Your assumptions for capacity factor are unrealistic. Great Plain's cap factors on the best sites can be 50% on average for the year. But DTE's newest wind farm in MI has an annual cap factor of 25%. But MI govt has committed to 100% clean energy. This means MI must have enough wind farms to power the grid during the worst month of the year. In July, MI wind's cap factor drops to 10%. This means MI will need 10 wind farms to replace 1 coal plant with the same nameplate capacity. But even 10 wind farms will come up short during extended wind droughts. You can't say "on average, the grid will be powered". Wind and solar just don't work in many places even if you ignore the outrageous costs.
Hi David, I think we used a fair estimate of the capacity factors of wind facilities that have built over the last several years, which are predominantly in the Great Plains. I also agree that they will be lower elsewhere and this LCOE doesn’t take the total costs into account. If you want our analysis on that, check out our piece How to Destroy the Myth of Cheap Wind and Solar.
More likely using past performance of recent wind farm builds is going to be overly optimistic. Wind turbine avg performance will decline, while O&M costs increase, as the turbines age.
And just as we are experiencing with hydro plants. They are sited in the areas with the best weather related conditions. However those "best conditions" inevitably shift with time. Areas that were once very good, in all probability will decline in wind resource. This fact is made even worse since we know more wind farms = lower wind resource. And as the best sites are exploited, that leaves less productive sites.
And it is also known that climate change will cause the best wind & solar regions to shift, while reducing the overall magnitude of the wind resource by reducing temperature differentials which are the fuel for wind energy.
Agree. You have to power the grid and charge enough batteries to carry you through the other 50-100 percent of the time the wind isn’t blowing. That adds up to more wind farms and batteries than anyone can afford.
Actually the CF% (or average output) is not the best metric for wind & solar productivity. The median output is a much more useful metric which more closely represents the utility of the wind & solar generation. Notably the median output is typically quite a bit lower than the avg output.
My friend in Dallas just lost everything in her fridge because a tree branch falling made a nuclear power plant a $20 billion paper weight….plan accordingly!
Whenever I see the Lazard stuff it is so wrong and misleading that wonder what the real agenda is. Fooling investors? Why?
I loved the transmission queue reform bit. You can reform the process, as FERC is attempting, but you can’t “reform” hundreds of billions of dollars in of necessary grid upgrades into existence. That’ll take 20 years.
I don’t suppose Lazard will ever tackle the elephant in the room. If wind and solar are so cheap, please explain power prices in Germany and California.
Whenever someone starts talking about averages where grid operations are concerned, little fragments of doubt creep into my mind.
I think Lazards realized that if they make renewable energy sources look for more cost-effective than they really are, they get far more media coverage, donations and social media traffic. When they first started these reports, Lazards was very careful to say the LCOE is not comparable between renewable and non-renewable sources. They never combined the two on the same graphic. They were not as well known.
Then they moved the caveat to the appendix.
Now Lazards deliberately put them on the same chart and “forgets” the caveat. Not sure If the caveat is even in the appendix any more. I have lost confidence in them.
Lazard is a bank. I don’t think they are soliciting donations! More likely the LCOE “analysis” is just a marketing strategy as they are trying to advertise their financing services to get business.
Plus Peter Orszag is the Lazard CEO (former Obama cabinet member) so there is also likely some renewables true believer energy there…
One point that is often overlooked is that wind and solar natural resources are not evenly distributed across all geographies. Access to high average wind velocity locations, cheap land, proximity to customers, favorable market policies and pricing, low construction and labor costs, and other factors that advantage first movers will always diminish as new capacity is built out. Thus even using biased "average" costs underestimates the true costs and and overestimates economics for new construction.
We may be seeing this in the data. Wind projects brought online after 2018 had lower capacity factors than some wind facilities built in earlier years.
I wonder if it’s that or just that sweet, sweet government money. Boosting incentives via the IRA doesn’t just distort energy markets, it also makes projects pencil out that wouldn’t before. Im curious what the break-even analysis would show for capacity factor at a given capital cost. Could the newly reinvigorated ITC and PTC make what would have previously been marginal projects work?
There's a great C.O.B. Tuesday interview of George Bilicic, one of the Lazard LCOE guys titled "You can't have 100% renewables".
