In late 2021, we made a bold and deeply contrarian call: We predicted massive capital flows into renewable energy could potentially become history’s worst malinvestment ever. Our call looks correct three years later, and the consequences have emerged with a vengeance.

Over the past six months, several notable wind and solar projects have been canceled, delayed or impaired due to rising costs. Stocks that were once market favorites have now pulled back hugely. Wind turbine manufacturer Orstead is off 73 percent from its peak and 47 percent in 2023 alone. Renewable provider NextEra is off 50 percent from its peak and 30 percent during 2023. Hydrogen maven Plug Power is off an incredible 95 percent from its peak and 68 percent for 2023. The Invesco Solar ETF is off 58 percent from its peak and 35 percent for 2023.

In recent months, Orstead has taken a $4 billion write-off on its offshore U.S. wind projects, canceled its Norwegian projects, and fired its CEO. In November, Siemens withdrew its wind turbine manufacturing plant in Portsmouth, Va. A September U.K. offshore wind concession auction failed to attract a single bid. Renewable proponents, who claim costs are lower than conventional energy sources, argued the relatively high tariff 44 was insufficient to encourage wind development.

Two massive wind farm projects off the coast of New Jersey have been canceled. Two partially completed wind farm projects off the coast of Rhode Island and Massachusetts are now on hold as the developers wrestle with regulators on tariff structures, now made obsolete because of rapidly rising construction and installation costs.

As The Wall Street Journal published on Nov. 12, “The Path to Green Energy is Getting Messier.”

In 2016, we asked ourselves an important question: What role should renewable energy play going forward? If one studies the history of energy, its production and consumption, new technologies with superior energy efficiency always displace old technologies with inferior energy efficiency. As the pundits argued, if wind and solar were ideal forms of energy with superior energy efficiencies, we would be forced to leave behind our oil and gas investments and embrace renewables, as renewables would ultimately displace all hydrocarbon-related energy production.

As energy investors, it was imperative for us to develop a framework to judge renewables and their actual cost structures.

We have read excellent works by professors Charles Hall and Vaclav Smil on energy efficiency or energetics. Professor Hall developed the energy return on investment concept, or EROI, which measures how much input energy is required to generate a unit of usable power output — the key energetic measure of efficiency. Professor Smil, a prolific author, writes captivatingly about the history of energy advancement. We ultimately developed our lens through which to judge renewable energy. We also noted a new energy technology had never replaced an incumbent without having superior energetics. We were amazed so few analysts or policymakers had questioned the energetics, or EROI, of wind and solar and sought the answers ourselves.

Despite being heralded as the future, wind and solar have terrible EROIs. Compared with coal or natural gas, sunlight and wind are not energy dense. Compare the energy from a gas stove with a stiff breeze or a sunny afternoon; they are different orders of magnitude. Because renewable energy density is so low, their size must be enormous to generate the same output. A modern windmill stands 80 stories tall with rotor blades that are 600 feet in diameter. A 100-megawatt solar installation, enough to power 20,000 households, requires a staggering 139 million square feet of PV solar panels. Large size means copious raw materials, which consume enormous energy. As a result, the energy required to generate output is very high, and the EROI is low. A combined cycle natural gas plant enjoys an EROI of 30:1, compared with the best wind and solar at 10:1 and 5:1, respectively. Unfortunately, wind and solar are intermittent and must be “buffered” by either building redundant capacity or through grid-scale battery backup, reducing their overall EROI further to as low as 3-5:1. Based upon our framework, wind and solar could never replace conventional energy given their inferior EROI.

With deficits soaring and energy becoming more scarce and expensive, how much longer can we continue down the renewable path?

Leigh Goehring and Adam Rozencwajg are managing partners of Goehring & Rozencwajg. Read the complete version of this article here.