Solar and wind power through the eyes of an investor

It is the time of the year again. Autumn had just started and the media was flooded with stories about possible power failures this winter. Under the current circumstances a power failure seems rather plausible. Nuclear power delivers 50-60% of our electricity and six of the seven nuclear reactors will be scheduled for maintenance this winter. This could become a real issue in the coming months.

The reason that we are in such a pickle right now is because the last seven governments had no strategic energy policy vision. The initial decision to phase out nuclear power was taken in 2003, but until now there are no concrete plans to actually replace it with something else. Okay, maybe that is not entirely true: enormous investments were made in solar and wind power. Maybe that was just the plan, replacing nuclear with solar and wind power? The problem is that these investments will not help us with the current problem. Production of solar energy is limited during winter and it is even non-existing during peak hours. Wind power is intermittent and there is no guarantee whatsoever that it will be available when needed.

There are however people who don’t agree and claim that we now should invest even more in renewable energy. One of them is Marc-Philippe Botte who works for an investment company in renewable energy and wrote an opinion piece (Dutch) published on the website of our Flemish Radio and Television (VRT) in which he defends more investments in solar and wind energy.

He first explains that Belgium has a problem with its aging energy supply and then continues that this crisis is not about pro or contra nuclear power. He argues that there is no debate about that anymore. I recognize that style of argument (it is the same argument commonly used in climate communication that the debate is over, thereby avoiding any arguments). He obviously doesn’t want the nuclear option open. More, it seems he doesn’t want any other option than solar and wind open. There is no mention of any other power sources in his story. Remember, he is an investor in renewable energy.

He states that instead the debate should be “about the question whether Belgium is capable of delivering electricity to its industry that fulfills the three demands of modern industry”:

  1. security of supply
  2. competitive price
  3. massive availability of renewable sources

I can certainly understand the first two arguments, but I don’t think that industry is concerned whether or not they receive energy from renewable sources. There are certainly industries that want to use electricity from solar and wind, but I think that most industries just want reliable and cheap energy, whatever the source. He then gives the example of the big energy consumers (Google, Apple, Facebook, Amazon) to prove his claim that industry want renewable energy (translated from Dutch):

Google for example, with its data centers one of the largest electricity consumers in the world, is running on 100% renewable energy since 2017. And of course it can not afford that a data center goes down because of lost power.


Apparently he doesn’t seem to understand the intermittency of solar and wind power. Sure, Google can’t afford power outages and it “runs 100% on renewable energy”, but that is on average. They pay for renewable sources to deliver on average what they need. It doesn’t mean that they are connected to wind and solar installations. If that was the case, then it would constantly be hit with brown-outs and black-outs when there is no(t much) solar energy (at night) or wind energy (when it doesn’t blow much). Or it would overload their installations when there is too much. The fact that they don’t have frequent power outages means that something else is taking over when there is not enough solar and/or wind power. In our country, that something will be a conventional power source.

The renewable suppliers deliver to the main grid and this will deliver power to the data centers. The main grid will account for all the losses when there is too much and will supply power from conventional sources when there is not enough sun and/or wind. The fact that the grid is so stable is not the result of the reliability of renewables (as Botte seems to suggest), but it is because the grid manager compensates for the intermittent supply from these renewables.

He then makes the claim that some countries do some serious effort to get data centers on their territory (translated from Dutch):

For example, Sweden moves heaven and earth, with success as evidenced by recent investments by Facebook and Amazon, to promote itself as the perfect country for more efficient data centers, because of the availability of cheap green energy from wind farms.

The Netherlands does the same thing and attracted data centres by, among others, Microsoft and Google, working with electricity from wind farms.

Also here, the efficiency of those data centers is not guaranteed by the “cheap” green energy from wind energy farms. That reliable power supply is guaranteed by the grid manager that compensates for the unreliable, intermittent wind energy.

In the case of The Netherlands, the Google Data Center FAQ explains that, indeed, Google contracted for the entire 62 Megawatt output of a nearby wind energy installations, but I don’t think that this power cable runs from these installations directly to the data center. Otherwise the power supply to the data center would fluctuate with the wind. Connecting a data center to the output of wind power would not be a bright idea.

In the case of Sweden, that specific location was chosen by Facebook because of multiple hydro-electric power systems along the Lulea river (resulting in a very reliable electricity supply), as explained in the The Facebook Data Center FAQ . Even if they buy their average supply from wind facilities, then it is hydro power that provides this stability, not intermittent wind energy.

Later in the article he seems to confuse between capacity and output (translated from Dutch):

For example, the Dutch coalition agreement provides a capacity of 11,500 MW wind energy in the North Sea by 2030 (about 50% of the total production capacity out there today in the Netherlands, regardless whether this is conventional or renewable).

Sounds impressive, all right, but it is a rather meaningless metric since wind energy has a capacity factor that is smaller than that of the conventional energy sources. It is also misleading since it could be interpreted as if half of the power will be delivered by solar and wind by 2030, which is not the case. It will probably only be somewhere around 15% or so. Using capacity rather than output is a quite popular technique to inflate the importance of wind (and solar) in the energy supply, so it is not surprising he is using it.

