im Video wird Solarenergie als eine der kostengünstigsten und wachsenden Energiequellen hervorgehoben.

💡Windturbine

Eine Windturbine ist ein Gerät, das Windenergie in elektrische Energie umwandelt. Im Video wird erläutert, dass Windturbinen, insbesondere Offshore-Turbinen, aufgrund ihrer Effizienz und steigenden Anzahl zunehmend wichtige Energiequelle werden.

💡Kapitalkosten

Kapitalkosten beziehen sich auf die anfänglichen Investitionskosten für die Errichtung einer Energiequelle, einschließlich der Kosten für Ausrüstung und Installation. Im Video wird die Auswirkung von Kapitalkosten auf die LCOE diskutiert.

💡Finanzierungskosten

Finanzierungskosten sind die Kosten, die entstehen, wenn ein Unternehmen Geld aufnimmt, um ein Projekt zu finanzieren. Im Video wird gezeigt, wie Finanzierungskosten die LCOE beeinflussen können, insbesondere für fossile Brennstoffe im Vergleich zu erneuerbaren Energien.

💡Brennstoffkosten

Brennstoffkosten sind die Kosten für Brennstoffe, die für die Energieerzeugung in Kraftwerken benötigt werden. Im Video wird betont, dass diese Kosten für fossile Brennstoffe wie Gas und Kohle eine wichtige Rolle in der LCOE spielen.

💡Betriebs- und Wartungskosten

Betriebs- und Wartungskosten umfassen die laufenden Kosten für den Betrieb und die Wartung einer Energiequelle. Im Video wird erläutert, dass diese Kosten, insbesondere für Solarenergie und Windenergie, gering sind, was ihre Wettbewerbsfähigkeit erhöht.

💡Energiespeicherung

Energiespeicherung bezieht sich auf die Technologien und Methoden, die verwendet werden, um erzeugte Energie für spätere Nutzung zu speichern. Im Video wird angemerkt, dass die Entwicklung von Energiespeicherlösungen wie Batterien zukünftig die Verteilung von Energie und die Effizienz des Energiesystems verbessern könnte.

Highlights

LCOE (Levelized Cost of Energy) is a standard way to combine various cost factors of energy sources to get a single number for the overall cost of energy.

Utility-scale solar panels are the cheapest in terms of capital cost for 500 megawatts of nameplate capacity.

Coal power plants have the highest capacity factor at 66%, meaning they operate closer to their nameplate capacity more consistently.

Combined cycle gas plants have an average capacity factor of 50%, while peaking gas plants operate at around 10% capacity.

Offshore wind turbines can achieve capacity factors over 50%, though their equipment and other costs are higher compared to onshore wind.

Financing costs can double the capital cost of energy projects, and renewables often attract more favorable financing terms due to being less risky investments.

The fuel cost for coal and gas power plants significantly impacts their LCOE, with recent spikes in gas prices highlighting this volatility.

Solar and wind energy have no fuel costs, giving them an advantage in the LCOE race, especially when fossil fuel prices are high.

Operations and maintenance (O&M) costs vary, with solar having the lowest, followed by gas, and then wind and coal having higher O&M costs.

In 2021, solar comes out as the cheapest energy source according to the LCOE calculation, followed by wind, with fossil fuels trailing behind.

The LCOE does not fully capture the complexity of energy costs, as it doesn't account for the availability of electricity at different times.

Value-adjusted LCOE (VALCOE) considers both the cost and the value of electricity at the time of production, providing a more complete picture.

Gas turbines, despite having a high cost per megawatt hour, are valuable for their ability to generate electricity on demand, especially during peak times.

The rise of energy storage solutions, like batteries, will help balance the supply and demand, smoothing out price fluctuations and enhancing the value of renewable energy.

There are other important values to consider beyond cost, such as CO2 emissions, biodiversity, health impacts, and local job creation.

Transcripts

What do you think is the best energy source? and what I really

mean is what's the cheapest?

So gas power plants are pretty cheap to install,

coal power plants can run fairly constantly,

solar panels don't need much maintenance.

And the huge wind turbines that are popping up in greater

numbers every year are very efficient.

So I make a lot of videos about renewable energy and wind

turbines especially. And I often talk about efficiency and ways

to improve it. And every time I do that, I get dozens of totally

reasonable comments to the effect of "who cares about

efficiency when the wind is literally free." And then the

commenter will suggest that the more relevant topic is the cost

of the generator, or how many you can fit in a certain area,

or which has the lowest maintenance cost, basically,

which is the best and ultimately, which is the

cheapest energy.

So I want to make this video to address all of these concerns.

It isn't actually very useful to compare just one or another of

these factors without considering them all together.

