Costs compared: Renewable vs. fossil energy

Only renewables meet climate requirements

An electricity system that is 95-percent renewables-based in 2050 costs about the same or even less than an alternative system based on coal and gas. This is one of the key conclusions of the Oeko-Institut’s scientists, who were commissioned by Agora Energiewende to analyse the costs of various electricity systems. With the fuel prices that can be reasonably expected, if a CO2 price of 50 euros or more per tonne carbon dioxide is assumed the overall costs of renewable vs. coal+gas systems are similar. A coal-based electricity system is only significantly cheaper if it is assumed that CO2 prices are very low in 2050 (max. 20 euros per tonne CO2). An electricity system based on natural gas wins economically if it is assumed that gas prices are low in 2050 and CO2 prices are not high at the same time (100 euros per tonne CO2).

“Be this as it may, considering the uncertainties surrounding the development of fuel prices on global markets a renewables-based electricity system delivers overall benefits to the economy,” is the summary assessment of Dr. Felix Chr. Matthes, Energy & Climate Policy Coordinator at the Oeko-Institut. “Such a system offers independence from unpredictable fossil-fuel price trajectories and thus also strengthens Germany’s overall competitiveness.”

Only renewables meet climate requirements

In contrast to fossil-fuel-based systems, renewables-based electricity systems allow low-carbon economies and meet the requirements of the Paris Climate Agreement. If 95 percent of electricity comes from solar, wind and hydropower, the electricity sector’s CO2 emissions drop by 96 percent from the 1990 baseline. This can be achieved at CO2 avoidance costs around 50 euros per tonne CO2. That is a small sum compared to the anticipated costs of adapting to climate change. The CO2 damage costs are currently rated at 80 euros per tonne CO2 and are expected to rise to 145 euros over the medium term, reaching 260 euros over the long term.

Study: Erneuerbare vs. fossile Stromsysteme: ein Kostenvergleich. Stromwelten 2050 – Analyse von erneuerbaren, kohle- und gasbasierten Elektrizitätssystemen (Renewable vs. fossil electricity systems. Power worlds in 2050 – An analysis of renewable-, coal- and gas-based electricity systems) by the Oeko-Institut