Mother Nature’s Deflationary Forces

I like free stuff. Free delivery, free wireless, free breakfast… you name it.

I think most people share this view, and I know that companies and countries around the world are definitely on board. That’s what makes solar and wind power so interesting.

The basic resources are free. Yes, there’s the bit about environmental concerns, which are very important. But if environmental notions came first, we wouldn’t talk about renewable energy versus fossil fuel. We’d simply convert to green energy and be done with it.

But we don’t. Cost still matters. And while we can stand outside to enjoy sunshine and a nice breeze, harnessing those energy sources takes a bit of cash.

But the cost of capturing wind and solar has fallen dramatically over the past decade, and now the cost of storage is dropping as well. As batteries get better and cheaper, wind and solar will crowd out traditional power generation, driving deflation around the world while increasing our standard of living.

Last year, Crystalline Utility-Scale Solar Photovoltaic energy, one of the cleanest and environmentally friendly methods of generating electricity, cost roughly five cents per kilowatt hour (kWh). This is not the kind of thing you see on your neighbor’s house; it’s a large solar array set up by a power company.

Meanwhile, wind power cost between three cents and six cents per kWh in 2017. Both energy sources fell below the cost of energy from a natural gas combined cycle plant, which operated in a range of 4.2 cents to 7.8 cents per kWh.

This means that it’s cheaper for utilities to build solar and wind facilities than to build natural gas plants, and way cheaper than coal or nuclear.

The Problem is Storage

The problem is storage. Natural gas plants store their energy before the generation process in the gas itself, only using what is needed to run the plant and saving the rest. Because we can’t determine when the wind blows or the sun shines, those plants must operate when the conditions are right and then try to store electricity after it has been generated.