And there is a standard way to combine all of these important

things. And that's by calculating the levelized cost

of energy LCOE. That will give you a single number for the

overall cost of energy. So then you can compare different

technologies with each other. LCOE is calculated using this

equation. And I've actually heard that some people don't

find equations that exciting. So for those few people who don't

find equations, very exciting, I'm going to use a race car

analogy to explain it today.

So this method of analysis was basically invented by Lazard,

and their latest version of the analysis has just come out in

this very exciting report. So we can use their up to date figures

to see how the cost of energy compares for renewables versus

fossil fuels.

Alright, so let's go to the race. We're on our way to the

start line. And we've got coal gas, solar and offshore wind

ready to go and the grid positions will be determined by

how much the generators cost. So let's say 500 megawatts,

including the equipment cost and everything else that you need to

pay to transport, install and connect to the grid. 500

megawatts worth of utility scale solar panels is the cheapest of

the four so it gets pole position. Second is combined

cycle gas closely followed by onshore wind and coal power

comes in most expensive, by a really long way actually at over

$3 billion. So the capital cost for 500 megawatts of nameplate

capacity gives us our starting grid, but the real race hasn't

even started yet, because it's not the capacity that you know,

that we use.

When we get our electricity bills, we don't buy watts, or

kilowatts or megawatts. Those are instantaneous measurements

of power, kind of like how fast water is coming out of the hose.

When we buy electricity, or we buy a megawatt hours on a

household scale kilowatt hours, which is energy, more like how

many buckets of water. So to calculate the cost per megawatt

hour, we need to know how many megawatt hours the generator

will produce over their lifetime. How many buckets of

energy if you like.

To calculate the cost of energy, we need to divide the total

production over the generator's lifetime by its cost. And the

lifetimes typically vary between 20 and 40 years for the

generator types were comparing. if they were running 24/7 at

100% of their nameplate capacity, then you would get 4.4

million megawatt hours each year of their operating lifetime. But

no generator operates that much. solar doesn't work at night or

on cloudy days. Wind turbines don't turn when there's no wind,

coal and gas power plants ramp up and down depending on demand

and all kinds of generator have a little downtime for sheduled

and unexpected maintenance. If we look at the average figures

in the latest LCOE report, we see coal with the highest

capacity factor at 66% and solar with the lowest at 23%. So to

compare those, you would need three times as much solar

capacity as coal to get the same output. And because the coal

plant last longer to 40 years for coal versus 30 for solar,

overall, you'd need about four times as much solar panels to

get the same total amount of energy over their life as one

one coal power plant.

So gas here has a 50% capacity factor, which is average for

combined cycle gas. But peaking gas plants are run with a low

capacity factor - on average about 10%. They only run to

supply demand spikes. The Australian government is

planning to build a new gas peaker in Kurri Kurri. And it's

only expected to have a capacity of 2%. So that means it's

unexpected around on average a total of about one week per

year. And to continue digging in just to fill out the picture.

The average capacity factor given for wind is 38%. That's

for onshore wind, and there is a trend more towards offshore

wind. And this is mostly because you can get really good capacity

factors offshore over 50% is pretty normal there. But that

does come with a trade off that equipment and other costs are

higher offshore.

So combining all this once you factor in lifetime capacity

factor, we get a cost per megawatt hour based purely on

how much the equipment costs and how much electricity it will

produce in its lifetime. So let's go back to the race and we

can see things have changed a lot. Solar is still the

cheapest. But gas is now close behind, followed by wind. And

coal has caught up most of its initial handicap due to having

the highest capacity factor and the longest operating life.

So the race is really heating up. But that's just for the

capital cost. So we need to add everything else. So now we head

to the next corner, which is financing costs: how much it

costs the company to get the money it needs for the project.

Using a weighted cost of capital of 7.7%. Over a 20 year project

lifetime, the capital recovery is going to double the cost. For

longer project lifetimes, it's more. and that assumes all

energy types have access to the same rates. But in reality,

these days we're seeing coal projects having trouble

accessing good finance terms compared to renewables projects.

That's because wind and solar projects are seen as less risky

than coal and they therefore attract more favorable terms. So

you can imagine that building a new coal power plant now with an

expected 40 year lifetime. So if you're a bank that wants to lend

to that project, you need to factor in the chance that in 40

years things will change. And that coal power plant may very

well not be profitable anymore and might not be able to pay

them back.

After we add in financing costs gas has overtaken solar and

snuck into the lead. But can it stay there? Oh, what's this gas

and coal are pulling in for a pitstop they need fuel! but the

wind and sun are free, so they don't need to stop. they're

making up time.

