Models Hide the Shortcomings of Wind and Solar

A major reason for the growth in the use of renewable energy is the fact that if a person looks at them narrowly enough–such as by using a model–wind and solar look to be useful. They don’t burn fossil fuels, so it appears that they might be helpful to the environment.

As I analyze the situation, I have reached the conclusion that energy modeling misses important points. I believe that profitability signals are much more important. In this post, I discuss some associated issues.

Overview of this Post

In Sections [1] through [4], I look at some issues that energy modelers in general, including economists, tend to miss when evaluating both fossil fuel energy and renewables, including wind and solar. The major issue in these sections is the connection between high energy prices and the need to increase government debt. To prevent the continued upward spiral of government debt, any replacement for fossil fuels must also be very inexpensive–perhaps as inexpensive as oil was prior to 1970. In fact, the real limit to fossil fuel extraction and to the building of new wind turbines and solar panels may be government debt that becomes unmanageable in an inflationary period.

In Section [5], I try to explain one reason why published Energy Return on Energy Investment (EROEI) indications give an overly favorable impression of the value of adding a huge amount of renewable energy to the electric grid. The basic issue is that the calculations were not set up for this purpose. These models were set up to evaluate the efficiency of generating a small amount of wind or solar energy, without consideration of broader issues. If these broader issues were included, EROEI indications would be much lower (less favorable).

One of the broader issues omitted is the fact that the electrical output of wind turbines and solar panels does not match up well with the timing needs of society, leading to the need for a great deal of energy storage. Another omitted issue is the huge quantity of energy products and other materials required to make a transition to a mostly electrical economy. It is easy to see that both omitted issues would add a huge amount of energy costs and other costs, if a major transition is made. Furthermore, wind and solar have gotten along so far using hidden subsidies from the fossil fuel energy system, including the subsidy of being allowed to go first on the electricity grid. EROEI calculations cannot evaluate the amount of this hidden subsidy.

In Section [6], I point out the true indicator of the feasibility of renewables. If electricity generation using wind and solar energy are truly helpful to the economy, they will generate a great deal of taxable income. They will not require the subsidy of going first, or any other subsidy. This does not describe today’s wind or solar.

In Section [7] and [8], I explain some of the reasons why EROEI calculations for wind and solar tend to be misleadingly favorable, even apart from broader issues.

Economic Issues that Energy Modelers Tend to Miss

[1] The economy is very short of oil that is inexpensive-to-extract. The economy seems to require a great deal more government debt when energy prices are high. Models for renewable energy production need to consider this issue, even if any substitution for oil is very indirect.

I think of the problem of rising energy prices for an economy as being like a citizen faced with an increase in food costs. The citizen will attempt to balance his budget by adding more debt, at least until his credit cards get maxed out. This is why we should expect to see an increase in government debt when oil prices are high; oil and other fossil fuels are as essential to the economy as food is to humans.

A recent review paper by Murphy et al. seems to indicate that wind and solar have favorable EROEIs compared to those of coal and natural gas, at point of use. I don’t think that these favorable EROEIs really mean very much when it comes to the feasibility of scaling up renewables, for several reasons:

[a] The pricing scheme generally used for wind and solar electricity tends to drive out other forms of electrical generation. In most places where wind and solar are utilized, the output of wind and solar is given priority on the grid, distorting the wholesale prices paid to other providers. When high amounts of wind or solar are available, wind and solar generation are paid the normal wholesale electricity price for electricity, while other electricity providers are given very low or negative wholesale prices. These low prices force other providers to reduce production, making it difficult for them to earn an adequate return on their investments.

This approach is unfair to other electricity providers. It is especially unfair to nuclear because most of its costs are fixed. Furthermore, most plants cannot easily ramp electricity production up and down. A recently opened nuclear plant in Finland (which was 14 years behind plan in opening) is already experiencing problems with negative wholesale electricity rates, and because of this, is reducing its electricity production.

Historical data shows that the combined contribution of wind, solar, and nuclear doesn’t necessarily increase the way that a person might expect if wind and solar are truly adding to electricity production. In Europe, especially, the availability of wind and solar seems to be being used as an excuse to close nuclear power plants. With the pricing scheme utilized, plants generating nuclear energy tend to lose money, encouraging the owners of plants to close them.

In Figure 7, Palmer shows the pattern of energy investment and energy payback for a particular off-grid home in Australia which uses solar panels and battery backup. His zig-zag chart reflects two offsetting impacts:

(a) Energy investment was required at the beginning, both for the solar panels and for the first set of batteries. The solar panels in this analysis last for 30 years, but the batteries only last for 7.5 years. As a result, it is necessary to invest in new batteries, three additional times over the period.

(b) Solar panels only gradually make their payback.

Palmer finds that the system would be in a state of energy deficit (considering only energy out versus energy in) for 20 years. At the end of 30 years, the combined system would return only 1.3 times as much energy as the energy invested in the system. This is an incredibly poor payback! EROEI enthusiasts usually look for a payback of 10 or more. The solar panels in the analysis were close to this target level, at 9.4. But the energy required for the battery backup brought the EROEI down to 1.3.

Palmer’s analysis points out another difficulty with wind and solar: The energy payback is terribly slow. If we burn fossil fuels, the economy gets a payback immediately. If we manufacture wind turbines or solar panels, there is a far longer period of something that might be called, “energy indebtedness.” EROEI calculations conveniently ignore interest charges, again making the situation look better than it really is. The buildup in debt is also ignored.

Thus, even without the issue of scaling up renewables if we are to make a transition to energy system more focused on electricity, EROEI calculations are set up in a way that make intermittent renewable energy look far more feasible than it really is. “Energy Payback Period” is another similar metric, with similar biases.

The fact that these metrics are misleading is difficult to see. Very inexpensive fossil fuels pay back their cost many times over, in terms of societal gain, virtually immediately. Wind turbines and solar panels depend upon the generosity of the fossil fuel system to get any payback at all because intermittent electricity cannot support an economy like today’s economy. Even then, the payback is only available over a period of years.

I am afraid that the only real way of analyzing the feasibility of scaling up electricity using wind and solar is by looking at whether they can be extraordinarily profitable, without subsidies. If so, they can be highly taxed and end our government debt problem. The fact that wind and solar require subsidies and mandates, year after year, should make it clear that they aren’t solutions.