In today’s issue:

  • When 100% still isn’t enough, you know you’ve got a problem
  • Excess or shortage, but nothing in between
  • Does adding more renewables help or hinder?

Success, everyone! Renewables generated enough electricity for all of California for 30 days out of 38. And it’s managing to produce enough electricity for all of Australia too, at times.

The Germans pulled it off back in 2018, when renewables generated about 100% of demand… for a while. Scotland managed a spell this year. Last year, Portugal had enough renewables to power itself for an entire weekend.

It’s impressive stuff. But it begs the question: why do we need more?

Trillions of pounds in investment are planned to increase renewable energy capacity… in places that are already maxing out. This seems a bit odd. What sort of energy system needs more of the same when it already produces too much?

We’re already seeing the consequences of producing too much electricity. Negative electricity prices, renewables paid to stop producing, CFD pricing that pays renewables well above the market price for electricity, and countless other signs of too much power in the system.

Al this is of course occurring because renewables are intermittent. But all forms of power are intermittent. Even nuclear needs maintenance. Especially if you don’t maintain it properly.

The true distinction is whether humans can control the intermittency. Even a source of power that can only run half the time would be just fine if humans could decide when that time is.

But not only can we not control renewables. We can’t predict them either. This has created an impressively long list of alternative problems that humans haven’t had to deal with before. Even sailors had the trade winds to rely on.

More importantly, they’re problems which everyone except renewable energy must pay for…

No capacity, or excess capacity, but not much in between 

Take a look at a chart of how renewables perform and you’ll notice something. They tend to be either fizzing with so much energy we don’t know what to do with it, or doing very little at all. But there’s not much time spent in between.

This is not much of an insight. The wind blows or it doesn’t. It’s either day or night.

But what this means for our energy grid hasn’t quite been grasped.

As renewables provide ever more power, their correlation is going to become a rather big pain in the neck. When it’s windy or sunny we’ll have too much power. When it’s neither, we won’t have enough. But there won’t be much time in between.

Goldilocks will not be happy about her energy bill at any point in time. She’ll either be overpaying renewables for producing energy that isn’t needed, or France for nuclear power imports.

The price is one thing. Who pays it another.

Renewables also require an enormous grid to function. They’re built in inconvenient places. And the need to interconnect the country to combat intermittency adds the need for high voltage and direct current transmission lines.

Building, running and upgrading this grid is going to cost trillions. Who is going to pay? What if we can’t afford it?

Then there’s the cost of electricity storage. By adding batteries and other forms of electricity, we can combat intermittency… for a while. But how long? At what cost? And do you really think the government will get that decision right?

Around 25% of a renewable energy-based grid’s flexibility will reportedly come from something called “demand flexibility”. This is when you shuffle around your own electricity use to suit what renewables deem fit to supply. The mechanisms for this are of course surge pricing and smart meters.

Unfortunately, we now know these don’t work. Let’s leave aside the issues we’ve had with those notorious smart meters. Canada has used surge pricing for years now. The Telegraph has a brilliant article about how that’s working out:

In 2014, four years after TOU was introduced in Ontario, a major review of the project by the Office of the Auditor General of Ontario found that it had failed to significantly bring down household energy consumption during times of day when the energy grid was historically busy.

It compared ratepayers who were moved to TOU with some 77,000 households which kept paying fixed-rate deals already agreed with suppliers, where the per kilowatt hour price of energy remains the same all the time.

“Consumption patterns of retail [fixed] and TOU ratepayers were about the same, suggesting that TOU pricing provided no more incentive to change usage behaviour than retail [fixed] contracts,” it said.

Consider whether people like the idea of surge pricing for their power. Especially the big users like industry. I suspect it won’t be very popular. And that will be felt at the polls. Surge pricing will go the way of the heat pump and combustion engine car ban.

So, how will renewables manage without the 25% flexibility they’re presuming? Not well.

Here’s the rub: in a renewables-based energy system, no matter how much renewables we build, no matter how big the grid, and no matter how much storage, there will always be the risk of a power shortage due to the weather. All we’re really debating is how big that risk should be.

What bothers me about this is that the consequences of minimising that risk are not born by those who advocate for more renewables. A wind power developer doesn’t have to pay for the backup gas generator or long-term energy storage, for example. Nor for the electricity grid upgrades either.

This means we have dangerously misaligned incentives. Those who are paying for renewable’s hidden expense are not the same as those who profit from it. We’re setting ourselves up for disaster.

Fortunately, there’s nothing like the consequences of your decisions to help you wake up. And the form of energy we turn to when we do wake up is a trend you can invest in now.

In the end, we still need backup power which must sit there waiting and unprofitable until the day it is needed. What does it cost to maintain that plan B?

Decades into this energy transition we’re stuck relying on foreign gas and foreign renewables components from geopolitical enemies in the Middle East, Russia and China. Our pants are down and we’re hoping nobody will take advantage.

I say it’s time to beat them at their own game.

Until next time,

Nick Hubble
Editor, Fortune & Freedom