People have the economics of wind and solar wrong.
The mistake is surprisingly simple. We tend to treat the cost of conventional energy and the cost of wind and solar as though they were two independent numbers.
They aren’t.
There is a persistent assumption that whatever makes conventional energy more expensive automatically makes wind and solar more competitive. Oil goes up. Gas goes up. Therefore, the relative advantage of wind and solar improves.
It sounds logical.
It is also incomplete.
The problem is that wind and solar have a characteristic that conventional energy sources do not share to anything like the same degree.
They are unreliable.
They produce energy when nature happens to provide it.
Not necessarily when we need it.
The wind does not consult the electricity grid before stopping. The sun has never shown the slightest interest in peak demand. We can forecast both reasonably well, but we cannot command either of them.
That creates a second problem which tends to disappear from the neat little cost comparisons.
Supply and demand still have to match.
Every moment.
If wind and solar are not producing enough electricity, somebody else has to produce it.
And when wind and solar suddenly produce a great deal, somebody else has to reduce production or the system has to find somewhere to put the excess.
That “somebody else” is the balancing system.
Gas plants are particularly useful for this. Hydro can help where geography permits it. Batteries can help over certain time periods. Interconnectors can shift electricity between regions. Demand can sometimes be adjusted.
But none of this changes the underlying problem.
A system that relies heavily on intermittent generation needs another system capable of compensating for its intermittency.
You therefore end up with two systems rather than one.
One produces electricity when the weather permits.
The other stands ready to produce it when the first one doesn’t.
And this creates a rather awkward economic question.
Who pays for the second system?
Because the backup system is not merely some optional luxury added to an otherwise perfectly functioning wind-and-solar system.
It exists because wind and solar cannot guarantee supply on their own.
Yet regulation has largely separated these costs.
The headline cost of wind or solar can look very attractive because some of the costs required to make that electricity useful to a modern grid are carried elsewhere.
Someone else pays for the grid reinforcement.
Someone else pays for balancing.
Someone else pays for backup capacity.
Someone else pays for storage.
Someone else pays for curtailment when there is too much electricity.
Someone else pays when conventional generators have to operate inefficiently or remain available despite running fewer hours.
And once those costs are distributed across the system, they become remarkably difficult to see.
But they have not disappeared.
They have merely moved.
This is why the relationship with conventional energy prices is more complicated than the usual argument suggests.
If gas becomes more expensive, for example, the cost of the balancing system becomes more expensive.
And if that balancing system is required because intermittent generation cannot reliably meet demand, then the effective cost of integrating that intermittent generation rises as well.
The supposedly independent costs are therefore connected.
This is the part that tends to get lost when people celebrate higher oil and gas prices as though they automatically make wind and solar more competitive.
They may make conventional generation more expensive.
But they can also make the system required to compensate for wind and solar more expensive.
War does not magically change the physics.
If anything, it exposes them.
The uncomfortable truth is that there is no regulatory trick capable of making intermittency disappear.
You can subsidise it.
You can hide its costs.
You can spread them across consumers.
You can force conventional generators to carry them.
You can build enormous amounts of storage and transmission.
You can overbuild generation so that there is more available when conditions are poor.
You can develop technologies that may eventually change the economics.
All of these are possible.
But none changes the basic requirement:
Electricity has to be available when people need it.
And until wind and solar can provide that reliability on their own, their real cost is not simply the price of producing a megawatt-hour when the sun shines or the wind blows.
It is the cost of building an entire system capable of making that intermittent electricity dependable.
That cost is real.
Regulation can move it around.
Accounting can obscure it.
Politics can pretend it isn’t there.
But physics remains stubbornly outside the jurisdiction of government.
And that is why making conventional energy more expensive does not automatically make unreliable energy cheap.
Sometimes it simply makes the entire system more expensive.