Renewables are Cheaper Because of Fuel Volatility – Watts Up With That?

Roger Caiazza

When questioned about affordability, New York Climate Leadership & Community Protection Act (Climate Act) proponents have claimed that renewable energy development can reduce costs.  This article responds to their argument that reduced fuel price volatility will make renewables cheaper.

The December 18, 2024 New York Assembly Committee on Energy public hearing enabled legislators to question New York State Energy Research & Development Authority (NYSERDA) and New York State Department of Public Service (DPS) staff about Climate Act progress. Jessica Waldorf, Chief of Staff & Director of Policy Implementation, DPS was asked what impact Climate Act GHG emission reductions would have given that New York emissions are smaller than the observed annual increases in global GHG emissions. Waldorf said that there are other reasons “to build renewable energy resources in New York that are not just related to emissions.”  She gave two reasons: energy security and price volatility. 

The other thing I would say about energy security is price volatility.  Customers are beholden to the whims of the fossil fuel industry and the up and down markets that we see from fossil fuels.  Localizing our energy production and renewables allows us for price stability.  That is definitely a benefit of building resources here. 

The claim was also made at an New York State Energy Plan Planning Board on March 3, 2025 to adopt the scope for the state energy plan the claim was mentioned.  The presentation by Jeff Freedman from the Atmospheric Sciences Research Center, University at Albany, Albany, New York included the following slide that makes the claim that renewable energy can reduce costs.

One characteristic of the NYSERDA documentation is lack of detail, so it is not surprising that the justification for the claim is not readily available. Table 6-1 was in New York State Climate Impacts Assessment Chapter 06: Energy.  That chapter does not address renewable energy costs specifically.  I searched for references for costs in the chapter and found only one relevant reference on page 370:

Energy costs: Fossil fuel prices are increasingly volatile, largely because they are traded on global markets. In contrast, a power sector composed of large volumes of renewable resources that have no fuel costs could lead to less volatile energy bills due to the elimination of this driver of variability in energy costs. The presence of distributed resources amplifies this effect. Whether the costs of a clean power sector are lower than, comparable to, or higher than the status quo, they will be more predictable and less likely to create indirect costs that arise from unexpected price changes.

The presumption in this article is that the basis of these claims that renewable energy will be cheaper and less volatile is that a renewable energy dependent electric system will have less unstable fuel costs resulting in cheaper and more secure energy.  This in turn is based on two presumptions: fuel prices are volatile because of global markets and renewables would eliminate this cost driver.

Fuel Volatility

The US Energy Information Administration (EIA) noted in June 2024 that fossil fuel price volatility has shown significant changes over time, with recent years experiencing particularly high levels of volatility: “In 2022, natural gas price volatility reached extreme levels, with historical volatility peaking at 171% in February 2022, the highest since at least 1994.”  Note that EIA is only discussing natural gas volatility which has become a much larger electric generating fuel source in recent years.  In my opinion, the increasing reliance on a single fuel could be the fundamental reason for the observed increase in volatility.

In any case, the New York agency global market argument picks just one driver for fuel price volatility.  The EIA  gave other reasons for natural gas variability in August 2022:

Increased uncertainty about market conditions that affect natural gas supply and demand can result in high price volatility. Events that have contributed to changing market conditions include:

• Production freeze-offs
• Storms
• Unplanned pipeline maintenance and outages
• Significant departures from normal weather
• Changes in inventory levels
• Availability of substitute fuels
• Changes in imports or exports
• Other sudden changes in demand

U.S. natural gas prices are typically more volatile during the first quarter of a year because of the fluctuating demand for natural gas for space heating as weather changes. Factors that contributed to heightened volatility in the first three months of this year include:

Of the eight events that contribute to changing market conditions and fuel volatility is the only one is related to global market conditions.

There is one other aspect of volatility.  In today’s electric system prices spike when load peaks during the hottest and coldest annual events.  When the electric grid becomes dependent upon weather dependent wind and solar resources, prices will also spike when there are resource lulls.  That effect will be exacerbated when the two coincide.  I believe that this volatility will be more frequent, just as severe, but for shorter periods than any fuel price volatility caused by global events.