To calculate the fuel cost per megawatt hour, we need to know

the energy content of the fuel and its cost put this into the

LCOE formula, we use the heat rate which is a slightly weird

unit, BTU per kilowatt hour. BTU is British thermal units and BTU

and kilowatt hours are both energy, just in different

systems. There are 3412 kilowatt hours in a BTU so you can divide

the heat rate by that to get the efficienc. the efficiency is

kilowatt hours of heat energy compared to kilowatt hours of

electricity that comes out of the generator. And just to

complicate things even further, the heat rate varies depending

on the quality of the fuel source. So for coal, it's

between about 8,700 12,000 normally, but sometimes can be

lower for very good quality coal. And for combined cycle

gas, it's about 6000 to 7000.

So putting that in terms of efficiency, it's around 28% of

our coal power plant and 50% for combined cycle gas. And if we

just want to compare that to the efficiency of renewable energy

sources, a good wind turbines a little over 50% efficiency and

solar panels somewhere around 20%. But as you guys like to

point out: who really cares? because the wind and the sun

come for free.

For coal and gas, though the fuel cost matters a lot.

Obviously, the price of these commodities goes up and down.

And at the time of recording this, the price of gas in Europe

was through the roof as high as 110 euros per megawatt hour a

few weeks ago, which is about 37 US dollars per million BTU -

more than 10 times its recent average of $3.45. If you add

that cost in and your LCOE for a gas generator, it just becomes

ridiculous. as unfortunately, Europeans are learning the hard

way right now. But let's just assume that will probably

eventually settle down again. So let's use average prices to

estimate how much fuel costs are going to add to the LCOE of gas

and coal power.

So where do we end up after our fossil fuel pitstop coal took a

$24 per megawatt hour hit and gas when you use average prices

$17. By the time gas and coal get back on the race course

solar and wind have gone through. And so now we have

renewables leading the race as they go to the final corner.

The homestretch of our race cars is operations and maintenance.

Each generator type has fixed maintenance cost each year, no

matter how much was generated, which is kind of like how you

still need to change the oil in a petrol car, even if you barely

ever drive it. And those fixed costs include the cost of

leasing land. And then fossil fuels also have a variable

maintenance cost per megawatt hour generated, which is kind of

like replacing the timing belt in a car every, every time you

drive 100,000 kilometers. for O&M in total solar has the

lowest cost by a long way followed by gas. And then wind

has a fair amount of maintenance required, as does coal so their

costs are higher.

And that was the last component of our LCOE calculation for each

technology. So after all that here's the chequered flag. in

2021 Solar comes in the winner followed by wind, then the

fossil fuels are actually a fairway back.

So that is LCOE by way of race car analogy. And I mentioned at

the start that the values for each of these parameters were

taken from Lazard's latest LCOE, which is version 15. That report

gives a range of values for each technology. And we use the high

case in this analysis shown by the pink dots here. You can see

in this chart the contribution that each component of LCOE made

for each technology, and if you want to play around with the

assumptions, then you can head to keynumbers.com And they have

a really good dashboard where you can play around with each

parameter and see the effect that it has including adding a

price on carbon emissions in case you think that there should

be an incentive to, you know, not treat the atmosphere like a

free public sewer.

So when I was doing a bit of sensitivity analysis on the

LCOE, I was a bit surprised actually to see how big of an

influence the financing costs have on the LCRA. And then also

the fuel cost. These two combined are probably the most

unpredictable aspects of the future LCOE. So if we see fuel

costs stay high in the future, and financing costs rising for

fossil fuels compared to renewable energy projects, then

these two things together could really dramatically widen the

growing cost advantage that renewables have over fossil

fuels.

Lazard publish an updated version of the LCA every year

and since 2015 wind and solar have been the cheapest.

in fact by now even the marginal operating costs of operating a

fossil fuel power plant, so that like assumes an older power

plant where they've already paid paid off the cost of the

capital. Even in that case, the marginal cost of fossil fuels is

higher than new build wind and solar in a lot of situations.

So that's it right, wind and solar are the cheapest and getting cheaper, end of story

energy transition solved, yeah?

If renewable energy is the cheapest, then anybody who likes

money should have already stopped building fossil fuel

power plants as soon as renewables got cheaper than

fossil fuels. But that happened six years ago. And we are

gradually using less fossil fuels. But it's certainly not

disappearing completely, yet. Why?

So it is true that wind and solar have won the race for the

cheapest electricity production. But that was pretty much just

the easy part of the energy transition. As we get more and

more variable renewable energy in the grid, that cost of energy

becomes less and less relevant. And we start to have to worry

about the availability more. And so LCOE on its own can only take

us so far, when we compare different energy sources. I used

the analogy earlier - and yeah, I know I've used like really a

lot of analogies in this video - I compared megawatt hours of

electricity to buckets of water. But there's a key flaw with that

analogy. You could put coal in buckets and wait to make

electricity with it when you want. But you can't put like

wind and solar generated electricity in a bucket for

later. you have to use it when it's made.

