Why did renewables become so cheap so fast? And what can we do to use this global opportunity for green growth?

January 31, 2021
Energy
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Image Source: https://ourworldindata.org/

The world’s energy supply today is neither safe nor sustainable. What can we do to change this and make progress against this twin-problem of the status quo?

To see the way forward we have to understand the present. Today fossil fuels – coal, oil, and gas – account for 79% of the world’s energy production and as the chart below shows they have very large negative side effects. The bars to the left show the number of deaths and the bars on the right compare the greenhouse gas emissions. My colleague Hannah Ritchie explains the data in this chart in detail in her post ‘What are the safest sources of energy?’.

This makes two things very clear. As the burning of fossil fuels accounts for 87% of the world’s CO2 emissions, a world run on fossil fuels is not sustainable, they endanger the lives and livelihoods of future generations and the biosphere around us. And the very same energy sources lead to the deaths of many people right now – the air pollution from burning fossil fuels kills 3.6 million people in countries around the world every year; this is 6-times the annual death toll of all murders, war deaths, and terrorist attacks combined.

It is important to keep in mind that electric energy is only one of several forms of energy that humanity relies on; the transition to low-carbon energy is therefore a bigger task than the transition to low-carbon electricity.

What the chart makes clear is that the alternatives to fossil fuels – renewable energy sources and nuclear power – are orders of magnitude safer and cleaner than fossil fuels.

Why then is the world relying on fossil fuels?

Fossil fuels dominate the world’s energy supply because in the past they were cheaper than all other sources of energy. If we want the world to be powered by safer and cleaner alternatives, we have to make sure that those alternatives are cheaper than fossil fuels.

The price of electricity from the long-standing sources: fossil fuels and nuclear power

The world’s electricity supply is dominated by fossil fuels. Coal is by far the biggest source, supplying 37% of electricity; gas is second and supplies 24%. Burning these fossil fuels for electricity and heat is the largest single source of global greenhouse gases, causing 30% of global emissions.

The chart here shows how the electricity prices from the long-standing sources of power – fossil fuels and nuclear – have changed over the last decade. The data is published by Lazard.

To make comparisons on a consistent basis, energy prices are expressed in ‘levelized costs of energy’ (LCOE). You can think of LCOE from the perspective of someone who is considering building a power plant. If you are in that situation then the LCOE is the answer to the following question: What would be the minimum price that my customers would need to pay so that the power plant would break even over its lifetime?

LCOE captures the cost of building the power plant itself as well as the ongoing costs for fuel and operating the power plant over its lifetime. It however does not take into account costs and benefits at an energy system level: such as price reductions due to low-carbon generation and higher systemic costs when storage or backup power is needed due to the variable output of renewable sources – we will return to the aspect of storage costs later.

This makes clear that it is a very crucial metric. If you as the power plant builder pick an energy source that has an LCOE that is higher than the price of the alternatives you will struggle to find someone who is willing to buy your expensive electricity.

What you see in the chart is that within the last 10 years the price of electricity from nuclear became more expensive, gas power became less expensive, and the price of coal power – the world’s largest source of electricity – stayed almost the same. Later we will see what is behind these price changes.

Read more: https://ourworldindata.org/cheap-renewables-growth

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