The data on declining renewable generating costs obscures additional costs. Firstly, in the EU context, the price paid for electricity on the wholesale market is not a straightforward reflection of the costs of generation. Prices on the European wholesale market – where electricity is bought and sold by generators and suppliers – are determined by a system called ‘marginal pricing’. Under this system, all generators receive the same price for the electricity they are selling at any given time. And this price is set by the most expensive generating source. Therefore, falling renewable costs do not have a direct impact on wholesale prices, which continue to be set by the cost of fossil fuels.2
Additionally, there are expenses that are unique to an electricity sector powered by renewables which renewable price data does not account for.3 Unlike fossil and nuclear power plants which can be controlled and coordinated in line with the imperatives of shifting demand, wind and solar are ‘variable’ energy resources. This means that our capacity to generate electricity from wind and solar is dependent upon a number of variables such as the weather, climate, season and time of day. This brings a host of extra challenges in ensuring that energy supply is capable of meeting demand. What happens, for example, at points when consumer demand is surging yet the wind is not blowing and the sun is not shining?
One partial solution for this technical issue is scaling up investment in storage capacity. However, storage investments are not growing at all on pace with increases in renewable production.4
Accordingly, incumbent companies face a further financial burden of adapting, updating and expanding electricity networks so that they can absorb and transport the increasing amounts of variable renewable energy. The International Energy Agency (IEA) estimates that once solar and wind provide up to 25 per cent of total energy production, the additional costs of their variability will increase the unit costs of installed wind and solar capacity by an additional 10–15 per cent.5 As renewables increase their share of total production beyond 25 per cent, these additional costs will only increase.
Others estimate the system costs of renewables to be even higher. According to research that calculates the broader system costs to keep renewable energy reliable in Texas, US, from integrating backup power plants to building storage facilities, the wind and solar price per MWh increases seven- to elevenfold.6
This means that data on falling renewables prices is in some ways deceptive. The pursuit of price parity tipping points, where renewables become more competitive than fossil fuel energy, is proving less straightforward than advocates of this myth suggest.
A focus on prices also masks the fact that renewable power would not be so cheap without the labour exploitation that tends to underpin the supply chain. From the mining of metals and minerals to the manufacturing of PV panels and wind turbines, there’s growing evidence linking renewable energy supply chains to forced labour and modern slavery.7