Visualized: Renewables and the Price of Electricity
Organizations like Lazard try to estimate the cost of electricity, known as the Levelized Cost of Electricity (LCOE), by source. For the last several years, the price of renewable electricity prices, including both wind and solar, have been cheaper than fossil fuels and nuclear.
So, do countries with higher amounts of wind and solar have cheaper electricity prices?
There are several factors that can contribute to higher electricity prices in countries with higher amounts of renewables:
- Infrastructure Costs: The initial capital costs of building renewable energy infrastructure can be high, and these costs are often passed on to consumers in the form of higher electricity prices. This is because the cost of renewable energy generation equipment such as wind turbines and solar panels is generally higher than traditional energy generation equipment such as coal-fired power plants.
- Reliability and Integration Costs: Renewable energy sources such as wind and solar power can be intermittent, meaning they do not always produce electricity when it is needed. As a result, additional infrastructure and energy storage systems are required to ensure that electricity is available when needed. These reliability and integration costs can also contribute to higher electricity prices.
- Government Policies: Many countries with high amounts of renewables have implemented government policies to support the development of renewable energy sources. These policies may include subsidies or tax incentives, which can increase the cost of electricity for consumers.
- Market Dynamics: In some cases, high electricity prices in countries with high amounts of renewables may be driven by market dynamics such as supply and demand. For example, if demand for electricity is high and there is limited capacity to generate electricity from renewable sources, prices may increase.
It’s still unclear exactly what’s driving the higher costs for countries with more wind and solar, so the trend may go away with time or continue. Additionally, the long-term benefits of reducing greenhouse gas emissions and improving public health may outweigh the short-term costs of higher electricity prices.
LCOE – Levelized Cost of Electricity