“The LCOE narrative has just collided with reality. If ‘cheap’ solar and wind really were enough, the energy transition would largely run on autopilot. Emissions would fall. Subsidies wouldn’t be needed. Electricity would get cheaper. None of that is happening.” – Jonas Kristiansen Nøland, Norwegian University of Science and Technology (below)
Noncompetitive energies need studies; competitive energies need markets. This insight deserves to become an adage in today’s contentious debates over relative costs for electric generation. This is particularly true for levelized cost of energy (LCOE) studies purporting to show that wind and solar generation is competitive with thermal generation from oil, gas, and coal.
The most recent attempt is by the International Renewable Energy Agency (IRENA), titled “91 Percent of New Renewable Projects Now Cheaper Than Fossil Fuel Alternatives” (July 2025). And the fix was in with a study purporting to justify “accelerat[ing] the deployment of renewables-based energy transitions worldwide.”[1]
Jonas Kristiansen Nøland, Norwegian University of Science and Technology, took issue with their study, posting:
The LCOE narrative has just collided with reality. If “cheap” solar and wind really were enough, the energy transition would largely run on autopilot. Emissions would fall. Subsidies wouldn’t be needed. Electricity would get cheaper. None of that is happening.
Fossil energy use is still increasing, not decreasing. Electricity prices in low-LCOE-dominated electricity systems are rising, not falling.
Why? Because LCOE was never designed for weather-dependent electricity systems. Historically, LCOE was used by the International Energy Agency (IEA) to plan electricity systems based on firm, dispatchable generation fueled by non-weather-dependent resources.
Today, the same metric is used to justify electricity systems dominated by variable energy sources that require backup, reserves, ancillary services, and flexibility assets — costs LCOE simply ignores. The result? Low-LCOE power ≠ low-cost electricity.
This is exactly why a new UNECE report [United Nations Economic Commission for Europe] now calls for abandoning LCOE as a planning tool and replacing it with full system cost of electricity (FSCOE). System costs matter. Reliability matters. Physics still matters.
I’ve linked the UNECE report in the comments.
Curious to hear: Should LCOE finally be retired from energy policy?
Yes, it is time for LCOE to be demoted for energy policy-making. Pronto! And many of the 150+ comments agreed.
————————
[1] The About section reads:
IRENA is a lead global intergovernmental agency for energy transformation that serves as the principal platform for international cooperation, supports countries in their energy transitions, and provides state of the art data and analyses on technology, innovation, policy, finance and investment. IRENA drives the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy in the pursuit of sustainable development, energy access, and energy security, for economic and social resilience and prosperity and a climate-proof future.
IRENA’s membership comprises 170 countries and the EU. Together, they decide on the Agency’s strategic direction and programmatic activities, in line with the global energy discourse and priorities to accelerate the deployment of renewables-based energy transitions worldwide.”
Occam’s Razor applied.
LCOE is obviously simplistic and incomplete, while EIA proposes a complicated scheme of LCOE, LCOS (levelized cost of storage) and LACE (levelized avoided cost of electricity). It serves both the drive for more renewables and job creation for accountants. David Wojick OTOH suggested a much simplier solution in his CFACT article: https://www.cfact.org/2021/03/21/it-takes-big-energy-to-back-up-wind-and-solar/
“Power system design can be extremely complex but there is one simple number that is painfully obvious. At least it is painful to the advocates of wind and solar power, which may be why we never hear about it. It is a big, bad number.
To my knowledge this big number has no name, but it should. Let’s call it the “minimum backup requirement” for wind and solar, or MBR. The minimum backup requirement is how much generating capacity a system must have to reliably produce power when wind and solar don’t.
For most places the magnitude of MBR is very simple. It is all of the juice needed on the hottest or coldest low wind night. It is night so there is no solar. Sustained wind is less than eight miles per hour, so there is no wind power. It is very hot or cold so the need for power is very high.
Thus what is called “peak demand” is a good approximation for the maximum backup requirement. In other words, there has to be enough reliable generating capacity to provide all of the maximum power the system will ever need. For any public power system that is a very big number, as big as it gets in fact.
Actually it gets a bit bigger, because there also has to be margin of safety or what is called “reserve capacity”. This is to allow for something not working as it should. Fifteen percent is a typical reserve in American systems. This makes MBR something like 115% of peak demand.
In short the true cost of wind and solar is LCOE + MBR. This is the big cost you never hear about. But if every state goes to wind and solar then each one will have to have MBR for roughly its entire peak demand. That is an enormous amount of generating capacity.
Of course the cost of MBR depends on the generating technology. Storage is out because the cost is astronomical. Gas fired generation might be best but it is fossil fueled, as is coal. If one insists on zero fossil fuel then nuclear is probably the only option. Operating nuclear plants as intermittent backup is stupid and expensive, but so is no fossil fuel generation.”
Here’s what it looks like in California:
https://www.powermag.com/wp-content/uploads/2023/04/mansoor-linkedin-canyoncurve.jpeg