Proponents of renewables and batteries doggedly insist that their costs are rapidly falling and will continue to do so. Unfortunately, as I show here, this is not the case.

Nuclear power’s cost is one of its detractors’ main objections. ‘Once the technology promise electricity too cheap to meter,’ they say, ‘but now it is so expensive it must be subsidised.’ (never mind that the term was coined to refer to fusion power not fission¹). On the other hand, renewables and batteries, they argue, have plummeted over the last 40 years. While it is a bold proponent who believes that they will deliver electricity too cheap to meter, they are buoyant around its future prospects to fall further.

Unfortunately, recent news has offered a reality check to these assumptions. A combination of pandemic related supply chain disruptions and competition for critical minerals in the race to decarbonise, has placed a stay to the fall in battery costs and has even led to a real terms rise in the cost of wind.

Battered Batteries

The International Renewable Energy Agency (IRENA) recently noted,² “The intermittent nature of renewable energy sources presents challenges for electricity supply. Solar panels can generate electricity only during daylight hours, while wind turbines depend on weather conditions.”

Storage, therefore, is needed to bridge the gap between when the electricity is produced and when it is used. While pumped hydro continues to make up over 90% of global electricity storage,³ its role out is limited by its geographical requirements (it requires a suitably placed reservoirs). In our last background paper,⁴ we note that there is only a little over 0.7GW of financially viable hydropower in the UK. The amount of that which could be used for pumped hydro is even lower as it requires a suitably located lower reservoir to pump the water from.

As batteries can be built anywhere, they get around this issue. But they raise issues of their own. Batteries are phenomenally resource intensive – an article in Forbes⁵ suggests that the majority of the lifecycle carbon emissions from a wind farm with battery storage will be from the battery storage. Honestly, I would like to see a better analysis on the question of what is the lifecycle carbon emissions from an integrated grid with battery electric storage. Unfortunately, it is the only analysis I have seen done on the question.

Another issue is battery chemistry. Both lithium-ion and sodium-ion batteries are not designed to hold their charge for long periods. The International Energy Agency (IEA) suggests⁶ that all batteries are unsuitable for seasonal storage⁷ and lithium and sodium batteries are unsuitable for this purpose.

Quite besides this, there is the issue of costs. While the same revolution in electronics technology and mass manufacturing that has hit solar panels has also boosted batteries, the effect seems to be wearing off. IRENA notes that the “costs of fully installed battery storage projects declined by 93% between 2010 and 2024, from USD 2,571/kWh to USD 192/kWh”, however as can be seen from their attached graph, almost all of that fall happened before 2019, since when it has stuck doggedly in the $200-400/kWH range.

Note that these prices are all inflation adjusted into 2024 USD meaning that they have been stagnant in real terms.

Worse, these prices are well above the point where wind and solar become cost competitive with a nuclear power plant for baseload power. According to a study published in Joule, “A cost-optimal wind-solar mix with storage reaches cost-competitiveness with a nuclear fission plant providing baseload electricity at a cost of $0.075/kWh at an energy storage capacity cost of $10-20/kWh.”⁸

$0.075/kWh (£56/mWh) is probably optimistic for a nuclear fission plant, though the system costs of energy with storage costing $200/kWh for Massachusetts⁹ is somewhere between $0.15 and $0.2/kWh (£112/mWh and £149/mWh), well over the cost of a nuclear power plant.

Headwinds For Wind Power

When it comes to electricity generation, talk of rising prices and cost overruns in dominated by nuclear. It’s not hard to see why: as shown by this chart from Our World in Data, between 2010 and 2019 the cost of a nuclear power plant rose by around 50%. We have an upcoming article to explain why and what can be done about it, but let’s consider the impact of this graph on renewables.

As the graph shows, until 2019 all forms of renewable energy were falling in price. Offshore wind, which has been favoured in the UK, was – however – the slowest falling. The UK has relied upon offshore wind for a number of reasons – lower land footprint, an effective moratorium on onshore wind, the inefficiency of solar at high latitudes – meaning that it hasn’t seen the cost decreases that other nations have.

