Energy for Everyone

You'll hear fairly often, that solar and wind powered electricity are now cheaper than electricity powered by coal. Is this really true? Yes, but only if you compare them using what's know as the Levelised Cost Of Electricity (LCOE). I'll argue here that the LCOE is not an appropriate way to compare these things, since, as we've seen , they don't do the same job. Comparing their costs is like comparing the cost of a bicycle with that of a car and saying the bicycle is cheaper. First of all, what is the Levelised Cost Of Electricity? When you build a power plant, just like anything else, it has a finite lifetime. Over that lifetime, there are a range of costs to pay: first you have to pay for the land, planning and permitting, engineering and so on. Then you have to pay for construction and commissioning. When you operate the plant you have to pay for wages, insurance, fuel, shareholder dividends and taxes. Finally at the end of life you have to pay for decommissioni

Last time, we saw how instantaneous electricity supply power has to match instantaneous demand, in order to keep the electricity grid functioning within safe limits. Demand is mostly determined by individual consumers turning things on or off, with the exception of relatively few large industrial users who are able to turn demand down when instructed (in exchange for a cheaper rate). The wholesale market Supply is matched to demand by the Australian Energy Market Operator (AEMO) every 5 minutes, but how do they do this?  Because we live in a world where free and open markets are believed to deliver the most efficient outcomes, they do it using a market. Every 5 minutes, the market operator conducts an auction. Each registered generator bids an amount of electricity and a price - the minimum price they are prepared to be paid - to supply electricity to the market for the next 5 minutes. The market operator then ranks the bids from cheapest to most expensive, and proceeds down the list u