At RESET.org, we cover a wide range of technologies concerning power generation – all the way from familiar solar and wind to breakthroughs in fusion energy. When discussing renewable energy, one negative issue always seems to rear its ugly head: cost. Often renewable technologies are seen as less reliable and simultaneously more expensive than traditional fossil fuels, which are often defined as being ‘dirty but cheap’.
However, a new study emerging from Oxford University suggests this might not actually be the case. Their results suggest that while fossil fuels are certainly dirty, comparatively speaking, they are not that cheap.
Oxford’s Institute for New Economic Thinking examined historic price data for both renewable and fossil fuel energy to create a long term comparisons. In the case of the fossil fuel data, they went back to the peak of the industrial revolution in the 1880s. When plotted over the entire 140 year timespan and adjusted for inflation, the researchers concluded that fossil fuels, such as coal, oil and gas, are highly volatile and subject to significant increases and decreases with no overall long term trend. Importantly, however, the price of fossil fuels today are largely the same as they were in 1880, and in most cases are more expensive.
Meanwhile, the costs of renewable technologies are only getting cheaper. Although originally starting at a much higher price point, many renewable technologies are now cheaper than oil and approaching coal and gas. On average, renewable technologies, such as solar, wind and storage batteries, have dropped roughly ten percent per year since their commercial introduction and continue to decrease.
Additionally, although fossil fuels currently provide more energy production, the amount they produce has only increased slightly since 1880, and in many cases has plateaued. Renewables on the other hand, have only increased in efficiency and are now approaching the production levels of fossil fuels.
With this data, the team used probabilistic modelling to develop three future scenarios (Fast Transition, Slow Transition, and No Transition) regarding the shift from non-renewable to renewable sources, and assessed their likely costs from 2020 to 2070. Their analysis suggests that a rapid transition to renewables (by 2050) is significantly cheaper than both the Slow and No Transition model. They concluded that by 2050, the annual energy system cost for the Fast Transition model was 514 billion USD cheaper than the No Transition scenario. When taking into account changes in changes in interest rates and the additional cost fossil fuels would impose on other areas of society, the team concludes savings could ultimately be as high as 12 trillion USD.
The Fast Transition scenario is especially beneficial as increased investment into renewable technologies will only further improve the technology, likely reducing costs and increasing output.
Ultimately, the report and the Oxford team view with scepticism the suggestion that a shift to renewable power would lead to a drop in GDP and astronomical prices. Instead, the transition could result in massive savings in only a relatively short space of time.