DISRUPTIVE TECHNOLOGIES?

Can Wind and Solar Generation Disrupt the Generation Industry?

I have been doing a lot of thinking and reading about renewable wind and solar generation technologies in preparation for writing about them in my book and posting a few articles about them as well.  In connection with this effort, a couple of weeks ago I looked at a post by Robert Bryce on his Substack about increases in power purchase contract prices for renewable energy.  He attached a chart showing that power purchase contract prices for solar energy have more than doubled since 2020, and asserted there is no reason to expect those contract prices to ever come down.  I entered a comment disagreeing with this assertion.  The chart showed that the increase in prices resulted largely from permitting and other delays that increased the costs of the projects, and there is no reason to believe that these delays are permanent or that costs could not come down in the future.

I was then subjected to a series of reply comments from another person (not Robert Bryce), in which I was told that “[t]here’s no development [of renewable resources] being ‘fostered.’ There’s just graft, profiteering, and fraud;” that “[w]ithout free government money greasing the solar panel life cycle from manufacture to disposal, the solar cost/benefit math doesn’t work. It just doesn’t;” that “[i]f one can’t speak to … technical topics . . . then they must take what they know about ‘Green Energy’ on faith. That’s not science. That’s religion;” and finally that the information about the economics of renewable generation I had mentioned in my posts was “all just made up. Stop.”

I found it amusing that, after accusing green energy supporters of relying on religion and faith instead of considering the science and the relevant technical details, this person then dismissed all the information I had reviewed as “all just made up” without even knowing what information I had looked at.  He clearly belongs to a different religion than the green energy supporters.  But this exchange also made me wonder about how we should characterize wind and solar generation.  They are not just “graft, profiteering, and fraud,” but they also are not the amazing panacea for all climate ills that the green energy religion makes them out to be.

After some consideration, I have decided the best way to think about and describe wind and solar generation is as disruptive technologies that are still in the earlier stages of development.  Think about how cable disrupted the broadcast television industry and now in turn is being disrupted by streaming services, or how cell phones disrupted the telephone industry.  In each case, the early versions of the technologies made limited inroads, and then as the technologies gradually improved, their advantages allowed them to increase their market share and to dominate.  And in each case, the previously dominant companies in the industry adapted and survived, although not in the same dominant roles.  We still have the same broadcast channels we had before cable—local CBS, NBC, ABC, and PBS affiliates—but now they are available on cable along with several hundred other channels.  Many people, including me, still have cable, even though they (and I) also subscribe to streaming services.  And landline phones still have a presence in the market, even though AT&T now also sells cellphones as a large but not quite as dominant member of the telephone industry.

Why do I think that wind and solar generation likewise are disruptive technologies?  Because they have some important advantages over other generation technologies.  Unlike fossil generation, their fuels—wind and sunshine—are free, which means they are not expensive to operate once installed.  The ability to generate electricity without incurring significant additional costs is a huge advantage.  And unlike fossil, nuclear, and hydro, wind and solar generation facilities can be installed almost anywhere in relatively small sizes at a relatively low cost. Think of solar panels on the roof of your house for example.  These two features are attractive to many people, even those who are not climate activists.  And if you are concerned about climate change and the environment in general, the most important advantage of wind and solar generation facilities is that they do not emit carbon, sulfur, or other harmful gases when generating electricity. 

It is easy to project that wind and solar can potentially take a dominant position in the generation market as a result of these advantages.  Indeed, these technologies already produce a significant portion of the energy generated in the US.  According to data on the electric industry published by the U.S Energy Information Administration (and is not “just made up”), the amount of electricity generated by wind and solar facilities increases every year and in 2023 constituted about 20% of all energy produced in the US.  More and more wind and solar generation capacity is being constructed, so this share likely will continue to increase.

If wind and solar technologies are disruptive technologies, what technologies are being disrupted?  The technology most affected is coal-fired generation.  Energy Information Administration data shows that coal was once the dominant form of generation, representing over 50% of all generation capacity in the country, but coal’s share of energy generated in the country has dropped to 15% in 2024.  This is a good thing.  Most coal generation facilities are old, they are not very flexible operationally, and they emit not only carbon but also other pollutants such as sulfur dioxide that causes acid rain. 