European Experience

However, if the fuel volatility claim is true then proponents should be able to point to jurisdictions where wind, solar, and energy storage have make electric prices cheaper.  The best example of the claim that renewable energy is cheaper because it reduces fuel volatility should be Germany.  Oil, coal and gas prices spiked in the immediate aftermath of Russia’s invasion of Ukraine and have been volatile ever since. Germany’s Energiewende is the country’s planned transition to a low-carbon, nuclear-free economy and is often cited as an example of what New York should do. Enerdata reports that “According to the German Federal Network Agency, the installed renewable power capacity in Germany increased by nearly 20 GW (+12%) to nearly 190 GW in 2024.” If the proponent’s claim is true then prices should be trending down.  However, since 2000, electricity prices for German households have risen by 116%, from 13.94 to 30.43 cents per kilowatt-hour in 2019 .  As of April 1, 2024, households with basic supplier contracts were paying around 46 cents per kilowatt-hour, making it “the most expensive option compared to other providers or special contracts” .

Another way to look at the claim is to compare electricity prices within the European Union.  I highly recommend  the Nemeth Report for its coverage of European energy issues. The post EU Action Plan for Affordable Energy  includes just such a comparison.  It quotes Ursula von der Leyen, President of the European Commission, as saying: “We’re driving energy prices down and competitiveness up. We have already significantly reduced energy prices in Europe by doubling down on renewables. “

However, the data in the following figure do not support her claim. 

The analysis states that:

Note that the household price average shows a large difference between EU countries that use coal, nuclear, and gas vs those that have focused on wind and solar. For example, as shown in the chart above, according to Statista, using 2023 data, Hungary’s electricity price was 9.68 Eurocents/kwh (50% of their electricity is from nuclear, 38% coal & gas) and Bulgaria which relies mostly on coal and nuclear was around 11 Eurocents/kwh, whereas Germany, which has “doubled down on renewables” (and closed down its nuclear), was the highest at 44.97 Eurocents/kwh and Denmark which has a small population and a whole lot of windmills was at 39.44 Eurocents/kwh! 

Data sources and the year of the data matters. Eurostat uses numbers from the first quarter of 2024 which reorder some of the countries but the overall argument, that countries that “doubled down on renewables” and made other poor choices of shutting down nuclear power plants and/or coal experienced higher prices, remains supported. 

Discussion

Roger Pielke, Jr recently posted an article about the politicization of expertise that is relevant here.  He argues that society needs to depend on the expertise of specialists in many fields – “Nobody knows enough to run the government”.  As a result, society needs all of us.  He explains that “We do not have to agree on everything, but we do have to work together”.  Then he points out that “In recent years, credential expertise—like many things—has become pathologically politicized.” 

Such is the case shown by the politicization of the Climate Act implementation led by NYSERDA.   The presenters at the meeting were carefully chosen to further the Hochul Administration’s narrative that all is well with the Climate Act.  Consider, for example, the presentation by Jeff Freedman to the Planning Board.  His main research focus is on “renewable energy and atmospheric boundary layer (ABL) processes” so his bias is towards renewable energy virtues.  He has no energy sector experience that qualifies him to claim that “renewable energy can reduce costs” He was a spokesman because of his adherence to the narrative.

New York agencies are required to take shareholder comments into account for regulatory actions.  Unfortunately, they only go through the motions.  Rather than using the process as an opportunity to improve the product it is treated as an obligation.   My problem with this is that if anyone provides specific comments or raises specific issues with their work, there is no documentation that the submittal was addressed, and nothing included to respond to the issue raised.  For example, the claim that renewable energy can reduce costs was undocumented in Freedman’s presentation.  I have no doubts that NYSERDA will continue the charade that renewable energy can reduce costs and that costs of inaction are worse than the costs of action.  They have never responded to related issues raised and will continue to do so as long as they can get away with it.  In my opinion this is another instance of pathologically politicized expertise by NYSERDA because they are so arrogant that they don’t see any need to respond to stakeholder comments.

Conclusion

The biggest barrier to any net-zero transition away from fossil fuels is the inevitable extraordinary cost of implementation.  In New York, the Hochul Administration has ducked the issue since the Climate Act was passed.  They can only hide reality for so long.  The question is whether the issues associated with the net-zero transition will be addressed before New York’s economy is severely compromised.

In the meantime, if you ever hear anyone say renewable energy can reduce costs, please ask them why German electric prices are so high or to cite an example of any jurisdiction that is transitioning their electric system that has reduced ratepayer bill costs when using the renewable strategy to rely wind, solar, and energy storage resources to power the electric grid.

Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York.  He has been a practicing meteorologist for nearly 50 years, was a Certified Consulting Meteorologist, and has B.S. and M.S. degrees in meteorology.  The opinions expressed in this post do not reflect the position of any of his previous employers or any other organization he has been associated with.