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Energy: Expectations and reality

Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • Oct 13, 2021

Energy: Expectations and reality

We are able to use energy as much as we want, whenever we want. and at a price, controlled by the regulator.

The energy supply systems were essentially centralized, designed to robustly meet demand and, above all, backed by firm sources that are available by dispatch from an independent system operator.

The new sources such as solar and wind, which emerge as preferred alternatives, have a different characteristic from the traditional ones: they are intermittent. When there is no sun or wind, and even when its intensity is lower. .

These sources require investments in other, traditional ones, to face their intermittence.

We should therefore get used to the fact that the supply of energy will be more expensive with the increasingly massive introduction of these (solar/wind) sources.

This differs from the prevailing perception that sun and wind are free.

Andrew Blakers's picture
Andrew Blakers on Oct 13, 2021

Actually, solar energy provides the cheapest energy in history according to the IEA. Energy prices FALL when high levels of solar/wind are introduced.

Rafael Herzberg's picture
Rafael Herzberg on Oct 13, 2021

It depends on what is considered in this calculation.

I like to tell my consulting clients (industrial, commercial and institutional ones) that there are at least two approaches:

1st) Considering each energy source individually and come up with its intrinsic cost/price
2nd)  Considering the energy sources portfolio (as a whole) and see what's its cost/price.

The most popular trend is using the 1st one (above). But... at the end of the day the whole society pays for the 2nd.


Andrew Blakers's picture
Andrew Blakers on Oct 13, 2021

Prices in the wholesale spot market incorporate both energy and balancing costs. In Australia, at 36% renewables and tracking towards 50% by 2025, prices halved over 2020-2021 cvompared with 2016-2019. When the USA catches up to Austraia under Biden's 2030 emissions plan, prices in the USA will stay low.

Rafael Herzberg's picture
Rafael Herzberg on Oct 14, 2021

Hi Andrew!

Here in Brazil power prices are way higher than before solar and wind were introduced.

The situation is: the same installed capacity of the national system must be there as if there were no sun and wind related energy sources. The reason is simple: here in Brazil when there is no (or just a bit) sun or no wind (or just a bit) the conventional sources must be there - instantly -  to assure that the system is properly attended.

In financial terms, the CAPEX including PV and wind and the traditional sources are ADDED. It means that the total CAPEX is higher therefore amortization related costs are way higher and accordingly must be paid simply put because there is no free lunch!

Thanks for your comments. Please fee free to offer your analysis!


Andrew Blakers's picture
Andrew Blakers on Oct 15, 2021

In 2020, Brazil installed 24 Watts per person per year of solar+wind (IRENA). This is ten times slower per capita than Australia. Brazil has barely begun its solar/wind revolution. Its nonsense to ascribe price increases to the tiny Brazillian solar/wind industry.

Please read this to see a probable future for Brazil.

Michael Keller's picture
Michael Keller on Oct 18, 2021

Hogwash. Unbiased Pro Forma financial analyses do not support your claim. Is the IEA putting-their-thumb-on-the- scale? Yes.

Case in point. Has the price of energy in California significantly increased? Yes.Europe? Yes. Both have embraced renewable energy at levels that invariably raise the price of energy while decreasing reliability.

The electrical grid exists to provide reliable, reasonably clean and reasonably affordable energy. The grid’s function is not to support renewable energy.

David  March's picture
David March on Oct 18, 2021

Just an interesting note. I build a 5 MW AC solar project in the Caribbean.  I had to pay the utility to keep spinning reserve due to my intermittency. Since the island is diesel powered, this certainly did not help my carbon footprint. 

Rafael Herzberg's picture
Thank Rafael for the Post!
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