Welcome to Dispatch Energy! Since the start of my career in energy more than 15 years ago, I’ve been hearing about—and, indeed, actively championing—the declining cost of renewable energy technologies. Between 2010 and 2023, the price of wind turbines fell by about 70 percent and the price of solar panels fell by 90 percent. Lithium-ion batteries, which can store electricity for short durations when the sun isn’t shining and the wind isn’t blowing, have also shown impressive gains in both performance and price, dropping about 90 percent in cost through 2023.

Given these advancements, renewables are now competitive on a per-kilowatt-hour basis with incumbents like coal, nuclear, and natural gas. So why are electricity prices rising?

The explanation is threefold. First, the intermittency of wind and solar means that even very affordable renewable energy relies on enabling technology and infrastructure, like natural gas plants and extensive networks of power lines, with the consumer price set by the overall system. Second, though wind turbines and solar panels are cheap, they are increasingly running up against geographic limitations. The sunniest and windiest places are not always close to cities and industrial sites, or to transmission infrastructure that can connect generation to demand. 

These two factors are exacerbated by a third, which is perhaps the defining energy phenomenon of our era: U.S. electricity demand is rising for the first time in a generation. The electrification of vehicles and HVAC systems, artificial intelligence and other emerging industries, and growing use of air conditioning are combining to increase electricity demand faster than new sources of power generation are coming online. That lag time pushes prices up, and it’s just the beginning. 

While many renewables advocates have come to believe it’s a form of trolling to point out that the sun doesn’t always shine and the wind doesn’t always blow, it is, in fact, true. And because they’re both intermittent and have no fuel costs, wind farms and solar plants largely act as fuel-savers for the nation’s natural gas and coal plants (which are “dispatchable,” meaning they can be turned on and off by their operators instead of relying on the weather like renewables do). This capability has real economic advantages, especially given renewables’ current level of penetration in the U.S. grid system. But over the long term, grids that include more and more wind and solar will inherently require substantial overbuilding of redundant capacity to smooth out lulls in sunlight or wind. 

Battery storage also helps fill the gaps caused by fluctuating supply and demand, but today’s battery systems store electricity for only a few hours at a time. They cannot cover unexpected days- or weeks-long droughts in wind generation, nor store excess summertime energy for use when the solar panels are covered in snow in the winter. 

Meeting current, let alone growing, year-round demand with increasing shares of wind and solar will simply require far more electric power capacity than is installed today. That helps explain why the capital costs of the U.S. electric power system are expected to grow faster if more renewables are added to the grid.

One reason my fellow Dispatch Energy columnist Lynne Kiesling has written frequently about long-distance transmission is because large power lines make it easier to connect sunny and windy deserts and plains to demand centers. Provided they have access to the right infrastructure, renewables have some of the shortest lead times of any electricity sources available today, so utilities and independent power producers are trying to connect them to the grid as quickly as possible. But as with the nation’s bridges, tunnels, and rail lines, the U.S. has struggled to build significant high-voltage transmission for decades.

This wait time imposes something of a hard constraint on many renewable projects, hundreds of which are languishing in the “interconnection queue.” Transmission lines have become one of the most difficult types of infrastructure to build in the United States, often taking a decade or more to clear overlapping local, state, and federal siting and permitting regulations. As one prominent analysis of the Biden administration’s energy policy found, the growth of wind and solar through 2030 could be cut by as much as half if new electric power lines are not built in a timely manner. 

But it’s not just transmission. Communities across America have increasingly turned against renewable energy projects. In a prelude to the ongoing local opposition to data centers, hundreds of counties around the country have enacted siting limits on wind and solar projects. Building more clean energy may be a national priority, but it runs up against local preferences against new construction and infrastructure in people’s backyards. 

And even in areas that allow renewable energy development, other geographic features may get in the way. For example, the Northeastern United States has both high population density and dark, snowy winters—not exactly a welcoming combination for land-intensive and weather-dependent renewable energy projects. Many Eastern states had hoped offshore wind projects would overcome these limitations, but due to both economic and political factors, the U.S. offshore wind industry has failed to scale. 

There is still plenty of untapped solar and wind potential in the United States. But these geographic constraints are real, and we can already see evidence of them in the data on annual wind deployment, which, despite falling costs, has fluctuated substantially over the last decade. Solar, which is a much more modular technology that can be deployed at either the rooftop or megaproject scale, has grown more consistently. 

The dynamics that defined the expansion of U.S. wind and solar power over the past two decades have been completely upended by more recent technological developments. A steady migration toward air conditioning-reliant states like Arizona, Florida, and Texas, together with the growing adoption of electric heat pumps and vehicles, is helping drive electricity consumption up for the first time in a generation. But the big story, of course, is AI data centers, whose power consumption could triple (or more) within a decade. 

So it’s telling that, while wind and especially solar continue to grow steadily in the United States, data centers are relying overwhelmingly on natural gas to meet their immediate power needs—at least for now.  

AI is also infamously driving renewed interest in nuclear power, especially smaller advanced reactors that can be installed on-site and generate reliable power. The so-called tech hyperscalers like Google and Microsoft have also invested in next-generation geothermal and natural gas with carbon capture to meet the skyrocketing electricity needs of their data centers.

In other words, while wind turbines and solar panels have become cheap, mature electric power commodities, they alone do not appear capable of meeting rising electricity demand. In renewables’ defense, no other single technology is better-positioned either. Advanced nuclear, geothermal, and carbon capture technologies remain somewhat speculative, and there’s even a shortage of natural gas turbines. 

But as many energy analysts have been warning for years, even impressively declining solar and wind costs will not enable renewables to meet all or even most of the electricity demand facing modern power grids.