Levelized Costs of Energy? It's All "Lies, Damn Lies, and Statistics" When It Comes to Electricity from Unreliables
Guest Post from Vijay Jayaraj at the CO2 Coalition.
You wake up to an alarm, flick on the light, brew coffee, and drive to work. Every step requires energy – the stuff that shares the coin of physical reality with matter, the E in E = MC2. It keeps homes warm, food fresh, and economies running.
Supplying 80% of the world’s primary energy, coal, oil, and natural gas make up the lifeblood of modern civilization. Yet, there continue to be calls for the abandonment of these fuels without any feasible, scalable replacement in sight.
It is dishonest for “green” lobbyists to claim that electricity from wind and solar can replace fossil fuels, when currently most of the energy used in the world is not even in the form of electricity.
Electricity represents only about 20% of global final energy consumption. That means four-fifths of the world’s energy use comes from fuels that power ships, planes, trucks and industrial furnaces. Oil fuels vehicles, natural gas provides heat for homes and industry, and coal is critically important for the manufacture of steel from iron.
Demand for hydrocarbons is expected to exceed that of electricity for many decades.
You’ve probably heard it before: “Solar and wind are now cheaper than fossil fuels.” This is a falsehood supported by a misleading metric – the levelized cost of electricity (LCOE). When Mark Twain spoke of “lies, damn lies and statistics,” he had LCOE in mind.
LCOE purports to present an apples-to-apples comparison between various energy sources. However, the measure is meaningless because it ignores key costs such as those of providing backup power to compensate for the intermittency of solar and wind. Something must be available to step up when the wind and sun are not available for power generation.
While it may be true that sunshine and wind are “free,” converting them to a form of energy that works with modern power grids and integrating them into the 24-hour operation of electrical systems supplying millions of customers is difficult and expensive.
A 2022 study by Robert Idel exposes LCOE’s flaws.
First, LCOE assumes constant output, but solar and wind produce only 20%-30% of their designed capacity, compared to 80%-90% for plants running on coal, natural gas or nuclear fuel.
This commentary was first published by RealClearMarkets on July 7, 2025.
Vijay Jayaraj is a Research Associate at the CO2 Coalition, Arlington, Virginia. He holds a master’s degree in environmental sciences from the University of East Anglia, U.K., and a postgraduate degree in energy management from Robert Gordon University, U.K.
#LCOE #ClimateChange #Jayaraj #CO2Coalition #Climate #MarkTwain #LevelizedCosts #Solar #Wind #Electricity
"While it may be true that sunshine and wind are “free,” converting them to a form of energy that works with modern power grids and integrating them into the 24-hour operation of electrical systems supplying millions of customers is difficult and expensive."
Oil is also free. A gift of Nature. It's everything necessary to pull it out of the ground and convert it into power that imposes costs.
Unreliables can harm the grid in other ways. When they are dispatched because they have the lowest marginal cost, they crowd out more reliable sources, which makes the RTO/ISO create bandaids (such as capacity markets) to “fix” the problems they cause.
Treating wind and solar the same as other sources would he like treating all cars the same and only paying attention to price. A Ford Pinto would he treated the same as a Toyota Camry, a very nice SUV, a Lamborghini, or even a pickup truck. All of these other vehicles have qualities that are important to their consumers. Under LCOE all those other qualities are ignored. that would not be an apples to apples comparison.