The energy transition is collapsing—not in headlines, but in economics. What began as a hopeful vision for a cleaner future has become an economic bust. While markets and workers sense the failure, activists and policymakers remain caught in a consensus trance.
Bill Gates saw the winds shifting and changed course almost overnight. After years of climate evangelism, he now downplays the urgency. The public is angry about inflation, energy bills, and economic stagnation. They no longer see climate change or renewables as relevant to their daily lives. Gates didn’t reposition because the science changed—the political wind did.
Even longtime progressives are pulling away. The CEO of the Progressive Policy Institute now admits the Green New Deal “crashed to earth,” alienating workers by attacking fossil fuels instead of offering real energy solutions.
The failure is global. COP30 exposed the widening gap between climate rhetoric and political will. Six EU countries now want to abandon the 2035 engine ban to save their auto industries. Meanwhile, utilities like EDP Renewables and Orsted are retreating from Southeast Asia as red tape, erratic policy, and weak economics derail the clean energy boom.
The underlying problem is simple: the economics of wind and solar unravel once you ask them to behave like real power plants.
This may come as a surprise, since we’ve been told for years—by governments, banks, think tanks, and the industry itself—that wind and solar are the cheapest energy sources ever built. But that was always a narrow view, based on project-level metrics like Lazard’s Levelized Cost of Energy (LCOE). LCOE asks: “What does it cost to generate one megawatt-hour at the project site?” It ignores the cost of turning intermittent, weather-dependent output into reliable 24/7 power.
Lazard’s reports helped fuel the narrative. They show solar and wind falling from the most expensive to the least expensive electricity sources (Figure 1). Natural gas remains competitive but looks pricier. Coal and nuclear appear cost-prohibitive.
Figure 1. Lazard’s LCOE shows that solar and wind are the cheapest forms of electric power. Source: Lazard & Labyrinth Consulting Services, Inc.
Click on the image to enlarge.
|
But LCOE doesn’t ask the right question. It doesn’t include the cost of backup, storage, grid integration, or the challenge of matching supply and demand second-by-second. It’s not wrong—it’s just not the real world.
Lazard also evaluates relatively small projects—150 MW for solar, 300 MW for wind—compared to the 500–1600 MW size range of typical gas, coal, or nuclear plants.
The entire premise of the transition has been built on an accounting illusion. Wind and solar may be cheap at the generator fence, but not at the system level. The gap between those two is where the economic case collapses.
So I asked a different question: “What does it cost to add 1 GW of wind or solar that actually functions like a responsible, dispatchable generator—backed up, firm, and grid-integrated—at a 10% cost of capital?”
The answer is clear. Once wind and solar are required to carry full system responsibilities in a MISO-type region, the economics fall apart. At a flat power price of 5¢/kWh, neither solar nor wind ever breaks even—not even in the optimistic case. Wind performs better, but both remain deeply uneconomic (Figure 2). The dip around year 15 reflects the cost of replacing first-generation batteries.
Figure 2. 1 GW Solar/Wind With Storage and Backup: Cumulative Discounted Cash Flow per kW at 10% Real, $50/MWh. Source: Labyrinth Consulting Services, Inc.
Click on the image to enlarge.
|
Table 1 outlines the assumptions. These are not extreme. Battery prices are low. Backup is cheap. Integration costs are modest. I haven’t even shown the pessimistic case.
Table 1. One gigawatt plant (solar or wind) plant including storage and gas backup model assumptions. The only difference between solar and wind within a given case are capacity factor, generator capex, and generator O&M.
Source: Labyrinth Consulting Services, Inc.
Click on the image to enlarge.
|
Could technological improvements change this? Possibly—but only at the margins. Lower prices for batteries, turbines, and panels help, but they don’t fix the structural flaws. The core issue is that intermittent sources don’t provide firm capacity. They depend on layers of backup that come with their own capex and integration costs.
That’s why the dream of a 100% electric, mostly renewable economy is not just unlikely—it’s unworkable under current conditions. Renewables may still help displace coal over time. But even that is inconsistent with today’s consumption levels, storage limits, and the world’s vast, cheap coal supply.
It’s telling that the nuclear and geothermal projects I’ve modeled—despite high upfront costs—eventually break even. Wind and solar don’t, because they never produce firm output. Their intermittency prevents them from recovering the negative present value from capex.
Grid engineers have warned about this for years. In the early days, wind and solar were a rounding error—just a few percent of generation in grids dominated by gas, coal, hydro, and nuclear. They were classic “free riders”: their variability was absorbed by the rest of the system, and markets didn’t price their intermittency.
But as their share grew, so did the need for flexible thermal backup, grid-responsive controls, better forecasting, and new transmission. These real costs don’t show up in LCOE. Worse, wind and solar often generate power at the same time, crashing prices and cannibalizing their own market value. As curtailments rise, thermal plants must cover the gaps, pushing total system costs even higher. Spain’s April 2025 blackout revealed just how fragile this arrangement becomes without deep reform.
Scaling is a recurring theme in complexity science and systems engineering. Whether it’s software, infrastructure, or power systems—what works at 5% penetration often fails at 30%. It’s hard to believe engineers didn’t warn of this.
Cheaper parts don’t fix intermittency. They don’t erase the need for backup. They don’t eliminate the costs of integrating into the grid. They just slow the bleeding.
This isn’t an argument against technology. It’s a recognition of physical, economic, and thermodynamic boundaries. You can’t force inverter-based renewables into a system built for synchronous, frequency-stabilizing machines and expect stability to be free. Frequency control isn’t a minor detail—it’s fundamental. The more inverter-fed generation we add, the harder and costlier that control becomes.
Try searching for full-cycle discounted cash flow models for wind and solar like the one shown in Figure 2. What you’ll mostly find are LCOE charts. A recent review of 2011–2020 renewable energy finance literature shows why: the vast majority of studies focus on project-level economics. Almost none incorporate full system costs. This is astonishing, given that over $3 trillion has been invested in renewable energy globally as of 2024.
At this point, renewables resemble a trip to Abilene. The Abilene Paradox describes a group that makes a bad collective decision even though no one individually wants to. A bored family drives to Abilene for lunch. The food is bad, the trip is long, and only afterward does everyone admit they never wanted to go in the first place.
Society went to Abilene on renewables. We didn’t go for lunch. The climate crisis was real. Someone said, “Let’s go with wind and solar.” We went there to redesign the global energy system. Everyone nodded. No one checked the map.
This isn’t a failure of technology—it’s a failure of imagination. We believed we could transition to a fully electric, renewable economy without confronting growth, consumption, or planetary limits. The carbon pulse gave us a century of abundance. The challenge now isn’t to recreate it with wind and sun. It’s to grow up as a species—and learn how to live within the boundaries of a planet that no longer tolerates business as usual.
By the same author:
The False Promise of Enhanced Geothermal
Memes Are the Masks of Fear
Decoupling, Dumb and Dumber
ABOUT THE AUTHOR
Art Berman is Director of Labyrinth Consulting Services, Sugar Land, Texas, and a world-renowned energy consultant with expertise based on over 40 years of experience working as a petroleum geologist. Visit his website, Shattering Energy Myths: One Fact at a Time, and learn more about Art here.
|
|Back to Title|
LINK TO THE CURRENT ISSUE
LINK TO THE HOME PAGE
