Technical Feasibility is Not Economic Feasibility, Which Fluctuates with Market Forces

     I’m not an expert on economics. This is just me being speculative via an essay.  It is technically feasible to build a great many useful things, but not economically feasible to do so. In the energy space, a good example is grid-scale batteries. These can be deployed economically, where they can be optimized in niche peak demand applications. However, beyond those few niche applications, widespread use of batteries to store excess solar and wind is not economically feasible. We can aid such ventures with subsidies, and we should, but this is not enough to achieve widespread economic feasibility. We should also acknowledge that economic feasibility fluctuates under the influence of different markets. If fossil fuel prices are high, it makes wind and solar more competitive and vice versa. The cost relative to alternatives fluctuates. Another major variable affecting economic feasibility is technological efficiency improvements.                                                                     

TECHNICAL FEASIBILITY – Can be built, but the return on investment is too slow.

ECONOMIC FEASIBILITY – Can be built with an adequate return on investment.

     Variables:

1)        Profitability without subsidization

2)        Profitability with subsidization

3)        Technology efficiency gains

4)        Market forces and costs relative to alternatives

5)        Time factors

6)        Tech changes relative to competing technologies

   Economic feasibility also depends on time factors such as component life spans, degradation rates, and efficiency loss rates. These can change due to technological improvements. They generally are always getting better over time. They are often called incremental improvements. These variables and factors can be economically modeled for each project to predict economic feasibility. Incremental improvements can be modeled into scenarios as well. Changes relative to competing technologies have an indirect effect on economic feasibility by making them more or less competitive. The lowest cost technology will generally set the market trend.         

     Analyses may also attribute value based on negative externalities such as pollution and carbon emissions. This can be used to create a different class of economic scenarios depending on the negative value attributed to these externalities, typically priced into carbon markets or pollution abatement markets. It should always be clear and pointed out when externalities are factored into economic models. Even when these are not factored in, it is good to know and keep track of their value to estimate the costs of emissions reduction. Models need to be realistic and non-deceptive. Metrics like levelized cost of electricity and storage have been deceptive in the past, mostly by being incomplete, leaving out important costs like the cost of grid integration and the cost of curtailed generation.

     The renewable energy sector and its advocates have often utilized hype, carbon costs, and misleading and incomplete information to say things like solar is the cheapest form of electricity. While it is true that solar can be the cheapest form of dispatchable electricity during its peak production in the day or when available during its peak season in summer, it is often not available at all. Night solar output is nil, and winter solar output is limited by fewer daylight hours. Clouds are another factor that makes solar generation vary. Wind can also suffer from intermittency and unpredictability. There are also added costs of integrating solar and wind and preventing or utilizing peak overgeneration, which can be considerable. Thus, when it is said, as it often is, that solar is the cheapest form of electricity, that is quite a factually incomplete statement. It is misleading. If it were the cheapest, more of it would be built. Solar is quite technically feasible but often not economically feasible, even with subsidization.  

     Technical feasibility is a precursor to economic feasibility. It is precedent. Thus, one could say that something that is technically feasible but not economically feasible is an immature technology in terms of market success. It is not ready for primetime in terms of market competitiveness. Technologies often develop and see cost reductions as they are further developed and scaled up. There are economies of scale and of scope that may lead to economic improvements. Thus, the economic feasibility of what is technically feasible is often worth chasing and worth receiving investment dollars. Some projects may not make money, but they can lead to a better understanding, which can help them become profitable in the future. This is very true of pilot projects. Cost-reduction pathways can be plotted out. At some point, more financial risks can be taken, and perhaps economic feasibility can be reached.