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How cost-effective is a renewables-dominated electricity system compar

How cost-effective is a renewables-dominated electricity system compared to one based on fossil fuels?
How cost-effective is a renewables

A renewables-dominated electricity system can be highly cost-effective compared to one based on fossil fuels, particularly over the long term. Here are some key points to consider:


Cost Decline of Renewables: The cost of renewable energy technologies, such as solar and wind, has steadily decreased over the years due to advancements in technology, economies of scale, and increased competition in the market. This trend is expected to continue, making renewables increasingly cost-competitive with fossil fuels.

Fuel Costs: Renewable energy sources like sunlight and wind are essentially free, unlike fossil fuels which require ongoing extraction and transportation costs. Once renewable energy infrastructure is in place, the operational costs are relatively low, resulting in stable and predictable energy prices over time.

External Costs: Fossil fuel-based electricity generation often imposes significant external costs on society, including air and water pollution, greenhouse gas emissions, and health impacts. These costs are typically not accounted for in the market price of electricity from fossil fuels but are borne by society as a whole. In contrast, renewable energy sources have minimal or no emissions, reducing these external costs.

Resource Availability: Renewable energy sources are abundant and widely distributed, reducing reliance on imported fuels and the geopolitical risks associated with fossil fuel dependence.

Resilience and Security: Distributed renewable energy systems, such as rooftop solar panels and community wind farms, can enhance the resilience and security of the electricity grid by reducing reliance on centralized generation and transmission infrastructure.

Technological Innovation: The transition to a renewables-dominated electricity system can drive technological innovation and create new job opportunities in the renewable energy sector.


How do energy production costs compare between renewables and fossil fuels considering the example of Great Britain?

The ‘levelised cost of electricity’ (LCOE) provides a simple means of comparing different technologies for electricity production, taking into account capital costs and costs of operation, including maintenance and the purchase of any fuel needed.

The British government’s assessments of the LCOE of generation technologies since 2012 show striking reductions in the LCOE of wind turbines and solar PV panels over time, which fell to between £41 per megawatt-hour (MWh) and £48/MWh respectively for new developments in 2023. In comparison, the cost of new conventional gas-fired generation (without carbon capture) rose from £103/MWh (including a carbon price of £25/MWh) in 2012 to £124/MWh (including a carbon price of £65/MWh) in 2023.

Inflationary pressures in international supply chains have led to a recent increase in the maximum price (known as the ‘reserve price’) that may be paid for offshore wind in the next Contract for Difference auction, to £94/MWh. However, this price is significantly lower than the prices for offshore wind of £147–£155/MWh awarded in the first round of auctions in 2015 – a remarkable cost reduction driven by innovation and economies of scale. And importantly, this does not change the reality that the LCOE of renewables is now much lower than that of electricity produced from gas.

While there may be upfront costs associated with the transition to renewable energy, such as investments in infrastructure and grid upgrades, studies have shown that the long-term benefits, including cost savings, environmental protection, and energy security, outweigh these initial expenses. Additionally, many governments offer incentives and subsidies to encourage the adoption of renewable energy, further enhancing its cost-effectiveness.

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