One of the most important and best explanations of the risks of the energy transition is the difference in capital intensity of the various forms of energy generation. Like the LCOE (Levelized Cost of Energy) the capital intensity must be adjusted in order to make it an apples-to-apples comparison.
A combined cycle natural gas plant has an effective capacity factor of about 94% and is completely dispatchable meaning it will generate electricity on demand. In comparison, solar has a capacity factor of approximately 20% and is non-dispatchable. If you want electricity when the sun isn’t shining you’re simply out of luck.
In order to make a capital intensity comparison justified, we need to adjust solar to achieve a 94% capacity factor and make it dispatchable. There are two methods to achieve this. Both rely on building substantially more solar and then either using batteries to supply dispatchable power 24 hours a day, or distributing the solar around the the globe so it is daytime someplace and interconnecting these plants with long transmission lines. I will ignore the second alternative, since the cost and complexity of estimating the cost of transcontinental transmission lines is beyond the scope of this short article.
Starting with the raw capex numbers from the EIA (Energy Information Association) the cost of a new combined cycle natural gas plant is $ 987.00 per KW. In comparison, the cost for a utility scale single axis tracking solar plant is $ 1,313 per KW. Now we need to adjust the solar capex for the difference in capacity factor: so we multiply by 94/20 or 4.7 bringing our adjusted capex for solar to $ 6,171 KW. Unfortunately, we need to adjust the size for the difference in production between summer and winter. On average solar production will decline by 30% in the winter. So, we need to build additional solar to compensate. This requires us to divide our capex by 70% resulting in an adjusted capex of $ 8,816.
We need to make one last adjustment. Our solar is still only generating during daylight hours, so we need to add batteries so we can be dispatchable for all hours of the day, This will require 14 hours of storage at a cost of $ 347 per kWh. Adding 14 times $ 347 and adding to our $ 8,816 per kw, brings our effective solar comparison to $ 13,674. The capital intensity of solar is $ 13,674 / $ 987 = 13.9 times higher than a combined cycle natural gas plant and twice as expensive as a new nuclear plant.
Yes, there are no fuel costs with solar and the CCGT plant requires fuel, but the point is how much of our capital and GNP needs to be diverted from current purchases and investments (standard of living) to building of a solar + battery infrastructure and whether we are willing to make that sacrifice.
If you would like to read the EIA report you can download a copy here:
https://www.eia.gov/analysis/studies/powerplants/capitalcost/pdf/capital_cost_AEO2020.pdf