Bloomberg: Wind and solar will need subsidies indefinitely

Bloomberg recently ran a very interesting interview with Brett Christophers about his new book The Price is Wrong: Why Capitalism Won’t Save the Planet.

In the interview, Christophers argues there’s a widespread misconception about what’s needed to expand the deployment of renewables and transition away from fossil fuel generation. 

Christophers states there is a widespread argument that the economics of renewables work and that the only remaining significant obstacles are political and in the planning realm around permissions. However, his book pushes back quite forcefully against that argument and suggests that that’s a very partial and misleading perspective on the economics of the transition. 

The basic argument is simple, and it’s something that the world doesn’t want to admit: The business of developing and owning and operating solar and wind farms and selling electricity is kind of a lousy business. 

Whether new solar or wind farms get built is ultimately about the expected profitability of those assets. Even though the generating cost aspect has become increasingly beneficial over time that doesn’t necessarily mean that the expected profits are going to be there. 

Generating costs are only part of the costs that a company that owns and controls a solar or wind farm, and sells the electricity, incur. There are also costs associated with delivering that power to where it gets consumed. 

For renewables the delivery costs tend to be higher than they are for conventional power plants because conventional power plants on average tend to be located closer to centers of demand. 

That’s because unlike conventional power plants, renewables like solar and wind farms require huge amounts of land to produce significant amounts of power. 

Unless governments are willing to either assume the burden of renewables development through public ownership…they will have to keep subsidies and tax credits in place indefinitely or else renewables investment will collapse because of the unfavorable economics. 

The author obviously favors wind and solar and later advocates for a tax on carbon dioxide emissions. However, it is interesting that he acknowledges there is no economy-wide business case for wind and solar without government support.