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Commentary By Preston Cooper

Renewables Offer No Bang for Your Megawatt

Advocates of renewable energy are touting a new statistic that 70 percent of new electricity generation capacity in the first half of 2015 was renewable. While this figure is technically true, it merits an asterisk. That 70 percent refers to how much energy power plants could produce if they were running at full power all the time, a metric called installed capacity. It does not mean that 70 percent of new energy generated in the first half of 2015 came from renewables.

To find out how much energy the new power infrastructure will actually produce, we must look at the capacity factor for various types of energy. The capacity factor measures the ratio of the energy a power plant actually produces to how much it could produce if it were running at maximum power all the time. A higher factor indicates that a source of electricity is more likely to reach its full potential. Capacity factor may be thought of as how much bang you get for your installed megawatt.

Of course, capacity factors vary across energy sources. Coal-fired power plants reach a capacity factor of 61 percent, and natural gas combined-cycle plants hover around 48 percent. Nuclear power fares the best by this metric, with a factor of 92 percent. The most inefficient sources of electricity are renewables: hydroelectric (38 percent), wind (34 percent) and solar photovoltaic (28 percent). The one exception is geothermal, at 69 percent.

Large amounts of new renewable capacity, therefore, do not always translate into large amounts of new power generation. For instance, wind power comprises six percent of total installed capacity in the United States, but produces only three percent of the electricity. Nuclear power, by contrast, punches above its weight—it makes up only 10 percent of installed capacity but produces 19 percent of America’s electricity.

The following chart shows the capacity factors of various types of energy since 1980. While fossil fuels have maintained roughly the same capacity factor over the last few decades and nuclear power plants have got far more efficient, non-hydroelectric renewables have slipped.



Non-hydroelectric renewables have disappointed over the past three decades. Federal policies such as the Wind Production Tax Credit have encouraged the addition of new renewable capacity, but this has not given us a comparable amount of new renewable electricity. Since less-efficient wind turbines and solar panels have been added to more reliable geothermal wells, the overall renewable capacity factor declined from over 60 percent to an abysmal 34 percent in 2012.

Renewables have a low capacity factor because their power sources are dependent on the elements—the sun does not always shine, and the wind does not always blow. Solar panels will see their energy output spike in the middle of a clear day, but then drop down to zero at night. Additionally, wind turbines in the breezy Midwest will often achieve higher output than those in other parts of the country. Renewable energy generation depends on more factors than other energy sources, making it more unreliable.

The one trend that stands out from this graph is nuclear energy. Since 1980, capacity factor has increased from 55 percent to over 90 percent in recent years. Improvements such as reduced maintenance periods and fewer unplanned outages have contributed to this remarkable change. Advantages such as low variability in input costs have also given nuclear a leg up in reliability.

The United States added nearly 2000 megawatts of new wind capacity in the first half of 2015. It would take just over a third of that capacity to generate a comparable amount of electricity using nuclear power. But government policy tips energy investment in favor of renewables: in 2013, nuclear power got just $1.7 billion in subsidies, compared to twice that for fossil fuels and eight times as much for renewables. The federal government is quite literally subsidizing unreliability.

Incredibly, the Obama administration is doubling down on its aversion to reliable energy with its new EPA rule regarding carbon emissions. Nuclear power emits zero carbon, yet the EPA will not allow states to count existing or under-construction nuclear plants towards their emissions-reduction goals. There is little rationale for this provision other than supporting renewables, but such a rationale is self-defeating given that renewables require other sources of power to back them up.

Subsidies and regulations are generally more trouble for an economy that they are worth. But if the government is not going to get rid of energy subsidies and EPA commandments, it should at the very least update them to reflect which power sources show the most promise. The high reliability of nuclear power, as measured by its capacity factor, is a good indicator of the way forward.


Preston Cooper is a Policy Analyst at Economics21. You can follow him on Twitter here.

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