Energy Blue Print
Archive 2010

Moving from principles to action for energy supply that mitigates against climate change requires a long-term perspective. Energy infrastructure takes time to build up; new energy technologies take time to develop. Policy shifts often also need many years to take effect. In most world regions the transformation from fossil to renewable energies will require additional investment and higher supply costs over about twenty years

future costs of electricity generation

Figure 6.7 shows that the introduction of renewable technologies under the Energy [R]evolution scenario slightly increases the costs of electricity generation compared to the Reference scenario. This difference will be less than 0.5 cents/kWh up to 2020. Any increase in fossil fuel prices beyond the projection given in Table 6.1, however, will reduce the gap. Because of the lower CO2 intensity of electricity generation, by 2020 generation costs will become economically favourable under the Energy [R]evolution scenario and by 2050 will be more than 5 cents/kWh below those in the Reference version.

In both Energy [R]evolution scenarios the specific generation costs are almost the same up to 2030. By 2050, however, the advanced version results in a reduction of 4 cents/kWh compared to the Reference scenario, mainly because of greater economies of scale in the production of renewable power equipment. Due to the increased demand for electricity, especially in the transport sector, the overall supply costs in the advanced version are $37 billion higher in 2030 and $40 billion higher in 2050 than in the basic Energy [R]evolution scenario.

Due to growing demand, we face a significant increase in society’s overall expenditure on electricity supply. Under the Reference scenario, the unchecked growth in demand, increase in fossil fuel prices and the cost of CO2 emissions results in total electricity supply costs rising from today’s US$ 1,750 billion per year to more than US$ 6,460 billion in 2050. Figure 6.7 shows that both Energy [R]evolution scenarios not only comply with global CO2 reduction targets but also help to stabilise energy costs and relieve the economic pressure on society. Increasing energy efficiency and shifting energy supply to renewables leads to long term costs for electricity supply that are one third lower than in the Reference scenario. It becomes clear that pursuing stringent environmental targets in the energy sector also pays off in terms of economics.