Renewables Aren’t Ready for Prime Time: The LCOE Illusion and the Realities of Energy Demand
Wind and solar fanboys love citing Lazard’s LCOE charts to claim renewables are cheaper than fossil fuels. But ask them to explain those charts, and the conversation ends fast. Even as an energy expert, I can’t do it—Lazard leaves out too much to make a fair comparison.
Cost isn’t the issue anyway. The real conversation is how to secure the planet’s energy future and survival.
Let’s address what’s left out when LCOE charts come up: coverage. Lazard’s data includes the CAISO, MISO, SPP, ERCOT and PJM electric system grid operators (Figure 1). That’s only about half of the lower 48 states.
What else is left out? Intermittency. Wind and solar might look cheap, but it doesn’t matter if they only generate power 25% of the time—that’s Lazard’s own average.
What about market penetration? Renewables look fine when they’re a small part of the grid and gaps go unnoticed. But as their share grows, the costs of backup power and load balancing start to add up fast.
Firming costs cover storage or backup generation to ensure wind and solar meet demand. As solar penetration rises from 10% to 50%, these costs climb from 31% to 65% of total LCOE. In SPP, MISO, and PJM, solar penetration remains below 10%. Lazard’s LCOE reports exclude grid integration expenses.
Renewable energy is only a factor for electricity, barely touching the other 80% of energy use. The rise of AI and data centers exposes the renewable illusion. These power-hungry technologies are rewriting the energy story, ending 20 years of flat U.S. demand. Renewables aren’t even on the field—AI and data centers need constant, reliable power. Wind and solar, with their variability, just don’t cut it. Downtime isn’t an option.
Arguing about renewables’ costs is a waste of time. Comparing wind and solar to fossil fuels is like comparing a bike to a car. A bike is cheaper, but it’s useless for long trips or heavy loads. A car costs more but gets the job done. Energy works the same way—cost alone doesn’t tell the story.
LCOE confirms what we already know: renewables are part of the mix, but they have limits. If advocates want to treat this like the Super Bowl, it’s time to leave the tailgate party and face reality. Their team isn’t ready to compete.
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I believe that wind and solar will be left behind when we get to even newer ways to generate energy. I think wind and solar will be overcome even before they become mainstream. One big disadvantage is the huge amount of land it takes up for a wind or solar farm.
Mark,
I strongly doubt that there will be “newer ways to generate energy” that have any potential to replace existing forms of energy.
All the best,
Art
Art,
LCOE reliance, typically calculations using it as a central basis of analysis to understand the average (generation) cost, miss a number practical components for a particular project, etc. LET ALONE vs. real VALUE of renewables.
More to the conventional point of analysis (and avoiding real value & real costs that can no longer be discounted…but not included), higher layer of decision making of the use of renewables vs. fossil fuels is the calculation of profit (Brett Christophers). No deep analysis needed to understand the consistency of fossil over renewable cost selection.
Almost mortal sin against ‘common sense’, no high level math needed. We continue to ‘externalize’ the cost of carbon ‘pollution’ now at a size that even the largest insurance & re-insurance firms are tapping out trying to deal with what the calculations have swept under the rug for decades.
Seemingly sophisticated, new ‘exotic formulas’ all with a basis of framing from the fossil -dinosaur- days strongly favor one outcome in multiple ways. The results are all around us, annual or so papers such as Lazard that may as well be 25 years old if not with steam locomotive vintage conceptions of ‘marginal cost’. How hilarious if not for being ruinous. …continuing doing the SAME thing we’ve been honing and subsidizing for decades. (But it works so well for us baby boomers! What’s the problem??)
Art, that said, thank you for your work as it continues to be invaluable in my view and I realize to many many others with whom you freely ‘gift it’ here for informed discussion, critique, correction of ‘data’ wayward conclusions…and often wholehearted agreement. Happy holidays to you and all.
John,
LCOE borders on fraud IMO.
Thanks for your comments,
Art
Succinct and clear. Lincolnesque. The bicycle analogy really works for me, a non-scientist. I think you used it once before, when defining the concept of “power” in energy.
Thanks, Joe.
I’ve never used the bicycle analogy before. I’ve previously compared LCOE to buying a car without accounting for its operational costs including insurance, fuel, maintenance, licensing, etc.