So super cheap, renewable electricity is great, but only

if you can use it when it's generated. If you want

electricity at night, it can't come from solar on its own. In

that way, it's not 100% relevant how cheap solar has become, it's

not the full story, there's obviously a time of use

component that we need to add to LCOE if we want to get the more

complete picture. And there is a concept to do this. It's called

Value adjusted LCOE VALCOE. And it does that by comparing not

just the cost of the electricity generated, but also its value at

the time of production.

And this chart from the IEA shows how the value of different

energy technologies will change as we increase the proportion of

variable renewable generation up to 50%. So when there's a lot of

solar power in an electricity grid, it all comes on at a

similar time, if you know the solar panels are near each

other, leading to an oversupply at those times, and therefore

lower and sometimes even negative prices. The cost of

that solar energy calculated with LCOE is very low. But the

amount of energy that the solar panel owner can get for that

energy is also low. So the value adjusted LCOE reflects that.

And at the other end of the spectrum, we have gas turbines,

which have a high cost per megawatt hour, but the operators

can choose when to turn them on. So they'll only generate at

times when wholesale prices are fairly high, which might be

because there's not that much wind or solar available, or you

know, maybe a coal power plant exploded or something like that.

So they don't operate all that much. But when they do they get

paid well, so they have a high value adjusted LCOE.

It's worth noting that this infrequent operation also means

that their greenhouse gas emissions are reduced relative

to if they were operating with a high capacity factor. So that's

one reason why I think we'll probably see gas turbines

continue to fill gaps in wind and solar generation well into

the future and you know, then gradually reducing as other

energy storage options come on board like batteries.

And I'm not that worried about it. I'm not that worried about

the emissions from new gas generator like the Australian

Government Kurri Kurri one. If it's only used a tiny bit, then

it will only release a tiny amount of emissions. So it might

be a big waste of public money, but at least it won't have that

much of a climate impact.

So value adjusted LCOE, it adds something, but it's still not

telling the full picture because it projects into the future

based on today's operating environment. In reality, no

one's going to be investing in more solar farms if they're

mainly working during periods where there's negative

electricity prices. But if we continue to see a lot of

negative prices on sunny days, followed by price spikes in the

evenings and that's the basis of this duck curve chart, which

you've probably seen before. If this persists, well then

batteries and other forms of energy storage are gonna start

to look pretty attractive to investors who want to do a

little energy arbitrage.

They'll get paid to charge their batteries on sunny days and then

get paid even more to sell that power back in the evenings. So

the more storage we get online, the less price extremes we'll

see smoothing out that famous duck curve a bit. And meaning

that the real value adjusted LCA when we reach 50%, variable

renewable generation, it will probably look really different

to how it's predicted to now. If you want to hear more about

these kinds of changes in the energy system, then check out

this video I made with renewable energy finance experts, and

podcasters, Laurent and Gerard earlier this year.

And if you want to support the channel to make more videos like

this, then you can join the engineering with Rosie Patreon

team. And we would love to welcome you to the exclusive

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the future of the channel.

I just wanted to pop back in because while I was editing this

video, I could tell that there was a bit of a gap. And I knew I

knew I would get comments telling me that dollars are not

the only value that's relevant here. And I definitely agree

with that.

So I wanted to mention that whilst we've been really focused

on the cost, bringing the cost of renewable energy down over

the last decade, which is a great thing. Obviously, there

are other values that are important. There is also the

value of not emitting co2 into the atmosphere, which I did

mention briefly. But I also just want to add, there's a bunch of

other factors I didn't mention earlier, like biodiversity,

having uninterrupted views, having local jobs, health

impacts from particulate pollution, all of these things,

and many more are relevant to which energy source we choose.

And I don't really think we've done a great job at making

conscious decisions about which of these we value as

communities. And it's something that I hope that's gonna we're

going to get better out over the next decades, I'd really like to

see sensible discussions about the trade offs that we need to

make between all of these factors since you know, no

technology is impact free. and waiting for a perfect energy

technology to come along is just going to guarantee climate

catastrophe because it's just never going to happen.

Anyway, that's pretty off topic, maybe something for another day.

I just want to finish by giving a big thanks to John Poljak, the

founder of key numbers, he did all the calculations for this

analysis. And he also picked up in a draft I showed him what

would have been an embarrassing mistake in one of the figures.

And he was the one who suggested the racing analogy. So thanks,

John, for making this video more interesting and more accurate.

And thanks to you all for watching. I'll see you in the

next video.