Understanding the Costs of Climate Policies

In the insurance world, there’s a standard practice: you assess potential losses before selling a policy. No one would leave a deductible unfilled or ignore possible risks when writing coverage.

Yet, that’s somewhat how the climate policies proposed by Democrats approach energy grids. They focus on the costs of wind and solar energy without factoring in additional expenses such as battery storage, transmission infrastructure, substations, and the backup power necessary for times when the renewable sources aren’t producing. Moreover, they neglect the implications when the grid fails.

Economists refer to this gap as the value of lost load, which quantifies the impact on families and businesses when the power isn’t there when needed. According to a 2024 study for the Texas grid operator, this value is around $35,000 per megawatt-hour for a single hour of outage.

In contrast, wind energy can generate power at about $30 per megawatt-hour. The fallout from failing to deliver power can result in losses that exceed a thousand times that figure.

Texas learned a harsh lesson during February 2021’s Winter Storm Uri, which led to at least 246 fatalities, with the state comptroller estimating economic damages between $80 billion and $130 billion. Some civil engineers even suggested losses could reach as high as $300 billion.

But Uri wasn’t solely a failure of wind and solar; their contributions plummeted while gas and coal plants, which had been frozen, ended up ramping up their output by 500% because wind and solar were offline. The more a grid depends on weather-dependent sources, the less resilient it is in adverse conditions.

Consider a specific instance. Microsoft noted that its Mount Pleasant, Wisconsin, data center requires about 450 megawatts continuously. However, the local Paris Solar-Battery Park has a battery capable of holding just 440 megawatt-hours—less than an hour’s worth of power for that facility.

Using the Texas metric, one hour of unmet demand for 450 megawatts could result in losses around $15.8 million. While this figure serves as an illustration rather than a prediction, it highlights what critical costs might be left unaddressed.

To maintain that load for, say, five gray days in January using batteries, you’d need roughly 54,000 megawatt-hours—far exceeding the capability of over 120 batteries similar to the one in Paris. A federal energy laboratory predicts the cost of a four-hour battery system will be approximately $334 per kilowatt-hour in 2024 and $366 in 2026 in its higher estimations. At those rates, just the batteries could cost nearly $20 billion, not including expenses for transmission, charging losses, or replacements.

Germany recently demonstrated the implications of a renewable energy shortfall. In November 2024, a week-long event referred to as Dunkelflaute saw renewables decline to about 30% of the supply, sending baseload power prices rocketing to 145 euros per megawatt-hour—up from the usual 40—as electricity became scarce.

To keep the lights on, Germany relied on natural gas and coal plants, along with importing an average of 10.5 gigawatts. But the Midwest may not have similar options. During a frigid and windless week, diminished wind and solar energy would affect the entire region, leaving neighboring states equally short on power.

Due to some climate-centric agendas, we’ve been shutting down reliable coal plants before their effective operational lives are over. These have been replaced by intermittent renewables, which is leading to electricity shortages and rising prices for everyone. This is a direct outcome of the Democratic policies, which seem intent on imposing even more climate regulations indefinitely.

And then there’s the infrastructure aspect. An analysis from the Texas Public Policy Foundation suggests Texans are paying roughly $1 billion annually for transmission lines built to support wind and solar—nearly $15 billion in total since 2010.

In the Midwest, the Midcontinent Independent System Operator (MISO) has approved a substantial $21.8 billion transmission project aimed at facilitating wind energy. However, five state utility commissions have filed a federal complaint against this, with their consultant estimating likely benefits to be only between $4.3 billion and $7.2 billion—far below MISO’s claims of up to $72 billion.

A viable solution must start with a basic requirement: Any plan mandating a portion of wind and solar power, or retiring dispatchable power plants, should present the total systemic costs, not just those related to new generation methods.

It should also transparently display the failure costs when renewable energy sources fall short, alongside the construction expenses. A plan that outlines building costs yet overlooks potential outages and the heightened likelihood of failures with intermittent sources is fundamentally flawed. It resembles a policy with an absent deductible yet steep expenses.

Establish the true costs—especially outage costs—before proceeding with construction.

While Democrats often criticize the “very high costs of gas,” developing wind and solar energy isn’t likely to bring down gas prices or lower electricity bills.