Debunking the myths surrounding environmental economics

Put simply, renewable energies are at least as cheap as their fossil fuel alternatives. Here’s why.

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Put simply, renewable energies are at least as cheap as their fossil fuel alternatives. Here’s why

First, some surprising facts that correct myths we’ve all heard about renewable energies: Global fossil fuel subsidies are five times higher than renewable subsidies. Britain’s coal-fired power stations only run at 34 per cent efficiency. And studies have shown that solar technologies can produce ten jobs per unit compared with one in conventional energy.

Climate-sceptic rhetoric leaves aside this pertinent evidence preferring confirmation bias as a basis for policy instead.      

The cost of electricity is measured in cents ($) per kilowatt hour (kWh). This is calculated using a system called the levelized cost of electricity (LCOE) which accounts for factors such as capital costs, fuel costs, and maintenance, to create comparable figures.

The LCOE includes an assumed utilization rate that allows for intermittent renewable supplies. Critics say that the LCOE doesn’t account for additional costs associated with renewables. But the opposite is true.

LCOE skews estimates in favour of fossil fuels and disguises many of their implications. Illness and mortality due to pollution, environmental monitoring and clean up, and infrastructure damage, all cost the state as a direct result of fossil fuels. We call these costs: externalities.

The US Energy Information Administration (EIA) has projected levelized costs to 2019 for coal (6c), the cheapest gas source (1.4c), and onshore wind (6.4c). However, adding on only the most conservative estimate (p.1669) of externality costs, the prices become: coal (9.6c), gas (2.7c), and wind remains the same (6.4c).

Other studies calculate the cost of externalities to be much higher, between 9 – 27c kWh.

Based on lowest externality estimates and using the cheapest source of natural gas as an example, gas appears as a false alternative to renewables.

Methane leakage during extraction of gas has proved in many cases to negate any benefit. Methane emissions have been assessed between 1-9 per cent of total emissions at extraction. Unless leakage is below 3.2 per cent, the life cycle emissions of a gas plant will be no better than a new coal plant.

Externalities make gas more expensive than onshore wind, geothermal, biomass, and hydroelectricity.

The International Renewable Energy Agency reported earlier this year that, such was the burden of externalities on global economies, investment in renewables could save between $123bn – $735bn over a twenty year period.

These figures reflect the scale of the damage caused by fossil fuel-related pollution. In 2012, 3.7 million premature deaths worldwide were linked to outdoor pollution.

The World Health Organization also found in a study that 83 per cent of Europeans were exposed to high levels of PM10 (particulate matter), the most detrimental pollutant to human health. In fact, Europe ranks the second worst polluted region per capita on the planet as a result of fossil fuel reliance.

This catastrophic effect on health translates directly into expenditure. The World Bank reported in 2007 (p.xv) that damage associated with air pollution cost China 3.8 per cent of its GDP. Perhaps that’s why, despite its economy being smaller, China invested more in renewables last year than the entire EU.

The EIA also projected estimates to 2040 for coal (8.7c), the cheapest gas source (7.8c), and onshore wind (7.3c). Even without the costs of externalities, by 2040, gas and coal will be more expensive than renewables.

They calculate a further figure for 2040: the levelized avoided cost of electricity. This calculates whether new production adds value to the system by displacing more expensive generation. The only sources with value-adding potential were advanced conventional combined gas (+2.0c), geothermal (+75.2c), onshore wind (+13.0c), solar (+10.6c), and hydroelectricity (+11.0c).

By 2040, renewables will be cheaper in levelized costs, significantly cheaper when externalities are factored in, and will also be the primary sources for adding value to our energy system.

The fact that fossil fuels are more expensive than renewables is disguised because externality costs of fossil fuels are hidden in ordinary price comparisons. Renewables are not an expense but a saving, a figure that could run into the hundreds of billions.

Matt Bevington is a member of the Green Party and a contributor to the Fabian Review

7 Responses to “Debunking the myths surrounding environmental economics”

  1. Leon Wolfeson

    They’re not alternatives, except geothermal.
    They are *as well as* gas.

    Unbacked renewable electricity might be “cheap” (although the massive costs of managing the grid and so on will mean standing charges will be unaffordable for many), but nobody would be able to rely on it. You might “save” loads for power companies, but at the expense of workers and anyone else not able to afford battery and generator systems, or simply to hook up to a reliable grid (which I’m sure will be built out privately for the rich).

    Moreover, you’re ignoring job displacement, using 100% capacity factors and your future means we’ll continue to be reliant on fossil-fuel driven transport. That your “study” also assumes some technologies will be stuck at today’s levels, while renewables advance constantly…assumption piled on assumption!

  2. Robin Thorpe

    Coal, gas and nuclear plants do not run at all times. Even gas has shut-downs and maintenance. Coal and nuclear run at less than 50%. Tidal, wave and hydroelectric can produce a reliable energy stream. Solar and wind less so but as part of a network would contribute. The required network wld not be vastly more expensive then the existing one.

  3. Robin Thorpe

    Fossil fuel transport is already being replaced by electric trains, buses and cars.

  4. Leon Wolfeson

    One, not to any significant degree.
    Two, they are often *less* environmentally friendly

    The only way to make electrically powered transport environmentally friendly is to replace base load coal with nuclear. In your world, they would not be able to run much of the time, and people would be unable to rely on it. The middle class would go back to petrol cars, while the poor would just be stuffed.

  5. Leon Wolfeson

    They have capacity factors well above 90%, you’re deliberately confusing running coal plants at less than their maximum (in good part due to their age here) with that. Gas plants can be ramped up very quickly, in addition. You’re lying, plain and simple.

    Hydroelectric is affected seasonally, as is tidal, and wave power is subject to weather just like wind power.

    That you think an order of magnitude and more is “not vastly more expensive”, that unbacked power is useful for anything other than PR… (hence wind, solar and wave is gas-backed, in practice)

  6. Robin Thorpe

    I may be wrong but I wasn’t intentionally lying. I have tried, to no avail, to find the source that told me that nuclear and coal ran at less than 50% – from what I can gather nuclear runs approx 85% of time, however, as it is a steam turbine not all of the thermal energy is converted to electrical energy, hence the output is less than 50% of potential capacity. Furthermore, studies do show that a renewable energy future is possible. It’s not really my field but In my opinion we should invest more in renewable than in fossil fuel.

    The real key though, is to use less energy. This means better insulated homes, more energy efficient appliances and more energy efficient manufacturing and construction.

  7. Leon Wolfeson

    Yea, er, that’s *thermal efficiency*, which is not the same at all as *capacity factor*.

    A “future” of the rich using generators and the rest of us having to put up with constant power cuts in possible over the next few decades, certainly.

    “Use less energy”

    That means turning off heating and lighting. On shutting down business. On stopping people using electronics. Those are the only ways to get significant savings, and only here – you’d impoverish us, while countries like China…

    The reality is that many poor people can’t get insulation – most landlords (who need to approve works) don’t care and won’t approve works, and millions are intelligible for grants because of things like living above shops. Neither can poorer people *afford* to buy newer and more energy efficient devices.

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