The Transparency Query
“What does energy cost?” It’s a simple question that should have a simple answer. Energy is as much a necessity as food, shelter, and clothing. A click on the keyboard tells me what those necessities cost. Whole Foods boneless ribeye $11.99/lb. Four-bedroom house for sale in my neighborhood $315,000. Brooks Brothers button-down dress shirt $68.
Of course, I might want to shop around. Costco boneless ribeye $9.99/lb. Or negotiate. “$290,000 cash and we’ll skip the building inspection.” Or look for less expensive alternatives. JC Penny T-shirt $4.99. But prices for food, shelter, and clothing are transparent – as they should be, by definition, in a free market.
In a way, energy prices are transparent, too – gasoline $2.73 a gallon, natural gas $0.97 per 100 cubic feet, electricity 16.07 cents per kilowatt hour, crude oil $74.99 a barrel, coal $65.20 a short ton, uranium $28.85 a pound, and so forth.
But for the general consumer, who needs “energy” in general, the price information contained in these prices isn’t information at all, it’s confusion.
Your car will stall if you put lumps of coal in the gas tank. When your electrical outlets start emitting natural gas you’re in trouble. Thirty bucks worth of uranium would also be a household hazard. And what are you going to do with a 55-gallon barrel of crude oil? How do you even get it open?
It’s hard to compare forms of energy because they aren’t comparable. Needing energy is like needing food, shelter, and clothing but not knowing how the necessities should be put to use. Do you eat the blue jeans? Do you wear the living room? Do you protect yourself from the elements by holding a roasted chicken over your head?
The Comparative Query
For simplicity’s sake we’ll limit our cost analysis to just one form of energy: electricity. But be warned, this won’t do much to clear up the confusion.
I’ve chosen electricity partly because it runs more things around the house than most forms of energy. And partly because the virtue-signalers, the holier-than-thous, the earth-savers, and the climate-redeemers think that there is an immaculate, pure, and saintly form of energy called “electric.”
Which is ridiculous, bow down as they will to their Nissan Leaf. Electricity doesn’t grow on trees unless the Nissan is up one during a lightning storm.
Electricity must be generated from some other energy source. The rescue cats that the virtue-signalers own, rubbing against their yoga pants, are not useful generators of electricity (“renewable,” “sustainable,” and “alternative” though rescue cats may be).
The Expert Query
The asset management and investment advisory firm Lazard is perhaps the world’s leading source of expertise on the cost of generating electricity. It is, at least, the best source I’ve been able to find. Lazard does not have a dog (or a rescue cat) in the fight over particular types of energy generation. Lazard does not generate (or attempt to prevent the generation) of any kind of energy. It’s a bank. It wants to make money. The need for facts is the key fact of capitalism.
If you’d like to read a 22-page PDF with copious annotations in a tiny typeface, I recommend “Lazard’s Levelized Cost of Energy Analysis – Version 11.0”.
I’ll stick to the briefer and somewhat more comprehensible three pages therein devoted to “Unsubsidized Levelized Cost of Energy Comparison.”
The WTF Query
First I had to figure out what “Levelized Cost of Energy” (LCOE) means.
A visit to Wikipedia explained it. Sort of.
“LOCE is an economic assessment of the average total cost to build and operate a power-generating asset over its lifetime divided by the total energy output of the asset over that lifetime.” (Although the “lifetime” stuff makes me wonder whether I get a senior-citizen discount.)
LOCE is measured in “dollars per megawatt hour” or “$/MWh.” So I had to figure out what a megawatt is. It’s a million watts. This sounds like all the watts you’d ever need. But, as with a million dollars, it turns out you can blow though it quick. The average U.S. residential utility customer uses about 10.8 megawatts a year.
Finally, there’s the matter of government subsidies. Lazard, as the PDF subhead indicates, claims its LOCE excludes government subsidies. But there’s an element of government subsidy inherent in every form of energy – even if only in the government’s eminent domain permission (granted or denied) to build or use the infrastructure necessary to deliver the energy (pipelines, power-transmission lines, rail and road transport licenses, etc.).
It would be nice to look at energy prices without consideration of politics. But we might as well look at spaghetti without consideration of pasta.
It would be nice to look at energy prices without consideration of politics. But we might as well look at spaghetti without consideration of pasta.
The Query Itself
Listed below, according to source of power generation, is what electricity costs. Not, of course, what electricity costs you. You pay consumer prices. These are producer prices. Naturally, producers intend to profit. You’ll find that even a hippie in a yurt with a Buddhist prayer wheel hooked to the power grid is looking to make a good thing out of it.
You’ll also notice that, in every source of power generation, there’s a broad variable in the price. Sometimes the variable is so broad that you’ll wonder whether this cost comparison is of any use at all. (I wonder myself.) One reason for the variables is Lazard’s attempt to allow for fluctuating commodity prices and international differences in land, building materials, and labor costs. Another reason for the variables is that people are stupid. You didn’t hire your brother-in-law to install your solar roof panels, did you? You did? Sorry.
The best way to use the below graph is to look at the right side of it, the high-end cost. Odds are that’s what you’ll have to suck up.
Now let’s read the fine print in my footnotes:
1. The $/MWh figures for Alternative Energy do not include the costs of hooking alternative energy into a conventional energy grid. Nor do they include the costs to that grid for what Lazard politely calls “overcoming system intermittency.”
Which means, yes, there’s wind. Wonderful stuff. Wind power enabled Ferdinand Magellan to sail around the world… in three years.
Because the wind doesn’t always blow. And when it does blow, wind sometimes forms itself into a big black funnel and heads for wind farms. You can rely on wind the way you can rely on my teenage daughter. You can rely on her to be anywhere except where you want her to be. Such as home.
“Where are you going?”
