It’s often claimed that wind and solar are the cheapest forms of clean energy, while nuclear power is the most expensive. At first blush, this seems accurate; a single solar panel or wind turbine is relatively inexpensive, whereas building a nuclear power plant can cost billions of dollars. So yes, if you’re comparing individual units, wind and solar do appear cheaper. But that kind of comparison does not really tell us the full story. Let’s dig into the details and look at how energy costs really stack up.

The Levelised Cost of Energy (LCOE): A Flawed Model

The most commonly used tool for comparing the costs of different power sources is the Levelised Cost of Energy (LCOE). This metric aims to calculate the average cost per unit of electricity generated over the entire lifetime of a power source.

LCOE combines fixed and variable costs into a single figure. However, it fails to account for a number of costs associated with intermittency—essentially, the fact that the sun shines more brightly at some times than others (and disappears at night) and wind also varies from day to day and hour to hour. This is crucial since the variability of power generation plays a significant role in determining the costs of different energy sources. LCOE also overlooks other expenses involved in maintaining a reliable electricity supply and making sure it is delivered to end users. For example, renewables such as wind and solar may require additional spending on energy storage, backup power, and expanded grid infrastructure to compensate for their intermittency.

Another key limitation of the LCOE metric is that it completely overlooks the fact that the value of the electricity produced varies depending on when it is produced. For example, solar power generates electricity during the day, when demand is typically higher. By contrast, wind energy often peaks at night, when demand is lower. As a result, even if solar has a slightly higher LCOE than wind, it can be more economically valuable because its output matches consumption patterns more closely.

Another major issue is lifespan. LCOE calculations typically assume that a given energy plant will be in operation for a period of twenty to thirty years. This is a reasonable assumption for technologies like wind and solar. But nuclear power plants can operate reliably for at least sixty to eighty years and sometimes longer. Longer-lived technologies offer far more value over time, and the additional cost of having to replace solar and wind plants more frequently isn’t reflected in standard LCOE figures. 

In addition, LCOE doesn’t account for the cost of the land required to generate the energy, and this cost can vary dramatically. Solar arrays and wind farms generally require far more land area than nuclear power plants.

Yet another critical omission is dispatchability—the ability of a power source to quickly ramp up or shut down in response to fluctuations in demand. This flexibility is essential for maintaining the stability of a grid. Solar and wind are non-dispatchable.

LCOE also overlooks indirect costs, such as environmental impacts, the need for grid upgrades, or the additional infrastructure required to support non-dispatchable sources. These integration costs can be substantial. Nor does LCOE take into account the cost of the materials needed to construct renewable plants or the environmental damage caused by the manufacture of those materials.

Then there’s the issue of disposal. For nuclear energy, LCOE includes the full costs of waste disposal and the decommissioning of reactors. But it ignores these costs for wind and solar. After 20–30 years of use, solar panels will end up in landfill sites, probably often in poorer countries, where they will leach toxic chemicals. Wind turbine blades cannot be recycled; after a maximum of thirty years, they will also end up in landfills.

The environmental costs of wind and solar should not be disregarded, either. When we look at the greenhouse gas emissions associated with each form of energy generation over their lifetimes, nuclear has the lowest level of emissions. (See graph below.)

The Hidden Cost of Backup Power

One of the most significant costs overlooked by the LCOE is the need for backup or baseload power. Because it is not always windy or sunny enough to generate energy,  these renewables require energy storage systems or some form of backup generation to ensure a stable supply of electricity.