US power markets are still underestimating the economically disruptive role of renewables in power generation. According to a German study released last week (Weidlich, et al, 2025 “Base load power plants are not essential for future power systems”, Cell Reports Physical Sciences), their next target or victim could be base load power generation itself. This multi-authored study by German academics was tasked with answering a big question: could the German economy decarbonize in twenty years relying solely on incremental investment in renewables? Their answer was a definite “yes—assuming some other stuff happens and you’re willing to assume some consequences like “stranded assets”. The fact that a high level group of almost two dozen academics could theoretically design a future power system that’s fully decarbonized in twenty years doesn’t strike us as all that amazing. However, they also provided a broad investment framework for thinking about the integration and implications of a renewables-dominant grid.

The study claimed that providing a fully functioning, fully decarbonized power grid had four components: 1) most obviously, a big expansion in renewable investments (solar/wind), 2) a robust and flexible grid (more transmission to move power), 3) diverse short and long duration battery storage options, and 4) demand side flexibility. There is nothing revolutionary or dramatic in the above list.  Build more renewables and transmission? OK. More batteries for addressing off peak needs? Sure. And greater use of demand side management? With the proliferation of large commercial loads like data centers, it becomes a lot easier to find or negotiate flexible terms with large, sophisticated power users.

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But there is always something. Constructing a decarbonized grid like the one envisioned literally destroys the economics for all their base load power plants. Even worse, literally all new power generating technologies — fossil, nuclear, and geothermal — would be economically undercut by greater penetration of renewables and demand flexibility. Why? Because all the deployment of solar and other resources, being discussed here, could provide all power needs much more cheaply (and more cleanly). Nothing else would be able to compete. Even though there are likely to be gaps in generation needed, say during off peak hours, the meager revenues these are likely to provide won’t support the expense of maintaining a large base load power plants. At this point, this is no longer an academic exercise. The study’s conclusion seems pretty straightforward. Large-scale renewable deployment will destroy the economics of base load power generation, which, obviously, would have major implications for future capital allocation and stranded asset exposure for the power generation sector. And we see no reason why this economic logic does not apply in other Western economies.

For those of us on this beat for a while, none of this is a surprise. Renewables like wind and solar always win the economic battle in power generation. Always. They have almost zero operating expenses. Conventional fossil-fired facilities, by contrast, pay enormous sums for fuel every year of operation, and for this reason, they can’t compete. Solar power is produced from a chemical reaction. And the technology keeps improving and getting cheaper or more productive. Fossil-fueled technology is not getting cheaper while fuel costs, especially gas, remain volatile. The German study concluded that gas-fired power plants were closest to offering some prospective economic grid value, but new nuclear plants, both big and small, were so expensive as to be irrelevant in this grid planning context. 

The financially interesting question is whether our recently completed fleet of new base load power generating facilities is already on its way to becoming extinct, so-called “stranded assets”, that is stranded economically by a superior (i.e cheaper) power producing technology. We see this as a matter of tipping points. Once or if renewables -plus- batteries erode power market economics beyond a certain point, large expensive base load lower stations could become economically unstable. So the conclusion of the German grid decarbonization study is that yes, we can construct and operate a decarbonized grid, but that will financially kill all our base load power plants. In their own words:

“System level modeling for Europe shows that the question is not whether new base load plants are essential for a secure, net, zero grid—they are not. The defining question is whether they can become economical in a system dominated by low-cost renewables.“

And note the wording, whether a new base load plant “can become economical”, which implies to us that they are already out of the money.  And the study points to one more conclusion. We always assumed that renewables would pick up a large percentage of incremental electricity demand.  This study implies that renewables will not only pick up incremental demand but also replace legacy equipment, which, over two decades, would double or triple demand for renewable energy assets.  Finally, this is all about economics.

By Leonard Hyman and William Tilles for Oilprice.com

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