“To the library.”
“At 11 o’clock at night?”
2. The high-end price for utility scale solar is what the electricity costs when it needs to be stored because the sun doesn’t work night shifts. Picture a Mayan pyramid-sized pile of 12-volt car batteries rising from the desert floor.
3. The top price of wind is for windmills built off-shore, where they probably will have to be un-built when it’s discovered that the vibration from their blades interferes with Judy Collins singing duets with humpback whales.
4. The upper level of coal-generation cost is for coal plants with 90% carbon-capture technology. This is a better rate of carbon capture than I get from the trees I planted last year on my tree farm. True, that’s because of a fall bagworm infestation and all the trees are dead. But you take my point.
5. Stand-alone gas and diesel generators are on the graph for comparison’s sake. They’re used in remote locations or emergencies and no one would propose them as a source of “conventional” power. Except me, almost every week all winter and during spring and summer thunderstorms (see my “Letter From the Editor” in this issue).
6. Bonus footnote. Hydroelectric wasn’t part of Lazard’s analysis. Maybe because it’s too dam hard (sorry) to price it.
The ‘What Have We Learned?’ Query
Looking – as I suggested – at the right side of the graph, the first thing we learn is to get your brother-in-law down off the ladder. Residential solar is mainly for bragging rights. You think other people are going to be impressed when they look at your roof. Then they look at your roof and see your brother-in-law up there drinking beer instead of installing solar panels, and they think you’re running a nuthouse.
Residential solar is mainly for bragging rights. You think other people are going to be impressed when they look at your roof.
But let’s give the virtue-signalers their due. Large-scale solar is not unreasonably priced. I have no objection to solar even in northern New England. It seems to work for Tom Bodett even though I, who have lived in northern New England longer than Tom, can testify that our region gets a total of 72 hours of sunshine a year.
Tom also lives in Vermont while I live in New Hampshire. The main problem with solar power in New Hampshire is not cloudy skies and long winter nights… The main problem is that the entire state is zoned “Quaint.”
Putting up solar panels is all well and good until the local zoning board gets involved and you find out that your solar panels have to be authentic colonial white clapboard with green shutters.
More of a surprise to me than the price of solar is that, according to Lazard’s LCOE figures, biomass and geothermal look good.
But biomass doesn’t smell good. It’s the methane from rotting trash and sewage. Or, when it does smell good, it’s the ethanol alcohol from food crops. I’m not much of a holier-than-thou but, when pressed, I too can do a little virtue-signaling.
According to the World Health Organization, the globe has more than 800,000,000 under-fed people. Using something that they could eat to make energy when there are so many things useful for the same purpose that they can’t eat (natural gas, sunshine) seems under-good.
(By which holier-than-thou statement I do not mean to impugn the pure and saintly ethanol in scotch, bourbon, rye, vodka, gin, tequila, wine, or beer. People around the globe should be well-fed and get to have a little nip.)
As for geothermal, I have no idea how that works. Tom Bodett drills a deep-ass well and gets hot water. I drill a deep-ass well and get water that’s icy cold (and stinks like rotten eggs). Do well-drilling companies have “hot” and “cold” taps on their drilling rigs? Do they keep a supply of eggs that are past their sell-by date in their truck? I’m turning this geothermal stuff over to the more knowledgeable people on the American Consequences staff. Maybe they’ll have a geothermal investment tip for you some time in the future.
Meanwhile, if you’ve invested in coal power you might as well throw your investment down a coalmine. But be careful. A peek at the carbon panic in the news media and a glance at the $/MWh for coal with 90% carbon capture tell us that the canary has died.
Nuclear power is dead, too. Never mind if scientific and technical advances could (and they probably can) reduce the $/MWh to bupkis. There’s a variable that the bar on the Lazard graph doesn’t show. Actually, it’s more of a constant. As previously mentioned, people are stupid. The stupid public has absolutely and irrevocably convinced itself that nuclear power means a Fukushima in every back yard, and not only will we all be dead from radiation but we’ll be faced with cleaning up the tsunami damage, too.
Meanwhile, wind verges on being free as the wind. Reliability questions aside, you might be puzzled why more electricity isn’t being generated with it. I’m not, even though I live in a place where there’s nothing but wind. I have never seen the swings on our swing set hang vertically. You could light Boston with the power of what blows though the doggie door.
Plenty of windmills have been proposed to grace our local promontories. But the neighborhood virtue-signalers, claiming to love all things natural, always (wind) chime in:
“No, not on that hill – it will block the natural view of sunset!”
“No, not on that hill – it will block the natural view of sunrise!”
“Not on that hill – it’s a natural bird migration route!”
“Not on that hill either – the birds are migrating back!”
I’ve been to wind farms. I’ve watched the blades turn on wind turbines. They don’t go that fast. Any bird that gets hit by one – it’s a Darwin thing.
I’ve watched the blades turn on wind turbines. They don’t go that fast. Any bird that gets hit by one – it’s a Darwin thing.
For electrical generation, taking everything into consideration, the natural choice is natural gas. It wouldn’t seem to require much discussion. But lots of discussion there has been. Let me try to summarize the measured and nuanced, wise and insightful conversation that America is having about natural gas…
Frack you!
There was a time when I knew what energy cost. As I said in my “Letter From the Editor,” I once lived in New Hampshire by myself. My energy needs were modest. I heated with wood, cooked on the woodstove, and did my reading Abe Lincoln-style by firelight.
Yet to meet those modest energy needs, I had to burn a lot of wood. And to burn a lot of wood I had to cut a lot of trees. Every time I started my chainsaw and watched its keen-edged chisel teeth roar along the chainsaw bar at 60 mph inches from my flesh, I knew what energy cost. Or what it could cost.
Energy – it costs an arm and a leg.
