Energy transition: Costs for electricity remain constant despite renewables

Energy transition: Costs for electricity remain constant despite renewables

As the energy transition continues to progress, the proportion of renewable energies in the electricity system will continue to increase. However, the decline in the cost of these renewable energy sources in the coming years does not necessarily mean a corresponding decline in the overall cost of electricity. Economist Veronika Grimm from the Technical University of Nuremberg and her team criticize the common concept of the levelized cost of energy (LCOE), which takes into account the average costs of building and operating a power plant.

Electricity from onshore wind currently costs around 5.49 cents per kilowatt hour, while electricity from ground-mounted solar systems costs 4.07 cents. Forecasts assume that solar modules in particular will become even cheaper in the future, which could reduce costs to 4.69 cents for wind energy and 2.59 cents for solar energy by 2040. However, the authors point out that electricity production costs alone are not sufficient to adequately reflect future electricity costs.

A new indicator called LCOLC (Levelized Cost of Load Coverage) is proposed by the authors to measure the cost of electricity to cover demand. This also takes into account the need for storage, gas and steam power plants as well as future converted hydrogen power plants to cover supply gaps in the dark or when there is no wind. In a scenario with extensive use of various technologies, the cost of electricity in 2040 could be 7.85 cents.

The authors emphasize that their calculations should be understood as simplified models and are not intended to serve as concrete cost predictions. The aim is to make the discussion about the expansion of renewable energies more objective and also to take into account the additional technologies required. Power supply decisions should not be delayed as this could increase rather than reduce costs. A more flexible demand and increased integration into the European electricity market are further factors that should be taken into account in the discussion about future electricity costs.