It's interesting. He's clearly not hostile to nuclear at all but refers to using Vogtle only as the least controversial choice. To who? Well he also refers to the LCOE as a branding exercise. It's not a paid report. So I take it as they aren't trying very hard, and to the extent they are they have a bias to renewables as the best brand, at least for the time being.
What's also juicy is he is very pro natural gas and expects it to play a part in integrating renewables for a long time.
Maybe the best one line criticism of the LCOE is that "it estimates the price point of generation for investors, not consumers. Is that what we want to know?".
Excellent analysis. In addition to the very optimistic assumptions which you analyzed, it is important to point out that these numbers come from very optimal geographies. Very little of the rest of the world have the wind resources of the Great Plains, which most of this data comes from. Once you move beyond those windy regions, the economics of wind get much worse.
This may be nit-picking, but I have been doing pro-nuclear advocacy for a few years now, and would love to use some of your graphics in presentations. However, your cool logo can easily lessen the impact on skeptics, in my opinion. (Even if irrational, it may lead to dismissiveness, a la "Oh, these guys just look like kooks!")
Nice of Lazard to remind us up-front that these are just estimates. In a way it's their whole business model - but when you have "being knowledgeable" as a business model, going against common knowledge tends to reduce sales. Widening the ranges and keeping desired Levelized Costs low is just good business.
Generating a MWh is different from delivering it to customers when needed. Why isn’t that factored into LCOE? If wind generators had to do their own backup to provide a despatchable MWh….
"John Wilkes Booth was a talented and athletic stage performer. Other factors would also have a potentially significant effect on the results contained herein, but have not been examined in the scope of this current analysis."
Thank you for this clear analysis. People are asking me what I think of the Lazard data, and I am glad to have this to reference.
And thank you for the reference to my post about IBRs on the grid. And the quotes from it!
I laughed out loud about the length of government documents.
Your assumptions for capacity factor are unrealistic. Great Plain's cap factors on the best sites can be 50% on average for the year. But DTE's newest wind farm in MI has an annual cap factor of 25%. But MI govt has committed to 100% clean energy. This means MI must have enough wind farms to power the grid during the worst month of the year. In July, MI wind's cap factor drops to 10%. This means MI will need 10 wind farms to replace 1 coal plant with the same nameplate capacity. But even 10 wind farms will come up short during extended wind droughts. You can't say "on average, the grid will be powered". Wind and solar just don't work in many places even if you ignore the outrageous costs.
Hi David, I think we used a fair estimate of the capacity factors of wind facilities that have built over the last several years, which are predominantly in the Great Plains. I also agree that they will be lower elsewhere and this LCOE doesn’t take the total costs into account. If you want our analysis on that, check out our piece How to Destroy the Myth of Cheap Wind and Solar.
More likely using past performance of recent wind farm builds is going to be overly optimistic. Wind turbine avg performance will decline, while O&M costs increase, as the turbines age.
And just as we are experiencing with hydro plants. They are sited in the areas with the best weather related conditions. However those "best conditions" inevitably shift with time. Areas that were once very good, in all probability will decline in wind resource. This fact is made even worse since we know more wind farms = lower wind resource. And as the best sites are exploited, that leaves less productive sites.
And it is also known that climate change will cause the best wind & solar regions to shift, while reducing the overall magnitude of the wind resource by reducing temperature differentials which are the fuel for wind energy.
Agree. You have to power the grid and charge enough batteries to carry you through the other 50-100 percent of the time the wind isn’t blowing. That adds up to more wind farms and batteries than anyone can afford.
Actually the CF% (or average output) is not the best metric for wind & solar productivity. The median output is a much more useful metric which more closely represents the utility of the wind & solar generation. Notably the median output is typically quite a bit lower than the avg output.
My friend in Dallas just lost everything in her fridge because a tree branch falling made a nuclear power plant a $20 billion paper weight….plan accordingly!
Whenever I see the Lazard stuff it is so wrong and misleading that wonder what the real agenda is. Fooling investors? Why?
I loved the transmission queue reform bit. You can reform the process, as FERC is attempting, but you can’t “reform” hundreds of billions of dollars in of necessary grid upgrades into existence. That’ll take 20 years.
I don’t suppose Lazard will ever tackle the elephant in the room. If wind and solar are so cheap, please explain power prices in Germany and California.
