what are our current energy sources?
Energy is a fundamental input for economic systems. Current economic activity depends overwhelmingly on fossil fuels such as oil, coal, and natural gas. However, these fuels are non-renewable. Renewable sources including hydroelectric, wind, and solar power currently provide less than 14% of global energy.
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1973 and 2013 fuel shares of TPES (Total Primary Energy Supply)
Source: Key World Energy Statistics by the International Energy Agency Other includes geothermal, solar, wind heat, etc.
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are renewables more expensive than conventional energy?
Does the price of each energy source really reflect its full social costs?
According to various studies of energy externalities, if the price of all energy sources included externality costs, a transition toward renewables would already be much further along.
Some economists suggest that the biggest factor currently preventing a transition toward renewable energy is the failure to account for externalities. Getting the prices “right”, to reflect the externalities, would send a clear signal to businesses and consumers that continued reliance on fossil fuels is bad economics.
Based on European analyses, the figure below states a summary of the range of external costs associated with different electricity sources. The externality costs associated with renewable energy are much lower. Even though fossil fuels may currently have a cost advantage over renewables based solely on market prices, if externalities were included several renewables would likely become the most affordable energy sources.
Externality Cost of Various Electricity Generating Methods, European Union
According to various studies of energy externalities, if the price of all energy sources included externality costs, a transition toward renewables would already be much further along.
Some economists suggest that the biggest factor currently preventing a transition toward renewable energy is the failure to account for externalities. Getting the prices “right”, to reflect the externalities, would send a clear signal to businesses and consumers that continued reliance on fossil fuels is bad economics.
Based on European analyses, the figure below states a summary of the range of external costs associated with different electricity sources. The externality costs associated with renewable energy are much lower. Even though fossil fuels may currently have a cost advantage over renewables based solely on market prices, if externalities were included several renewables would likely become the most affordable energy sources.
Externality Cost of Various Electricity Generating Methods, European Union
Why are the operating externalities of nuclear energy relatively low?
The life cycle of nuclear power generates low levels of air pollution and greenhouse gas emissions. The most significant externalities from nuclear power are the risks of a major accident and the long-term storage of nuclear wastes. These impacts are difficult to estimate in monetary terms, and as a result the estimates shown in the figure left understate the true negative externalities associated with nuclear power. |
The figure on the right presents one projected comparison of the cost of electricity generation in 2020 using traditional fossil fuel methods and various renewable alternatives. Based solely on production costs, the renewable sources of onshore wind, wave energy, concentrated solar, and potentially offshore wind are all expected to be cost competitive with fossil fuels. When the impacts of externalities are included, all renewable sources become less expensive than fossil fuels. These results imply that there are good economic reasons to promote a transition towards renewables.
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Cost of Electricity Generating Approaches, 2020
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Those figures show that the costs of renewable energy are not higher than those for conventional energy as the market price of conventional energy does not tell the truth. A full transition to renewable energy is affordable because costs of climate change and health damage from fossil fuel use are avoided.
Summary
External costs caused by conventional energies such as environmental, climate and health damages are not internalized as current measures just look at prices and choosing the cheapest form of energy without factoring in external costs.
How can we get things right?
However, subtracting avoided costs of using renewable energy only indicates that a transition to renewables would be more affordable than maintaining our status quo on fossil fuels. It does not necessarily mean that the transition would be affordable on its own terms.
Summary
External costs caused by conventional energies such as environmental, climate and health damages are not internalized as current measures just look at prices and choosing the cheapest form of energy without factoring in external costs.
How can we get things right?
- Raise awareness of the externalities of conventional energy supply
- Internalize the externalities
However, subtracting avoided costs of using renewable energy only indicates that a transition to renewables would be more affordable than maintaining our status quo on fossil fuels. It does not necessarily mean that the transition would be affordable on its own terms.
Further Reading
- Do you want to know what scientists predict for the future? Check out this WORLD ENERGY OUTLOOK 2014 FACTSHEET and read about how the global energy markets might evolve to 2040 and how a possible future of fossil fuels, renewables and nuclear power looks like.
- 6 Charts that Will Make You Optimistic About America’s Clean Energy Future