If Solar And Wind Are Now Cheaper Than Fossil Fuels, Why Don’t We Have More?

Authored by Mike Shedlock via Mish Talk,

The answer is they aren’t cheaper…

Energy Talking Points

Substack writer Alex Epstein has a great post on The “Levelized Cost of Energy” Scam.

If you ever hear anyone favorably compare solar and wind to coal, gas, or nuclear by citing a low LCOE—“Levelized Cost of Energy”—you are being scammed.

You’ve heard it over and over: “Solar and wind are now cheaper than fossil fuels.”

You might suspect something is wrong here, because if solar and wind were so cheap their developers wouldn’t always be asking for subsidies, or claim the sky is falling when subsidies are taken away.

The suspicious claim that “Solar and wind are now cheaper than fossil fuels” is usually justified using an intimidating-sounding metric called LCOE: “Levelized Cost of Energy.”

In a 2020 report, the International Energy Agency used LCOE to claim that “renewable” energy costs are now “competitive” with fossil fuel costs, and that onshore wind is the cheapest source of electricity in most countries.

In a 2023 article titled “The Clean Energy Future Is Arriving Faster Than You Think,” the New York Times used LCOE to claim that solar and wind are somehow cheap while coal, gas, and nuclear are somehow expensive.

LCOE absurdly equates the value of reliable electricity and unreliable electricity

• Imagine there were a metric called LCOB—Levelized Cost of Babysitters—that compared the cost of different babysitters in your neighborhood.

  But there was a catch that made it useless: the organization collecting the metric allowed totally unreliable babysitters to qualify.

• Imagine that unreliable babysitters sold themselves by saying: We have the cheapest LCOB—we only charge $15/hour, while reliable ones charge $20.

  Obviously that would be a scam because in practice if you pay for an unreliable babysitter you also need to pay for a reliable one.

• Whether you’re comparing babysitters or sources of electricity, reliability is table stakes.

And yet LCOE—Levelized Cost of Electricity—popularized by the firm Lazard, explicitly excludes “reliability-related considerations”

• By allowing unreliable electricity to qualify as “electricity” or “energy,” LCOE wildly understates the cost of solar and wind. In reality, solar and wind need life support from reliable sources.

  The cost of using them is the full system cost, including life support cost.

• The full life-support cost of solar and wind includes the dispatchable power plants that accommodate solar and wind’s unreliability—and the high-density long-distance transmission wires needed to connect faraway solar and wind to nearby grids—and various grid-stabilizing expenses.
• Solar and wind’s life-support costs are large and increase with the percentage of solar and wind use.

References

New York Times – The Clean Energy Future Is Arriving Faster Than You Think

Guardian – Wind power is cheapest energy, EU analysis finds

IEA – Projected Costs of Generating Electricity 2020

Lazard – LCOE Report 2021

If Wishes Were Fishes

All of the above are scams.

If wind and solar were cheaper they would not need subsidies and we would have more wind and solar power.

Q: But isn’t China expanding solar?

A: Yes, but China does not care about costs, has a perfect high altitude location, and is not subject to ridiculous US tariffs on solar panels.

Hydropower may be cheaper. And China is again a perfect example.

Hydropower Electricity

On July 23, 2025, SCMP reported China is building the world’s biggest hydropower dam.

On the eastern rim of the Tibetan plateau, China envisions a future powered by the roaring waters of the Yarlung Tsangpo, also known as the Brahmaputra. The river will be the site of a mega dam – the world’s most ambitious to date – that promises to bring clean energy, jobs, infrastructure and prosperity to the region.

How big is the mega dam?

The dam will be situated in the lower reaches of the Yarlung Tsangpo, where a section drops 2,000 metres (6,562 feet) over a 50km (31 miles) stretch, creating immense hydropower potential. The dam is reportedly located in Medog, a remote county in the city of Nyingchi in the Tibet autonomous region.

When completed, the project will overtake the Three Gorges Dam as the world’s largest hydropower dam. It could generate three times more energy with five cascade hydropower stations – an estimated annual capacity of 300 billion kilowatt-hours (kWh) of electricity, more than Britain’s total annual power output.

It is estimated to cost around 1.2 trillion yuan (US$167 billion), dwarfing many of the biggest infrastructure undertakings in modern history at around five times the cost of the Three Gorges Dam and even more expensive than the International Space Station.

But not all hydropower is unproblematic. Lake Powell and Lake Mead in the US are problem examples.

Dams silt up, US water rights are an issue, and water replenishment is an issue. The Brahmaputra damn has none of those issues.

I discussed hydropower on October 27 in Why China Is On a Pace to Win the AI Race

China has three big advantages over the US: cheap electricity, an open source model, and fewer capital needs.

Electricity Costs Are Soaring and AI Will Make Matters Worse

Please note Electricity Costs Are Soaring and AI Will Make Matters Worse

Electricity demand for AI data centers is soaring. The result won’t be pretty.

We should take advantage of cheap hydropower in Canada and be grateful for Canada’s ability to produce steel and aluminum cheaper than we can.

Instead, Trump proposes to make aluminum, copper, and steel manufacturing great again with 50 percent tariffs.