Interesting is the answer to the question “Is it correct that renewable energy is too expensive?” (translated from Dutch):

This is completely outdated story today. The investment price of renewable capacity has declined so much in recent years that the cost of green energy today is often below the cost of conventional power.

Which is a rather daft claim knowing that wind energy (and I also think commercial solar energy) is still subsidized in our country. Also, energy prices are the highest in the countries that have the highest share of renewables. If solar and wind are really that much cheaper, then why the need for those subsidies? Why then the high prices?

He again shows that he doesn’t understand the intermittency of solar and wind. The investment cost is only part of the story. When there is no(t much) sun and/or wind, then something has to jump in, so also investments for this backup installations need to be made. These conventional power plants will spin idle or suboptimal when solar and wind are abundant and may even brought offline in summer. Meaning that those who invested in the backup plants will not get their investment back. If governments want those backup plants, they need to subsidize them, adding to the cost of solar and wind power.

If only investment costs are counted and all other costs are conveniently not included, then, yes, it is easy to come to the conclusion that solar and wind must be cheap.

Strangely enough, there are no backup conventional plants in his vision. This is what he answers to the statement that there is no energy when the sun doesn’t shine or the wind doesn’t blow (translated from Dutch):

This line of thinking becomes more and more outdated in the year 2018. The connection of renewable production capacity with giant batteries, that store electricity when there is a lot of Sun or wind and little demand, is a relevant and economically viable idea. That this isn’t science fiction anymore, but the hard reality, is proven by the 100 MW battery of Tesla in South Australia, connected to a local wind farm.

I understand that Tesla has build an array of batteries in South Australia. It has a capacity of 100 MW. It is capable of delivering 129 MWh when completely full and at 100 MW it will draw empty in less than 20 minutes (increasingly less over time). In the best case scenario, it would act as a peak shaver or as a delay mechanism to allow a conventional power plant to start up in case of an emergency. By the way, 129 MWh is seriously underpowered, even in the tiny energy market of Belgium. For example, we have a peak shaver in Coo with a capacity of 1,164 MW and it can deliver this power for about 5 hours. That is 45 times the potential production of the Tesla batteries. Remember, this is just a peak shaver. Having a battery based backup facility would demand an insane amount of batteries (that have to be replaced every 10-15 years).

Overall, the article shows an insight of the reasoning by an investor in solar and wind. Sure, if you are really convinced that:

  • the output of solar and wind facilities are so stable that they can reliable power data centers
  • installed capacity equals production
  • solar and wind energy are cheap because the investment cost of those installations went down
  • batteries are currently economically and technically viable as backup

then yes, I can understand that solar and wind are perceived as ideal power sources.

A pity that this is not the case in reality:

  • reliability of the power grid is sustained by conventional sources that compensate for the unreliable supply by solar and wind. Additional problem at our latitude: we also need most of our power at peak moments in winter when solar power is non-existing and wind power not reliably available to keep the grid running
  • production of renewable solar and wind energy is much lower than installed capacity – according to their capacity factor: in our region on average about 10% for solar and 17% for wind
  • there are many other costs involved beside the investment cost of solar and wind
  • batteries are currently incredibly expensive and we will need an insane amount of them, even in our tiny energy market.

The article ends with (translated from Dutch):

There is no place for ideology in this debate, we have to look at the facts, and a rational decision for the sake of our future.

Finally something I can agree on!

But I think it is his vision that is the ideological one and his facts are not based in reality.


2 thoughts on “Solar and wind power through the eyes of an investor

  1. manicbeancounter

    There are a lot of points covered here. As I have been involved in the past in justifying capital investments I would like to look at the investment costs.
    The investment cost (or price) the author is referring to is the cost to the investor get the facility up and running, presumably on the basis of capacity. That is a 500 MW wind farm compared to a 500 MW coal-fired or gas-fired power station.
    The cost of the investment will include some land and the cost of getting permission to build. In Britain you are far more likely get permission for wind turbines on cheap agricultural land than a gas-fired power station, which may have to be built on an existing industrial site. Planning permission for the conventional power station is likely to take much longer, and need more expensive plans. Non-productive resources are tied up for longer.
    One of the most expensive costs of wind turbines is connecting them to the grid. It used to be that in Britain the investor did not have to meet this cost. Conventional power stations may have to use expensive technologies to reduce emissions.


    1. trustyetverify Post author

      The situation is similar in Belgium. Costs for strengthen/expanding/enhancing the grid and connecting the installations to the grid do not have to be met by the investors (this is done by the network manager).
      The point of the post is that there are many more expenses that are not counted when declaring solar or wind power cheap. Also backup, like (unprofitable) fast cycling gas plants, pumped storage, maybe even battery, will be a huge cost that is conveniently not taken into account. Not sure whether it is ignorance or intentional.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s