Reader Beware: apples and oranges alert

When rhetoric edges toward demagoguery, techniques to beware of include selective use of data and misleading statements that may sound appealing but actually perpetuate misconceptions. And when an author’s own numbers don’t support their broad conclusions, it’s time to be even more wary about going along for the ride.

Enter Robert McCullough’s latest faulty comparison of the cost and value of various forms of power generating resources (Renewables Cost Report, published by McCullough Research on Oct. 5).

The primary focus of McCullough’s report is on declining costs for new renewable resources such as wind power and solar photovoltaic generation, relative to other types of power supplies, including new hydroelectric power plants. The report begins by reiterating the conclusion reached in an earlier McCullough Research report:

“This assessment only reinforces the conclusion I reached in my report last year – renewables such as solar and wind are less than half the cost of hydro.”

Immediately following this statement, the McCullough report presents a table comparing the average levelized (life-cycle) cost in Canadian dollars per megawatt-hour (MWhr) for the following generating resources:


Careful readers will quickly note that the numbers simply do not support McCullough’s claim that hydro is double the cost of other forms of renewable generation. According to his own comparison, the levelized cost of power from the Site C hydro project is estimated to be 15.6 percent higher than the cost of onshore wind power, and 41.5 percent higher than the cost of utility-scale solar photovoltaic generation. So right out of the gate, McCullough’s rhetoric is unsupported, even by the cost comparison he prepared himself.

But wait, it gets worse. McCullough’s simplistic comparison of the cost of power from these types of power resources totally ignores the practical reality that they have very different characteristics and capabilities. As a result, the value of the power produced by different types of power generation varies dramatically.

This is not a small point.

U.S. News and World Report made sure its readers were aware of LCOE drawbacks, the exact drawbacks McCullough chooses to ignore.

Despite the strengths of LCOE as a metric – it is easy to understand and widely used – it has some shortcomings, too. Namely, it leaves out geographic variability, changes with seasons and usually ignores the cost of environmental impacts such as the cost of carbon emissions. This metric is a bit too simple when comparing variable wind and solar generators to power plants that you can turn on and off at will, such as those fueled by uranium, coal and natural gas.

And one could add water.

For example, consider solar photovoltaic generation. As the McCullough report (correctly) notes, solar PV in the Pacific Northwest only produces at a 19 percent to 26 percent capacity factor. But what the McCullough report does not mention is that solar PV generation occurs primarily during the spring and summer months between mid-morning and late afternoon. Meanwhile, consumption of electricity in most of the Pacific Northwest is typically highest during earlier and later parts of the day, and during the winter season. This means that other, less intermittent forms of generation are needed when consumers use the most electricity. It also means that a significant share of solar generation occurs when the market value of power is low – further reducing the value of solar PV compared to other types of generation. These realities are not acknowledged in the McCullough report. (He does reference the potential use of energy storage to partially mitigate the daily mismatches between solar PV generation and consumer use of electricity, but conveniently neglects to include the additional costs that would be incurred for storage.)

Anyone living in the Pacific Northwest has felt the bite of Old Man Winter of late, with temperatures falling into the single digits for extended periods. How are people staying warm? Mostly from baseload, or full-time, electricity resources like hydro, fossils and nuclear.

BPA Source Graph.png

Is that value worth something? We think so.

Diversity is key

One of the information sources quoted in the McCullough report is Lazard’s Levelized Cost of Energy Analysis 9.0, which was published in 2015. The Lazard LCOE analyses are actually a good source of information about costs for various types of power generation. But unlike McCullough, Lazard is realistic about how a diversified mix of resources is needed to keep the lights on. Toward this point, here is a key quote from Lazard’s press release for their latest LCOE Analysis 10.0, issued December 15, 2016:

“Even though alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future. Therefore, the optimal solution for many regions of the world is to use complementary traditional and alternative energy resources in a diversified generation fleet.”

We could go on with identifying flaws in the McCullough report, but will close by observing that it improperly compares the cost of generating resources with the market value of wholesale power, and does so only when it supports false conclusions. For instance, the McCullough report once again trots out a previously-debunked and overly-simplistic comparison of the operating cost of nuclear power with “the low market cost of electricity.” Meanwhile, the report refrains from comparing the cost of new renewable resources with “the low market cost of electricity.”

When it comes to biased, inconsistent and misleading “analyses” like those presented in the latest McCullough report, reader beware.

(Posted by John Dobken)

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