There Is Absolutely Nothing Cheap About "Free" Energy: It's the Con of Cons and the Public Is Onto It!

Roger Caiazza nicely summarizes a series we previously published here in condensed form, tying everything together as to the energy problems New York (and others) face, which are enormous.

Guest Post by Roger Caiazza of Pragmatic Environmentalist of New York.

The solar and wind mandates in the Climate Leadership & Community Protection Act (Climate Act) were no doubt heavily influenced by the idea that renewable energy is cheap. This post describes three articles by Planning Engineer (Russ Schussler) that eviscerate that argument.

New York StatePublic Service Law Section 66-P Establishment of a renewable energy program, requires the Public Service Commission to establish a program to meet the interim Climate Act targets for 70% of the energy delivered in 2030 “shall be generated by renewable energy systems” and that “by the year two thousand forty the statewide electrical demand system will be zero emissions”. This mandate establishes a preference for solar and wind in the future New York grid.

Advocates think this will mean cheaper prices. A quick search for cheap solar quickly an example of the cheap claim. Pierina Fiestas recently updated an article at the WTS Energy website that claimed: “Solar energy has come a long way over the past few decades, and today it has become the cheapest source of electricity in history, according to the International Energy Agency (IEA).”

Russ Schussler is a retired electric system planner who wrote many articlesat Climate Etc about the electric system under the pen name Planning Energy before he retired. He recently posted a three-part series that addresses the myth of cheaper renewables: Why “cheaper” wind and solar raise costs. Part I: The fat tail problem; Part II: The hidden costs of residential solar; and Part III: The problem with power markets.

Cheap Most of the Time, Doesn’t Mean Cheap Overall

I have argued elsewhere that green energy works well until you really need it and then it does not work. Schussler notes that “just because a resource is cheaper most of the time, that does not mean that it reduces overall system costs.” His post explains why renewable energy costs must be considered within the context of constant energy supply, not just when the sun shines and the wind blows.

The fat tail problem refers to the shape of the total cost curve but don’t worry about that reference. Schussler explains that the fat tail problem is simply the fact that rare but extreme events drive the costs of the electric system. He notes:

Peak demand periods in power systems drive costs that overshadow renewables’ savings during easy times. Electricity demand fluctuates, and supplying power is far more challenging—and expensive—during certain periods.

His post includes both a generalized description and a more detailed discussion as backup. He explains:

Typically, the most difficult times are peak demand periods in winter and summer, which account for less than 5% of the year. During a single hour of peak demand, electricity costs can spike orders of magnitude higher than the typical average cost, forcing utilities to rely on expensive backup plants that sit idle most of the year. For example, during the January 2014 Polar Vortex, a massive cold snap gripped the eastern U.S., driving electricity demand for heating across the PJM Interconnection to record levels. With no spare power to share among states, wholesale prices soared to $2,000 per megawatt-hour, over 60 times the typical $30/MWH average. Smaller localized events are more common with less drastic price fluctuations, but they contribute as well to the fat tail problem.

This is a particular issue with renewables that advocates ignore:

Wind and solar often shine during easy times, producing electricity at a lower marginal cost than traditional sources like natural gas or nuclear power. However, their output is intermittent and less reliable during peak periods, when weather conditions may not align with demand. Relying heavily on renewables requires backup systems—often expensive fossil fuel or nuclear plants—to ensure reliability during these critical fat tail events. The cost of maintaining these backup systems, combined with the infrastructure needed to integrate intermittent renewables, can greatly outweigh the savings from cheap renewable energy during easy times.

This problem is exacerbated because the peak load often occurs when wind resources are low and winter peaks occur when days are short. The b0ttom line is that if you consider the total costs to provide power over every hour of the year, then the added costs for the extreme situations increase total costs so much that solar and wind are not the “cheapest.”

Hidden Costs of Residential Solar

In his second post, Schussler explains that residential solar has an issue like the fat tail. He states that:

Residential solar follows a similar pattern: it seems affordable for homeowners, but raises system costs through rate structures that over-incentivize adoption. Generous subsidies, like retail-rate net metering, drive excessive solar growth, risking grid stability and shifting costs to non-solar customers that are often less affluent.

Schussler explains the problem of cost-shifting through rate structures well:

It’s hard to understand why many don’t see the unfairness in rate structures, as similar arrangements would seem absurd in other industries. Imagine hotels required to keep rooms ready for all customers (at standard rates) just in case they “might” want them. Worse, during low occupancy, hotels must send guests to customers’ Airbnb properties whenever there are excess rooms. Or consider pizza chains forced to buy excess pizzas from restaurants during slow hours while supplying low-cost pizzas during peak hours and covering all pickup and delivery costs. In all of these cases, the major problem is that large infrastructure investment is required that will sit idle most of the time and receive inadequate compensation from the beneficiaries.

He goes on to explain how the residential rate structure currently in use in New York is another incentive for the Climate Act transition. He provides details on “net-metering” which in one way or another enables residential owners to serve their own needs and sell the excess that the don’t need back to the utility at a rate unfavorable to the utility and everyone who does not have solar panels.

