Paul Krugman: Wind and sun don't have to pass through the Strait of Hormuz
Electricity prices jumped 60% in a week despite renewables. We look at the paradox, gas dependence and the nuclear vs. solar debate.
English · Original discussion in Spanish · Published
More renewables, but the bill soars: the paradox dividing analysts
Electricity prices in Spain have risen 60% in the past week, despite the country having more renewable capacity than ever. The figure, drawn from OMIE data, reopens the debate over whether the massive bet on sun and wind is actually making the system cheaper, or whether we are instead paying the price for a model that still relies on gas to cover the gaps.
Paul Krugman's argument — that renewables provide energy independence because wind and sun don't pass through the Strait of Hormuz — clashes with the reality of the Iberian market: marginalist pricing sets the cost based on the last technology dispatched, which is usually gas. So even though renewables generate cheap power, consumers pay the fossil fuel price whenever gas sets the marginal cost.
The cost of intermittency: batteries, hydrogen and the elephant in the room
The lack of large-scale storage is the bottleneck. Without systems that store surplus solar and wind power, windless or overcast days force gas plants to fire up, setting the price for the entire system. Solutions such as green hydrogen or pumped hydro are being floated, but none is commercially operational yet. Meanwhile, nuclear power is put forward as the alternative some feel is missing: "If we had nuclear, we wouldn't give a damn about the sun, the wind, coal..." — a recurring view that clashes with those who point to the problems of waste and uranium dependence.
On the other hand, some note that the fall in the price of Chinese solar panels has been dramatic, but their manufacture requires oil and shipping, creating a different kind of dependence: on hydrocarbons to produce the renewables themselves. "We've swapped one set of Arabs for the Chinese," some analyses sum up.
The figure nobody disputes: more renewables haven't made electricity cheaper
One point of agreement across the different positions is that, despite Spain's record rollout of solar and wind, electricity bills remain among the highest in Europe. The causes cited are the marginalist pricing system mentioned above, taxes and the fixed costs of the grid. Some interventionists propose setting the price of renewables below that of gas, but regulatory reality is stubborn.
The open question is whether the solution lies in more storage, a return to nuclear, or a complete redesign of the electricity market. For now, Spain's energy paradox remains unresolved.
Related debates in the forum
Electricity prices in Spain have risen 60% in the past week, despite the country having more renewable capacity than ever. The figure, drawn from OMIE data, reopens the debate over whether the massive bet on sun and wind is actually making the system cheaper, or whether we are instead paying the price for a model that still relies on gas to cover the gaps.
Paul Krugman's argument — that renewables provide energy independence because wind and sun don't pass through the Strait of Hormuz — clashes with the reality of the Iberian market: marginalist pricing sets the cost based on the last technology dispatched, which is usually gas. So even though renewables generate cheap power, consumers pay the fossil fuel price whenever gas sets the marginal cost.
The cost of intermittency: batteries, hydrogen and the elephant in the room
The lack of large-scale storage is the bottleneck. Without systems that store surplus solar and wind power, windless or overcast days force gas plants to fire up, setting the price for the entire system. Solutions such as green hydrogen or pumped hydro are being floated, but none is commercially operational yet. Meanwhile, nuclear power is put forward as the alternative some feel is missing: "If we had nuclear, we wouldn't give a damn about the sun, the wind, coal..." — a recurring view that clashes with those who point to the problems of waste and uranium dependence.
On the other hand, some note that the fall in the price of Chinese solar panels has been dramatic, but their manufacture requires oil and shipping, creating a different kind of dependence: on hydrocarbons to produce the renewables themselves. "We've swapped one set of Arabs for the Chinese," some analyses sum up.
The figure nobody disputes: more renewables haven't made electricity cheaper
One point of agreement across the different positions is that, despite Spain's record rollout of solar and wind, electricity bills remain among the highest in Europe. The causes cited are the marginalist pricing system mentioned above, taxes and the fixed costs of the grid. Some interventionists propose setting the price of renewables below that of gas, but regulatory reality is stubborn.
The open question is whether the solution lies in more storage, a return to nuclear, or a complete redesign of the electricity market. For now, Spain's energy paradox remains unresolved.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (49 replies).
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