City rooftops showing solar panels

Too much of a good thing

Rolf Schulten/Bloomberg via Getty Images

“Germany had so much renewable energy on Sunday that it had to pay people to use electricity.” That was the striking headline on the Quartz news site last week. Excess electricity can overload a grid, so to even things out some big consumers were paid to up their energy use.

Wind and solar provided 22 per cent of Germany’s electricity in 2015. That isn’t typical but it’s not the only place with too much energy at times. In Texas there is now so much wind energy that some firms give electricity away to households for free at night.

It sounds like wonderful news. The cost of wind and solar is falling so dramatically that they are finally becoming competitive with other electricity sources. The tempting conclusion is that the days of fossil fuels are numbered. Clean, green energy is going to deliver cheaper power for us all. Problem solved.

Except this is not how it works. To understand why, imagine you’re a potential solar investor in a free market. The question you have to ask is will you be able to sell electricity for more than it costs you to produce it. If you’re the first to install solar in an area, the answer could well be yes. But as more solar comes on line, there’s going to be a surfeit of electricity on sunny summer days, meaning no one will want to buy yours. You will have to sell it cheap if you can sell it at all – whereas your fossil-fuelled …

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