Not surprisingly, the greater the incentive offered the more solar panels installed. However, he also explains that there are significant costs to the system:

• Lost Revenue: Utilities need steady charges to cover fixed costs (grid lines, backup power). Solar homeowners avoid these during low-demand periods, reducing revenue.

• Overpaid Purchases: High credits for low-value power strain utility budgets.

• Fat Tail Costs: Peak periods drive high costs (peaking plants and transmission and distribution expansion). Non-solar customers face 1-2% rate hikes in high-solar areas, per National Renewable Energy Laboratory studies.

Schussler also recommends a path forward that would “reduce incentives and align adoption with grid economics”.

Problem with Power Markets

In the third post Schussler describes why power markets that can optimize resource allocation in many sectors, “struggle to deliver affordability and reliability in electricity systems dominated by intermittent renewables.”

Schussler succinctly describes how power markets and the problem with renewables:

Power markets use a merit-order dispatch system, where generators bid their costs, and the market sets prices based on the most expensive unit needed. During “easy” times—when demand is low or renewable output is high—wind and solar often dominate. Their near-zero marginal costs (no fuel expenses) allow them to bid low, displacing higher-cost fossil fuel plants and driving down market prices. This creates the appearance of cheap electricity and fuels the narrative that renewables are inherently cost-effective.

However, during peak or extreme conditions, wind and solar often underperform due to weather or diurnal constraints. For example, wind speeds may drop during heatwaves, or solar output may be negligible at night or during cloudy winters. When demand spikes or renewables falter, markets rely on dispatchable resources—combined cycle plants, combustion turbines, or even older coal units—to meet the shortfall. These resources have higher marginal costs and are often called upon during the most expensive hours, driving market prices skyward. During Winter Storm Uri in February 2021, ERCOT prices surged to $9,000/MWh as renewables underperformed and demand soared. As discussed in the first posting, doing well most of the time is not enough. The challenge in providing costly backup during peak shortages exposes the limitations of power markets.

He goes on to note that he generally supports market-based systems over central planning. However, he also explains why there are issues with power markets. He notes:

Electricity differs from most commodities, with highly inelastic demand and a need for instantaneous balance between supply and demand to maintain grid stability. Unlike markets for goods like wheat or electronics, where substitutes abound, electricity has few viable alternatives. Storage technologies, such as batteries, remain costly and limited, unable to support seasonal needs, leaving utilities reliant on traditional generation (e.g., natural gas, coal, nuclear) to fill gaps left by intermittent wind and solar. This complexity makes electricity a poor fit for market-driven systems.

This complexity requires ten additional markets besides the real-time pricing market needed to address electric complexity. Unfortunately, power markets “tend to prioritize short-term efficiency over long-term reliability.” Consequently, we have seen blackouts occur because of market failures.

He points to the best evidence that solar and wind do not reduce costs:

If you look globally there is an unmistakable pattern: “regions with high renewable penetration often face higher electricity prices. Germany, with its aggressive Energiewende, has some of the highest retail electricity rates in Europe, despite abundant wind and solar. In contrast, regions, like France, with balanced mixes, including nuclear and natural gas, often maintain lower and more stable prices. Power markets’ short-term focus exacerbates cost increases by neglecting reliability during high-cost events.

Conclusion

I cannot provide a better closing than just quoting Schussler’s conclusions.

Modern civilization needs electricity most all of the time. Otherwise, wind and solar would be a better deal. But having energy 80% or 90% of the time is not enough. Although there are many programs and approaches employed to limit electric use during peak times, large amounts of electricity are not shiftable away from peak periods. Consumers need cooling when it is hot and heating when the temperature is frigid. Those needs ensure the fat tail can’t be significantly slimmed down.

Poor rate designs hide solar’s true costs, making it seem affordable while raising electricity rates for all. Retail-rate net metering drives excessive adoption of solar, shifting costs to non-solar customers. Less supportive rates, like avoided costs or California’s NEM 3.0, slow solar growth, aligning it with grid needs. This ensures fairness and avoids cost spirals. A sustainable energy supply requires pricing that reflects true costs, ensuring affordability for all.

For now, the takeaway is this: power markets amplify the cost challenges of renewables by prioritizing short-term gains over long-term reliability. A sustainable energy system must prioritize reliability and affordability through regulated planning, market reforms, or other tailored approaches addressing power market limitations. Policymakers must prioritize reliability over short-term market gains for a resilient, affordable energy future.

#NewYork #ClimateAct #Renewables #Subsidies #NYISO #NYSERDA #Schussler #FatTail #FreeLunch

Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. This post represents his opinion alone and not the opinion of his previous employers or any other company with which he has been associated. Roger has followed the Climate Leadership & Community Protection Act(Climate Act) since it was first proposed, submitted comments on the Climate Act implementation plan, and has written over 500 articles about New York’s net-zero transition.