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David, The Economic Model's avatar

There's a big issue with this analysis. Namely, it uses levelized cost of electricity, which bakes very aggressive assumptions about time preference into its calculation while glossing over quality issues related to solar power. When this is your standard, solar overperforms its actual performance in reality. After all, you can throw up a solar farm in a relatively short timespan, especially with regulators largely leaving solar projects alone. Compare this to, say, a nuclear plant which will take years to build even if it doesn't get tied up in regulations for decades. By LCOE, the nuclear plant will fare much worse. In some sense, it should. After all, nuclear plants have loans which accumulate interest while the plant is under construction/fighting red tape.

But... look, your background is in architecture, so imagine I started talking about a revolutionary new technology which, under my Levelized Cost Of Shelter framework was vastly cheaper than conventional construction. I take you out to a demonstration site where I... pitch a perfectly normal tent. This is a very tight analogy, you can pitch a tent in a few hours, rarely need to deal with regulation, etc. But anyone who's been on a bad camping trip will tell you that no, tents aren't actually relevantly analogous to houses. In the energy context, nuclear (and coal, and LNG, and...) have properties (constant flows of energy, supply scalability which is responsive to demand, no need for battery-based energy storage infrastructure) which are hidden by a simple LCOE comparison. If you look at another framework, like energy return on energy invested, solar is actually not very cost-competitive with fossil fuels and nuclear. That's why, virtually everywhere they're widely deployed, renewables energy systems need to be supplemented with fossil fuels on pain of brownouts and blackouts.

So, before we ask "how did solar power get so cheap?" we should ask "did solar power get so cheap?" By at least one measurement which is in many ways more reasonable than LCOE, it didn't.

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Ben Southwood's avatar

Do you have any thoughts on the claims that LCOE measures substantially undercount the costs of solar (and wind) due to the direct and indirect (ie grid) effects of intermittency?

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