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Opinion: The hidden costs of '100 per cent renewable'

Electricity grids that rely on wind or solar must build backup that, unlike these sources, is not intermittent. That's expensive

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A recent ESG Today article celebrates Microsoft’s achievement of 100-per cent renewable electricity, framing it as a milestone in corporate climate leadership. Behind the headline lies a question: is this a claim about physics or about accounting? Electricity grids run on physics, not paperwork.

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On an electric grid, supply must match demand every second. Voltage and frequency must therefore be stabilized continuously to keep the grid from collapsing. If they aren’t, there is a serious risk of a total system failure, as happened in Spain recently. When the wind dies down or the sun sets, something else needs to take over instantly to provide the missing energy or voltage support. What takes over is “dispatchable” generation from stations burning natural gas or coal, or using hydro or nuclear, which grid operators coordinate to ensure reliability under all conditions, around the clock.

Opinion: The hidden costs of '100 per cent renewable' Back to video

When a corporation announces it runs on “100-per cent renewable electricity,” what non-experts hear is that its facilities are physically powered moment-to-moment by dedicated wind or solar sources. But, except very rarely, that’s not what’s happening. What the company is actually saying is that, over the course of a year, it has purchased renewable-energy credits or signed power-purchase agreements that support the construction of non-fossil fuel generation somewhere on some grid, and the company counts that output against its own annual electricity consumption. But that’s financial juggling. The grid still delivers the electricity the company needs in real time and its stability still depends on those back-up plants, which by definition must be instantly dispatchable, thus not wind or solar.

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A simple thought-experiment clarifies the distinction: could the company function if it were physically disconnected from the grid with its electricity supplied solely by its contracted wind and solar capacity? And continue to do so through windless nights, winter demand peaks and multi-day weather lulls without massive battery storage or back-up generation? The answer is no. Which means the gap between annual accounting and physical self-sufficiency is real and significant.

That poses important questions about who exactly pays for the grid’s reliability.

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Intermittent generation increases the need for back-up, frequency regulation, new transmission lines and other balancing services. These costs are real and usually large. They are recovered through capacity markets (energy producers have added capacity ready on demand), grid-wide charges and retail electricity rates and they are paid for by all consumers of electricity — residential, commercial, and industrial. For a corporation to claim the reputational benefit of “clean” energy while relying on reliability infrastructure that isn’t clean and is paid for by everyone else on the system is at least a little dishonest.

As more intermittent capacity is added to the grid, more financial pressure falls on dispatchable generators to keep the system stable. Corporations that procure heavily from renewables while depending on grid reliability provided by others are shifting a portion of the system’s true operating costs onto other consumers. The framing of “100 per cent renewable” obscures rather than illuminates the actual energy transition and makes honest progress harder to measure and achieve.

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In short, the concept of “100 per cent renewable electricity” is nonsense. Annual financial matching works precisely because others maintain and pay for the physical reliability that makes intermittent generation viable. If every large consumer structured its energy procurement this way while expecting the grid to absorb the balancing costs, the result would be massive overbuild of renewables, extraordinary storage investment, or continued reliance on fossil back-up, none of which is reflected in the clean-energy branding. If firms provided the needed back-up themselves, they would find that renewable energy was hopelessly uneconomic.

Electricity is the lifeblood of modern economies. Clear thinking about the energy transition requires separating financial juggling from real-world energy flows and being transparent about what keeps the lights on and who pays for it.

David McGruer is an independent researcher. Bryan Leyland is a consulting engineer.

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