Notes on Energy Policy and Renewable Subsidies

LCOE and the Impact of Intermittent Renewables

  • The Energy Information Agency (EIA) defines the Levelized Cost of Electricity (LCOE) as the estimated revenue needed to build and operate a generator over a specified cost recovery period.
  • The LCOE calculation doesn't account for existing generation resources.
  • Dispatchable generation is retiring rapidly.
  • Wind and solar can negatively impact the LCOE of dispatchable generation.
    • Gas, nuclear, and coal plants must reduce output but still have fixed operational costs.
    • This is to accommodate intermittent renewable generation.
  • Tax incentives for intermittent sources increase the LCOE of firm resources, raising costs for consumers.

The Secretary's Perspective on Energy Sources

  • The Secretary supports all sources of affordable, reliable energy.
  • The Secretary is not in favor of all sources of energy period; only ones that are affordable, reliable, and secure.
  • The LCOE concept is old and was designed to compare always-on dispatchable sources (nuclear, coal, gas).
  • LCOE was never intended for sources with intermittent availability.
Analogy for Intermittent Energy
  • A premature baby in a life-saving incubator needs consistent power.
  • It's unacceptable for the power to turn on only when the wind blows or when the sun is shining.
  • There are no customers for electricity that may or may not be available.
Uber Analogy
  • Imagine a competitor to Uber with 10% cheaper transport costs.
  • However, this competitor doesn't guarantee when or where pickup and drop-off will occur.
  • These are two entirely different things.

System Costs and Grid Reliability

  • System cost matters, not just generation cost.
  • Renewables often have their lowest delivery at peak demand.
  • The reliable grid must provide electricity at peak demand.
  • A second grid (renewables) comes and goes with the weather.
  • Managing both grids together is more expensive and less reliable.
Subsidies and Consumer Costs
  • Subsidies for unreliable energy sources can be counterproductive.
  • Spending a dollar of subsidy can increase consumer electricity costs by a dollar.

Sunnova and Ethical Concerns

  • Sunnova, a residential solar company, received a 3,000,000,0003,000,000,000 loan guarantee from the previous administration's Department of Energy (DOE).
  • Sunnova filed for Chapter 11 bankruptcy.
  • Jigar Shah, Biden's loan programs office director, was aware of accusations that Sunnova defrauded seniors.
  • Shah allegedly instructed DOE staff to prioritize Sunnova's loan application after attending a dinner hosted by a Sunnova board member.
  • The board member's spouse was the former chair of the DNC.
  • The DOE inspector general determined that Shah's actions potentially violated ethical standards.
Addressing Ethical Concerns at DOE
  • The speaker acknowledges the undermining of credibility due to such actions.
  • A program review process has been created with a cross-functional team to evaluate projects of meaningful scale (over a few million dollars).
  • Every project is evaluated in a business-like, not political or self-interested, manner.
  • The goal is to build a very different culture at DOE.