Wrong on Solar: Reason’s Bailey Flubs Energy 101

By Wayne Lusvardi -- November 9, 2020

Fiction: “All signs are that cheap solar power is coming and that’s really good news”. — Ronald Bailey, Reason.

Fact: “California’s rollout of solar baseload power, advertised as cheap and otherwise worthy, failed despite a raft of government subsidies. Think rolling blackouts, time-of-use price spikes, and dropped green-related powerline fire disasters.” (below)

Fact: “Like running out of oil, solar predictions are perennial and wrong.” (below)

Ronald Bailey, a libertarian science writer at Reason Magazine online, has for years claimed that “unlimited free solar power” is the wave of the future.  Thus, it comes as no surprise that he has recently posed the question “Is King Solar Now the Cheapest Electricity Source Ever?”  His conclusion is yes, and “that’s really good news”.

To energy experts, this is new news. Of course the New York Times announced the same back in 1994 (think Enron). Wrote Allen Myerson in “Solar Power, for Earthly Prices”:

Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.

But it is no more true today than back then when solar is compared to grid electricity on an apples-to-apples basis.

Bailey, who was briefly a government regulatory economist, is a long-time science correspondent, climate-change moderate, “liberation biologist” and utopian green-power advocate with an anti-libertarian view that “Republicans should be punished hard” on energy and climate policy. He likes carbon taxes too.

Lazard to IEA, Really?

Bailey cites data from the International Energy Agency’s (IEA) World Energy Outlook (October 2020), which concludes solar photovoltaic power (PV) is “consistently cheaper than new coal or gas fired power plants in most countries and solar projects now offer some of the lowest-cost electricity ever seen” ($30 to $60 per megawatt hour for wholesale electricity in the U.S.), justifying the claim that solar “is the new king of electricity” considering it is lowest “priced”. 

Nineteen days prior to Bailey’s October 28 article, the U.S. Energy Information Agency (EIA) released its Today in Energy report (Oct. 9) that contradicts Bailey and the World Energy Outlook. EIA states that wholesale solar-photovoltaic-generated electricity averaged $83 per megawatt hour in 2019 in the US, reflecting $49 per MWh more than fossil fuels ($34/MWh) and $58 more than nuclear ($25/MWh), or 153 to 232 percent higher than fossil fuels and nuclear power, respectively.

The difference in the IEA World Energy Outlook and the US EIA Today for PV prices can be attributed to IEA using Lazard’s Levelized Cost of Energy for an installation projected “over the warranted life of the system”, compared to the US EIA’s calculation of “revenues that generators (actually) receive in wholesale power markets divided by their technologies’ electricity generation” in 2019.

It must also be pointed out that Lazard is a global asset management and advisory service with a self interest in placing investors in renewable energy investments, not a government energy information agency. Lazard is a for-hire

Lazard clarifies that “by purchasing solar you are essentially creating a hedge against rising utility costs by fixing the kWh rate at a known cost”.  But, then, why have bundled electricity costs risen in California since the transition to solar baseload power?

Moreover, Lazards’s formula does not factor in the cost overlapping backup power for 5.8 hours per day, the energy cost for the other 18.2 hours per day, new transmissions lines for green power, extra grid coordination and retrofit costs to manage intermittent power, or the costs of side effects from downed green power line fires.

Bailey Hedges

Bailey acknowledges that Lazard’s formula considers only about “58 percent of the cost of power to retail customers” but fails to report that these extra costs are mostly shifted onto conventional power providers and customers and don’t entirely disappear.

Bailey cites a report from the liberal think tank Resources for the Future that renewable energy does not require fuel such as natural gas or uranium. But coal is captured sunpower, and hydropower is also free except for the cost to generate and transmit it.

Moreover, neither report considers the energy price risk in California that depends on 32 percent imported electricity (2018) from nearby states mainly from wind and hydropower sources at sunset hours when solar power ramps down (“Duck Curve” hours), which would be potentially subject to rising utility costs due to green energy mandates.

Bailey fails to recognize that because of California’s switch to solar baseload power at midday peak hours, it has shifted to time-of-use pricing that spikes the price of electricity when cheap or free solar PV power is not available after sunset each day.

California Data Points

The recent rolling blackouts in California due to a heat wave were partly due to insufficient in-state power available.  But more importantly, they were also due to nearby states not having enough wind and hydropower to bail out California because they were also shifting to solar baseload power for 5.8 hours per day and needed that backup power for their own grids.

During the recent heat wave, California was depending on its interstate “Energy Imbalancing Market” for backup but it was a metaphorical king caught with its pants down and no surplus power to sell to due to their transition to solar as baseload power.

Moreover, neither the World Energy Outlook or the US EIA apparently considers that the Los Angeles City Department of Water and Power (LADWP) and the Southern California Power Authority (SCPA) municipal power grids mostly avoided the recent statewide rolling blackouts (August-September) because they depended on 67 percent imported gas, coal and nuclear power from cheap long-term contracts with out-of-state power providers.  

Bailey cites Brian Murray of Duke University that cheap or free electricity generated from solar PV should be fixed by price discrimination (my term) of giving customers the choice of different service plans that factor in these escaped costs in their pricing.  But politicians will always want to rig the pricing of those plans for political gain that, once again, shifts costs back onto the middle class. 

The actual overall price outcomes of a future of switching to solar PV for baseload power, plausibly coupled with battery power, is unknowable and cannot be pre-concluded to be a “really good thing”.  The battery technology for decentralizing (distributing) California’s electric grid isn’t even invented yet and may never be.  It is utopian and premature to believe a solar powered grid at zero prices is axiomatically good because uncertainty and unanticipated consequences will always arise.

Low cost solar PV power for 5.8 hours per day is only viable in places like California which has a Basin Topography that forms inversion layers of smog traps, whereas in Plains and Gulf States emissions are dissipated by wind (the solution to pollution is dilution).   

Conclusion

California’s roll-out of solar baseload power as the cheapest energy source is mis-advertised and hasn’t turned out as planned given massive cost shifting, rolling blackouts, time-of-use price spikes and dropped green powerline fire disasters. Solar PV has been more like the story of the “king with no clothes” than the king of low prices.

As for Ronald Bailey, his analysis is just as shallow as as the energy Malthusians that he argues against otherwise. Like running-out-of-oil, solar predictions are perennial and wrong.