- Renewable energy’s expensive externalities
- It’s not the costs that count – it’s who counts the costs
- We can’t afford renewable energy
No doubt you’ve heard that renewable energy is vastly cheaper than fossil fuels. But it depends entirely on what is included in the cost comparison…
Do such comparisons compare the cost of the land and space that renewable energy takes up? It often removes vast tracts of productive land, valuable forests or wildlife habitat after all.
Researchers at Leiden University, in the Netherlands, gathered 177 estimates of US power densities across the scientific literature and compared the power densities for nine specific energy types. They discovered solar and wind power need around 40-50 times more space than coal and 90-100 times more space than gas. Biomass was even more space-intensive.
The optimal location for renewable energy is often not linked to where the energy is actually needed. Therefore, we must also factor in the cost of the land needed to move the energy around the country.
Adding in the space that renewable energy takes up relative to other forms of energy would radically shift the cost estimates.
Then there’s the cost of updating the grid to be renewables-proof. The cost is estimated to be in the hundreds of billions of pounds. How much of this is included in the cost estimates of renewable energy when compared to fossil fuels?
As a whole, decarbonising the grid is estimated to cost the UK £3 trillion. But what about the interest bill on borrowing the money to do so? Is that included in the cost of renewable energy?
What if you include the materials and mining costs for producing renewables in the first place? Sure, the marginal cost of running windmills and solar panels is close to zero. However, the resource intensity of building them in the first place is vastly greater than for fossil fuels.
The kilograms of resources needed to produce a megawatt of energy blows out frighteningly for renewables. It takes more than six times the resources to produce a megawatt from solar photovoltaics than gas – and about 15 times for offshore wind.
The world can spare some resources to build out a bit of renewable energy. But a proper green transition would trigger a vast boom in mining and resources refining. What will that cost be?
Including the vast cost of increasing mining to build a renewable energy grid – financial, environmental, human and other costs – would weigh heavily on the price of renewable energy.
Bottlenecks in mining and resources are already making themselves felt, as Bloomberg recently reported in its article, “Europe’s Biggest Offshore Wind Market is Heading For Disaster”:
The UK’s annual renewable energy auction may not include offshore wind for the first time since the system for awarding subsidies began almost a decade ago, posing another potential setback to the government’s net zero targets.
[…]
With supply bottlenecks and inflation increasing the cost of materials, the funding on offer this year may be too little to attract any bidders.
What will the cost of increasing incentives be? Will it be included in the cost estimates for renewables?
Intermittency is another cost not considered. Either we face the price of unreliable power, or the cost of making inherently intermittent power reliable. This can be done in two ways: either build a backup fossil fuel power system, as Germany has done with coal and gas, or build vast energy storage.
Either way, the cost is frightening. That’s why German power prices are so unaffordable and why Germany has ended up relying on coal in the end anyway.
And now add in the cost of the space taken up by backup power systems, such as gas and batteries. Not to mention the emissions they produce in their operation and construction, and the cost of maintaining them. All of this should be attributed to the cost of renewables.
We also have the cost of renewables disrupting wildlife, which is becoming increasingly known and popularised. Oil spills are unsightly, but so are beached whales and shredded eagles.
Coming in second to wildlife, of course, we have the cost of human lives. Wind and solar, once you factor in their backup power provider of gas, and the danger of mining the resources needed to build wind and solar, is likely to be far more dangerous than the form of energy that environmental activists have undermined: nuclear power.
Indeed, considering the human rights violations that are likely taking place in renewable energy’s supply chains across Africa and China, the price of renewables is likely to be rather awkward.
What about the cost of geopolitical risk? The cost that energy consumers in Europe are paying dearly this year. No doubt renewable energy advocates will tell you that the Russians don’t control the wind and the sun. But have they taken a look at the supply chain for wind and solar?
China dominates renewable energy production and the supply and refining of its minerals to an extent that makes OPEC+ and Russia look boring. We are merely swapping one geopolitical energy crisis for another.
The list of selectively excluded costs of renewables goes on and on.
My point is that the costs of renewable energy are being masked and hidden by its advocates, who simply exclude the true price. This is incredibly ironic given it was their inclusion of the externalities of fossil fuels that led them to oppose fossil fuels in the first place. But if we include the externalities of renewables, what would the comparison really look like?
To paraphrase Joseph Stalin, it’s not the costs that count, but who counts the costs. And today, we have renewable energy advocates running the energy system. So it’s hardly a surprise that they claim renewables are cheaper.
A fair accounting of the two systems would expose the true price of going for renewables. And I suspect we simply can’t afford it.
The real risk here is that we undermine our economy as a whole by sabotaging our energy system. The Germans are already struggling with this, despite turning back to coal. Deindustrialisation due to high energy prices has become a major theme in Europe.
If you expect the idealogues to stick with renewables in the face of the consequences, this will start to impact the wider stock market. It could wreak havoc on portfolios relying on “buy and hold” and “stocks go up in the long run”.
But there’s another way. By more actively trading short- and medium-term moves in markets, you can avoid being exposed to the bigger macro risks of energy systems. That’s why Eoin Treacy has recently launched the latest opportunity for you to learn how to trade such opportunities. You can find out more here.
Until next time,
Nick Hubble
Editor, Fortune & Freedom
