The Impact of Increased Demand for Green Energy on Electricity Prices

The demand for green energy is on the rise globally, driven by environmental concerns and sustainability goals. However, the transition to renewable energy sources comes with its own set of challenges, particularly in terms of electricity prices. This article explores how the increasing demand for green energy affects electricity prices and highlights the economic implications of this shift.

Introduction to Green Energy Demand

Many individuals and organizations are demanding green energy for various reasons. In countries like Canada, where I reside, the push for green energy is evident, but often comes with questions about who the actual demand-driven entities are. This article delves into the data and trends surrounding this demand and its impact on electricity prices.

Data and Findings

Madison Czerwinski and Mark Nelson's data from the U.S. over the period from 2009 to 2017 reveals a significant trend. Overall, electricity prices rose by 7 percent during this period, whereas electricity from solar and wind grew from 2 to 8 percent. This growth was even more pronounced in states like North Dakota ( 40 percent) and South Dakota ( 34 percent). Other states also saw significant increases:

North Dakota: Electricity prices increased by 40 percent, while solar and wind grew to 27 percent. South Dakota: Electricity prices rose by 34 percent, with solar and wind up to 30 percent. Kansas: Electricity prices went up by 33 percent, and solar and wind to 36 percent. Iowa: Electricity prices rose by 21 percent, and solar and wind to 37 percent. Oklahoma: Electricity prices increased by 18 percent, with solar and wind rising to 32 percent. Hawaii: Electricity prices went up by 23 percent, and solar and wind to 18 percent. California: Electricity prices increased by 22 percent, with solar and wind rising to 23 percent.

While proponents often argue that wind and solar are inexpensive, the reality is that when you factor in all the external costs, they are not as cost-effective as perceived. This is reflected in higher electricity prices, particularly in states that heavily rely on renewable energy sources.

The Economics of Renewable Energy

When discussing electricity generation, renewable sources include wind, solar, biomass, solar-generated hydrogen using fuel cells, hydroelectric power, and even nuclear. However, it is important to note that wind and solar energy are intermittent and not as consistent as traditional power sources like coal, natural gas, and nuclear.

Capacity Factors

The Capacity Factor is a crucial measure in understanding the effectiveness of different power sources. For instance:

Nuclear plants run at a Capacity Factor of 95% (0.95). Coal plants run at 85% (0.85). Natural gas turbines and/or combined cycle run at 85% (0.85). Wind farms have a Capacity Factor of 31% (0.31). Solar farms have a Capacity Factor of 25% (0.25).

When comparing the output of these sources, a MW of nuclear or coal can produce about 1 MW (0.95 MW x 0.95 for nuclear and 0.85 MW x 0.85 for coal). A MW of wind would produce 0.31 MW, and a MW of solar would produce 0.25 MW. To produce the same amount of electricity as a traditional plant, renewable sources require significantly more capacity. For example:

A MW of wind would require approximately 2.94 systems (2.74 for coal/nuclear). A MW of solar would need about 3.4 systems (3.8 for nuclear).

The internet often oversimplifies the cost comparison, failing to account for the added capacity needed for renewables. Comparing the actual electricity costs of new vs. existing systems can provide a clearer picture. In states like Wisconsin, existing conventional systems have very low costs due to paid-off loans. However, when these loans for wind and solar are also paid off, the systems must be dismantled.

Empirical Examples: Denmark and Germany

Denmark and Germany offer compelling examples of the high costs associated with heavy reliance on renewable energy. In 1985, both countries produced little wind and solar, with residential electricity costs close to the U.S. (7-10 cents/kWh). However, today, Denmark's residential electricity costs are 48 cents/kWh, and Germany's are 46 cents/kWh. The U.S., with lower reliance on renewables, has costs around 16 cents/kWh. This trend can be reflected in charts showing the electricity costs of European countries, displaying a clear correlation between high renewable energy use and high electricity costs.

Conclusion

While the push for green energy is laudable, it must be balanced with economic sustainability. The high costs associated with renewable energy can disproportionately affect lower-income households and hinder the USA's competitiveness in the global market. Organizations like the American Experiment are working to bring these issues to the forefront, providing technical insights to help policymakers make more informed decisions.

It is essential to strike a balance between environmental goals and economic viability. The truth about the cost implications of renewable energy should be widely understood to guide future energy policies effectively.