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CLIMATE ROUNDTABLE - TOWARDS A GREENER FUTURE
1.
Social impact
. These include factors such as health risks,
the risks of nuclear power accidents, water consumption of
nuclear and coal plants, and potential declines in the price of
property in the case of renewables.
2.
Transmission costs
. In the case of renewables, grids must
often be reinforced as power sources such as offshore wind or
solar are usually not centrally located. Clearly such costs must
be reflected in an accurate measurement.
3.
Variability costs.
These include payments to keep gas power
plants, for example, on stand-by as backup capacity for variable
renewable energy sources.
4.
Employment effects
. Generating electricity creates jobs and
value – but some types of energy production are more labour
intensive during the construction phase, while others create
more jobs through installation and maintenance.
5.
Geopolitical risk
. Some energy sources can serve as a
hedge against price increases or political interference. Wind,
for example, has no fuel price and cannot be manipulated by
adverse foreign parties.
6.
Environmental impact
. The cost of CO
2
is already reflected
in LCoE. At present, however, CO
2
costs are exceptionally low
and do not accurately reflect the impact of emissions on the
environment or on air quality.
SCoE takes these factors into account, resulting in a more
meaningful and accurate cost measurement system.
A traditional LCoE calculation demonstrates that onshore wind
power is already close to being cost-competitive today, and that
offshore wind is rapidly becoming more competitive.
When one applies the more comprehensive SCoE measurement,
the viability of wind becomes even more pronounced. Looking
ahead to 2025, one sees that wind power, both onshore and
offshore, will be the single most inexpensive source for power
generation, with natural gas the most cost-efficient backup for
variable renewable sources.
While market mechanisms like CO
2
pricing and emission
trading schemes (ETS) should be the adequate means to
drive investment decisions towards lower SCoE, so far they
have not demonstrated that they work with sufficient impact.
Until these deficiencies are overcome, binding targets for
renewables are needed.
The future development of wind power will be increasingly driven
by economic factors. Therefore, it is crucial that we have an
accurate and comprehensive method of calculating true costs.
SCoE can provide this, helping investors, policy makers, and the
public to better understand our true energy picture and to make
the best decisions going forward.
The single greatest challenge remains
making CO
2
-free power sources and CO
2
-
free renewable energy sources more economically
competitive. This demands accurate measurement
of the costs of competing energy sources.
Markus Tacke,
Siemens AG