Wind and solar power generate electricity depending on the wind or sunshine. A fossil-fuel plant can generate electricity on request. Blackouts are very expensive for society, so grid operators make sure blackouts are rare.
The electrical grid should have spare capacity sufficient to meet the largest demand peaks even when some plants are out of commission. Plants in spinning reserve status stand by ready to take over if a plant trips (breaks down). Injecting erratic electricity into the grid means that other plants have to seesaw output to balance the ups and downs of wind or solar.
Adding wind or solar to a grid does not mean that existing fossil fuel plants can be retired. Sometimes nuclear or hydro plants will be available as back up. Both wind and solar power have pronounced seasonality trends. And solar stops working as the sun sets. Wind behaves erratically hour to hour.
Even though the Texas 18,000-megawatt system has thousands of turbines spread over a wide area, the net output is erratic changing by thousands of megawatts in a single hour. These shifts must be balanced by fossil-fuel plants slewing their output up and down to compensate.
Sunny southwest cities have 50 or more cloudy days per year, stopping or reducing solar generation. Wind turbines are very sensitive to wind speed. A 10% change in wind speed will change power output by 30%, amplifying the erratic nature of the wind. When wind or solar is added to a grid, it is usually supplemental power. No natural gas plants are eliminated -- they handle periods when wind and solar are not producing electricity.
Adding wind or solar electricity provides the benefit of reduced fuel consumption in backup fossil fuel plants. This fuel savings amounts to about $15 per megawatt hour, the cost of natural gas to generate a megawatt hour of electricity. The cost of coal is similar. The backup fossil-fuel plants still have its full staff and will have more costly maintenance due to the up-down style of operation forced by the introduction of erratic wind and solar energy.
Wind or solar power actually costs around $80 per megawatt hour, even though $25 per megawatt hour is often touted in the press? The gap between $80 and $25 is accounted for by subsidies. The biggest "subsidy" is any law that requires the utilities to supply a certain percentage of renewable power. California has a law that 60% of its power must be renewable by 2030.
To attract investors to build the renewable power plants, the utility will promise to purchase all the power generated for 25 years at a fixed rate. Forcing utilities to buy renewable power puts the suppliers of renewable power in an advantageous position. The subsidy that reduces the cost from $80 to $25 are federal subsidies, and the lower required rate of return that results from having a 25-year contract in hand from a credit worthy utility before building of a wind or solar "farm" begine.
There is also a federal tax credit that pays up to 30% of the plant's cost. There is a tax subsidy called tax equity financing that allows a highly taxed partner to the investor to divert money from the federal treasury to the project. This subsidy depends on special depreciation rules enacted by congress to subsidize renewable energy.
Wind or solar electricity cost is mainly the capital cost amortized over the life of the plant. The "fuel" is free. If you take away the subsidies, renewable electricity, wind or solar, will cost about $80 per megawatt hour. No utility would buy $80 renewable electricity to replace $15 fossil fuel electricity.