Whenever someone starts talking about averages where grid operations are concerned, little fragments of doubt creep into my mind.
My guess is they want to will more tax credits for the financial markets into existence
I think Lazards realized that if they make renewable energy sources look for more cost-effective than they really are, they get far more media coverage, donations and social media traffic. When they first started these reports, Lazards was very careful to say the LCOE is not comparable between renewable and non-renewable sources. They never combined the two on the same graphic. They were not as well known.
Then they moved the caveat to the appendix.
Now Lazards deliberately put them on the same chart and “forgets” the caveat. Not sure If the caveat is even in the appendix any more. I have lost confidence in them.
Lazard is a bank. I don’t think they are soliciting donations! More likely the LCOE “analysis” is just a marketing strategy as they are trying to advertise their financing services to get business.
Plus Peter Orszag is the Lazard CEO (former Obama cabinet member) so there is also likely some renewables true believer energy there…
One point that is often overlooked is that wind and solar natural resources are not evenly distributed across all geographies. Access to high average wind velocity locations, cheap land, proximity to customers, favorable market policies and pricing, low construction and labor costs, and other factors that advantage first movers will always diminish as new capacity is built out. Thus even using biased "average" costs underestimates the true costs and and overestimates economics for new construction.
We may be seeing this in the data. Wind projects brought online after 2018 had lower capacity factors than some wind facilities built in earlier years.
I wonder if it’s that or just that sweet, sweet government money. Boosting incentives via the IRA doesn’t just distort energy markets, it also makes projects pencil out that wouldn’t before. Im curious what the break-even analysis would show for capacity factor at a given capital cost. Could the newly reinvigorated ITC and PTC make what would have previously been marginal projects work?
There's a great C.O.B. Tuesday interview of George Bilicic, one of the Lazard LCOE guys titled "You can't have 100% renewables".
It's interesting. He's clearly not hostile to nuclear at all but refers to using Vogtle only as the least controversial choice. To who? Well he also refers to the LCOE as a branding exercise. It's not a paid report. So I take it as they aren't trying very hard, and to the extent they are they have a bias to renewables as the best brand, at least for the time being.
What's also juicy is he is very pro natural gas and expects it to play a part in integrating renewables for a long time.
Maybe the best one line criticism of the LCOE is that "it estimates the price point of generation for investors, not consumers. Is that what we want to know?".
https://veriten.com/stream/cobt-178/
LCOE = Lying Clowns Obscure Energy costs.
Ha!
Lazard’s analytical teams are 3 months out of college and clearly never set foot in an actual power plant.
Great piece! Keep up the good work!
You guys keep telling the truth and maybe there can be some change! It’s an incredibly difficult job to beat the NARRATIVE. 🤞🤞🤞🇺🇸
We love to fight the narrative
I would love to see a similar analysis of Combined Cycle Gas Turbines…
Well probably do a thermal article in the future
Excellent analysis. In addition to the very optimistic assumptions which you analyzed, it is important to point out that these numbers come from very optimal geographies. Very little of the rest of the world have the wind resources of the Great Plains, which most of this data comes from. Once you move beyond those windy regions, the economics of wind get much worse.
This may be nit-picking, but I have been doing pro-nuclear advocacy for a few years now, and would love to use some of your graphics in presentations. However, your cool logo can easily lessen the impact on skeptics, in my opinion. (Even if irrational, it may lead to dismissiveness, a la "Oh, these guys just look like kooks!")
But the fork is wearing cool sunglasses
Nice of Lazard to remind us up-front that these are just estimates. In a way it's their whole business model - but when you have "being knowledgeable" as a business model, going against common knowledge tends to reduce sales. Widening the ranges and keeping desired Levelized Costs low is just good business.
Generating a MWh is different from delivering it to customers when needed. Why isn’t that factored into LCOE? If wind generators had to do their own backup to provide a despatchable MWh….
Hi Dave, check out the how to debunk the myth of cheap wind and solar that we link to in our piece.
My old boss said figures don't lie, but liars sure can figure.
They sure can buddy. I need to read those posts you tagged me in 😂
"John Wilkes Booth was a talented and athletic stage performer. Other factors would also have a potentially significant effect on the results contained herein, but have not been examined in the scope of this current analysis."