….When wind or solar is producing, the fossil fuel plants are throttled back and they use less fuel. If, for example, a coal plant was closed when wind was added to the grid, the safety margin would be compromised.

Viewed from the effect on the economy, adding wind or solar electricity provides the benefit of reduced fuel consumption in backup fossil fuel plants. This saving in fuel amounts to about $15 per megawatt hour, the cost of natural gas to generate a megawatt hour of electricity.  The cost of coal is similar. The backup fossil-fuel plant still has to have its full staff and may have more costly maintenance due to the up-down style of operation forced by the introduction of erratic energy. If the renewable energy costs more than $15 per megawatt hour, then it is not competitive. Wind or solar power actually costs around $80 per megawatt hour.

How can I claim that wind or solar cost $80 when power purchase agreements at $25 per megawatt hour are often touted in the press? Even at $25 the wind or solar is far from competitive. The gap between $80 and $25 is accounted for by subsidies. The $10 difference between $25 and $15 is also a subsidy because the purchaser is paying $25 for the electricity that could be generated in a backup fossil fuel plant, that already exists and that must exist, for $15. What are the subsidies that lower the $80 cost to the publicized $25?

The biggest and most important subsidy is not an explicit subsidy but a mandate. Thirty states have renewable portfolio standards. These are laws that require the utilities to supply a certain percentage of renewable power. For example, California has a law that 60% of its power must be renewable by 2030. The consequence of the mandate is that the utility has to grant whatever terms are required to convince investors to build the renewable power plants. In practice this results in the utility promising to purchase all the power generated for 25 years at a fixed rate. The contract is signed before a shovel of dirt is moved. Forcing utilities to buy renewable power puts the suppliers of renewable power in an advantageous position. The subsidy that reduces the cost from $80 to $25 are federal explicit subsidies, better financing, and lower required rate of return that results from having a 25-year contract in hand from a credit worthy utility. There is a federal tax credit that pays up to 30% of the plants cost. Additionally, there is a tax subsidy called tax equity financing that allows a highly taxed partner to the investor to divert money from the federal treasury to the project. This subsidy depends on special depreciation rules enacted by congress to subsidize renewable energy.

Wind or solar does not use fuel. The cost of the electricity is mostly determined by the capital cost amortized over the life of the plant. That in turn depends on the interest rate or discount factor. That factor is dramatically better due to the 25-year contract. If you take away the subsidies, renewable electricity, wind or solar, will cost about $80 per megawatt hour. Such comparisons are still dubious because there are no unsubsidized, utility-scale wind or solar plants. No utility would buy $80 renewable electricity to replace $15 fossil fuel electricity. A stand-alone, enterprise wind or solar plant would be a huge economic failure because there would be no market for overpriced electricity. The entire renewable electricity industry is actually a government boondoggle. Neither, is renewable electricity an economic method for reducing CO2 emissions as has been made clear by the most important proselytizers for global warming such as Climate Scientists for Nuclear.