Unfortunately, since the pandemic, the situation for offshore wind in the UK is even worse. UK renewable energy is subsidies through the contracts for difference (CfD) model where generators are paid by the government the difference between the current market price for electricity and the price stated by the contract for difference model. As explained in our background paper, the price of both wind and nuclear is currently largely irrelevant as the market price is set by the most expensive generator which is currently gas.¹⁰

However, let us ignore this for a moment, and examine the pricing of the CfDs for wind power. In April, the UK government concluded its 7^th allocation round (AR7) for renewable energy. According to Oxford University’s Smith School of Enterprise and Environment, the price for offshore wind reached its lowest point in 2022 in AR4 at £37.35/MWh (inflation adjusted to 2012 pounds).¹¹

The following year the government set a cap of £44/MWh (again in 2012 pounds) but could not secure a single bid at that price.¹² According to the Smith School, in the 2024 AR6 auction, the price was set at £54.23/MWh (2012 prices) and this year it rose again to £65.45 (2012 prices).

In other words, offshore wind has almost doubled in cost over the last 4 years, even after accounting for inflation.

Conclusions

You might expect me as a proponent of nuclear power to feel a sense of glee. But I believe that most of our electricity demand should be met with renewables, with a small amount of nuclear to provide baseload power.¹³

Rising wind and battery costs will make decarbonisation more expensive and harder to sell politically, and if wind continues to rise in price, it may make the offshore wind-based electricity grid the UK is currently meandering towards uneconomical. A diversified grid incorporating a range of power solutions would be more resilient in the face of price spikes than any single technology

Another thing that the Smith School notes is that compared with offshore wind, onshore wind is slightly cheaper and solar is considerably cheaper. While these technologies come with their own drawbacks such as considerable land use, abandoning the effective moratorium on onshore wind and building more solar will help bring the cost of the renewable transition down.

Pursuing ways to cut red tape to reduce the cost of both renewables and nuclear is also an avenue worth exploring and is an idea we will be discussing in a future blog post.

---

1. “Too Cheap to Meter”: A History of the Phrase | Nuclear Regulatory Commission ↩︎
2. Battery Energy Storage Systems: Key to Renewable Power Supply-Demand Gaps ↩︎
3. Energy storage – IEA ↩︎
4. Background Paper: An Evidence Responsive Technology Agnostic Approach to Strengthen Our Green Electricity Ambitions – note, we are currently working on a new one as part of the Energy Policy Working Group. ↩︎
5. Estimating The Carbon Footprint Of Utility-Scale Battery Storage – I do think even the 70g CO2e/kWh number is too high (what can I say, I am an optimist), but I do think that it will constitute the majority of lifecycle carbon emissions for storage on a zero emission or even low emission grid. ↩︎
6. Batteries and Secure Energy Transitions – Analysis – IEA, page 47 ↩︎
7. Which is important when your country has considerable variation in sunshine between the winter and the summer as well as power used for heating. ↩︎
8. Storage Requirements and Costs of Shaping Renewable Energy Toward Grid Decarbonization: Joule ↩︎
9. Massachusetts is probably the most reflective of the UK as a northerly state on the coast. Sates at lower latitudes with high levels of sunshine like Arizona have much more cost effective renewables. ↩︎
10. Yours truly would argue that the entire electricity market system – which seems all forms of generators subsidised in different ways in an attempt to ensure that all residential demand is met – is fundamentally unfit for purpose and was always poorly suited to a free market economy. ↩︎
11. Do the AR7 results mark the end of growing pains in the UK’s utility-scale renewables market? | Smith School of Enterprise and the Environment ↩︎
12. Britain’s failed offshore wind auction ↩︎
13. I would suggest around 12-13 GW after accounting for maintenance, meaning around 15GW of capacity. ↩︎