All the best,
Art
Thanks for the bike/car analogy at the end. A really vivid illustration that not all energy is the same
Thanks, Steve. Bikes are great; so are cars–each for different purposes.
All the best,
Art
How fast is the Permian in decline? Can opec make up the difference? Can it increase from other sources?
https://youtu.be/xPz8NyAMazw?si=JS5D_USpO1mGvE4R
This lady seems to think that it can come from other sources and still keep the prices down. I think that prices will have to rise in the short term. What I don’t understand is why are oil prices so low especially since wages have been increasing every where. I assume that the oil industry is labour intensive especially after reading the oily blog.
Daniel,
I’ve watched Christine Guerrero’s videos (and she follows me on X) and I find nothing substantive in all of those slides. She’s a parts person with little view of the whole–a waste of time IMO.
All the best,
Art
Variability (the price ranges!) in Lazard’s analysis reveal the impossibility of generalizing about LCOE. Look at the size of the price range bars!
And the sensitivities of prices to tax policy! Renewables are struggling mightily today. One shudders to think what happens if tax policy and other incentives change.
Wow! Anyone attempting to garner conclusions from Lazard’s analysis is making heroic assumptions (except, perhaps, with respect to fully-depreciated nuclear or green hydrogen).
Most saddening to me, though, is the premise of many supporters of bright green “solutions”: That our goal is to figure out how to continue to fuel the destruction of the natural world.
John,
Lazard appeals to people who are uninterested or incapable of trying to understand its impossible premises and hopelessly incomplete data base.
It borders of fraud IMO.
All the best,
Art
As a petroleum geologist, I’m surprised that Art doesn’t address exploitation of 24/7 renewable Geothermal resources that are widely distributed in western US, and already mapped in western PA & West Virginia. Nobody bats an eye about the cost of drilling oil wells, but for some inexplicable reason, we are told that geothermal wells that extract energy for much longer time spans are “too costly”. Add as yet undeveloped massive offshore wind resources that produce at night, when solar doesn’t. And shade all our ridiculously under-utilized large parking lots with solar +stationary storage batteries +Vehicle-2+Grid chargers, right where most of us live & work. No new transmission, site acquisition, or other site development spending required.
Jerry,
Geothermal doesn’t even make the category list for any credible agency projection like IEA, EIA, etc. for a reason. It’s too small to matter. It works great in certain settings but is not broadly scalable.
I have studied many proposals for deep geothermal drilling and they all have very low probability of commercial success. As a petroleum geologist, you should understand the mechanical and operational problems of working in a small diameter wellbore at high heat and high temperature. The idea of fracking at 20,000 or 30,000 feet–necessary to create the permeability in any reservoir at that depth–is just preposterous.
I could go on but will leave it here: There’s a religious faith in the power of technology that makes otherwise intelligent people gullible and stupid.
All the best,
Art
Art
I had shared your doubts about the challenges related to deep geothermal until recently however recent developments have caused me to reconsider.
You’re no doubt familiar with the work being done by Fervo Energy ,Forge and others and the work being done by the Energy Institute @ The University of Texas on deep geothermal based electricity generation.
https://energy.utexas.edu/research/geothermal-texas
Fervo Energy (so far) appears to be doing well with its projects in Utah as has Forge.
Christ Wright the proposed Energy Secretary also appears quite enthusiastic about enhanced geothermal.
Cheers
Greg
Greg,
I maintain my skepticism about geothermal. I read the section of the report on scalability and found nothing but blue sky “what-if-and-maybe” speculation with no substance or data to support its optimism.
Of course, Chris Wright likes geothermal because it means a ton of fracking business for his company!
All the best,
Art
When we put a solar array on our shop we often run into problems and have to switch to grid power from our batteries, its more than enough for most machinery but if you run everthing mill lathe ovens etc it will drain the batteries, and if it’s cloudy etc you have to be careful.
While I have no problem with this most people would ( at least the ones I encounter)
I heard a analogy I thought was good solar and wind are great for a small farm but you can’t run Tokyo or Los Angeles on it
AA,
Renewable energy has a place in our energy present and future–I’m 100% for that.
The idea of running this civilization mostly on renewable energy is just ridiculous.
All the best,
Art