Unfortunately, wind and solar also are disrupting nuclear generation, an important source of non-emitting generation capacity.  Although not as severely affected as coal, 13 nuclear power reactors have been retired since 2012 (two have been constructed), and more reactors would have been retired had some states not acted to subsidize financially failing nuclear reactors. 

To date, however, wind and solar generation facilities have not disrupted natural gas-fired generation.  To the contrary, fueled by cheap and abundant supplies of natural gas made available by fracking, natural gas-fired generation capacity has increased and now there is almost three times as much electricity generated by natural gas facilities as by coal facilities.  Indeed, natural gas is perhaps even more responsible than wind and solar for the rapid decline of coal and the weakening profitability of nuclear power.

Of course, at this stage of their development, there also are serious drawbacks to wind and solar generation technologies.  The most obvious is that the sun goes down at night and the wind does not always blow, so wind and solar by themselves can never provide reliable service on a 24/7 basis.  And even when the wind is blowing and the sun is shining, wind speed can drop suddenly and clouds can block the sun, causing wind and solar output to drop precipitously.  This was one of the reasons for the California blackout in 2020, described in my post “Whose Fault?”  This means that wind and solar generation must be backed up by other generation, and today the backup service most likely must be provided by natural gas-fired generation.

Capital costs are another current problem for wind and solar.  Even though you can install renewable technologies at a relatively low cost—$18,000 for solar panels on your roof as opposed to $34 billion for the most recently installed nuclear reactors—wind and solar generation capacity is more expensive on a per-megawatt basis than most other generation technologies.   The cost of solar panels and wind turbines are declining—although the current tariff on solar panels has pushed their cost back up—but the development of wind and solar generation continues to be reliant on subsidies. 

There are other drawbacks to wind and solar as well.  For now I am only going to list them, but may describe some of these in future posts.

• Large scale wind and solar generation, especially large wind farms, require lots of space.  Wind farms can extend over thousands of acres of land.

• The best sites for large scale wind and solar generation tend to be in remote locations, requiring the construction of expensive new transmission lines that have environmental impacts.

• The subsidies granted to wind and solar generation tend to depress the market prices for energy and capacity, thereby threatening the viability of other types of generation facilities needed to maintain system reliability.

• Even without subsidies, the low operating costs of wind and solar generation can result in low energy prices.  This can affect the economic viability of all types of generation, including wind and solar facilities that are not subsidized.

• There are social justice and environmental issues associated with the production of some materials used in the of wind and solar generation facilities and also used in energy storage technologies.

This is a daunting list of issues, but it is important to keep in mind that we are still in a relatively early stage of development for wind and solar generation technologies.  Many of the issues can be solved if advances in those technologies allow them to operate more efficiently and at a lower capital cost.  Many other issues will be addressed if better energy storage technologies can be developed and the necessary transmission and storage infrastructure put in place.  

The difficulties in integrating wind and solar generation into the grid also depend on how a great a role we want them to take.  There are efforts underway to foster the construction of new nuclear power reactors (I am somewhat skeptical as explained my post “Is the Third Time a Charm”).  And the Department of Energy has estimated that the amount of hydroelectric generation capacity can be greatly expanded without constructing new dams by increasing the capacity of existing hydroelectric facilities.  If the efforts to significantly increase the amount of these types of non-emitting generation facilities are successful, that would reduce the amount of wind and solar and associated infrastructure needed to meet carbon reduction goals without affecting the safety and reliability of grid operations.

There are a whole lot of ifs in the preceding two paragraphs.  In my view, it is reasonable to expect that future technological innovations are in store, and that the necessary infrastructure will eventually be built.  But the necessary technological improvements are not guaranteed, and their pace of development is not certain.  The extent to which wind and solar will disrupt the generation industry depends on the outcome. 

I hope you enjoyed this post.  I enjoy writing them and will never charge for subscriptions or ask for donations.  I only ask that, if you did enjoy it, you press the “like” button below.  Doing so will help me evaluate interest in the book I am writing on grid operations.  Of course, if you have a reaction to, or question about, this post, please leave a comment and I will be happy to respond.