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Magee's avatar

"And nobody builds a solar power plant that has three times the capacity of peak demand, which is what the optimal grid would require."

Why not? If solar panels are indeed cheap enough in comparison to either storage or other sources (especially taking into account a carbon tax), then that is the optimal model. Excess energy could be used for other purposes to such as smelting or crypto mining. Things that are more energy dependent than time dependent.

"And in the real world, the money to build these power plants and grids doesn’t fall from the sky".

Negative real rates would suggest otherwise.

I think you will be eating your words in 10 years time when this does actually prove to be the optimal model (to overbuild).

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Joachim Klement's avatar

You might be right, but solar power is currently the cheapest form of energy given existing load factors. If you reduce the load factor from 80% to 30% every energy source becomes much more expensive. Just look at Fig. 16 in my chapter on the geopolitics of renewables: https://www.cfainstitute.org/-/media/documents/book/rf-publication/2021/geo-economics-ch-8.ashx

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