Renewable vs Fossil Power Systems: A cost comparison

While the technical feasibility of a power system with a share of renewable energy of 90% or more is no longer disputable, the cost of such a system is not yet resolved. This study compares the system costs of different potential future power systems in 2050 in Germany: One based entirely on renewable energy, one based on a fossil fuel mix of lignite, hard coal and natural gas and one based entirely on natural gas. Sensitivities include the prices of fuels and carbon as well as different storage technologies in the renewable case (batteries versus power to gas).

Modelling of these future scenarios delivers among others the following results:

1.    The system based on renewable energy has mostly lower or similar total costs as the system based on a conventional mix of lignite, hard coal and natural gas (€63bn per year in the renewable case vs €59-67bn per year in the fossil mix case, assuming a carbon price of €50/ t CO₂) largely independent of fuel prices.

2.    The total costs of the natural gas system in comparison to the renewable system depend mainly on fuel prices: They are lower than those of the renewable system in case of low gas prices and higher in the case of high gas prices, largely independent of the price of carbon (€51-75bn per year given a carbon price of €50/ t CO₂).  

3.    Compared to 1990, a new lignite/hard coal/natural gas power system would have 7 to 24.5 percent, a power system based entirely on natural gas 59 percent, and an almost fully renewable power system 96 percent lower CO₂ emissions in 2050. Only the power system based on renewable energy is compatible with the climate protection targets laid down in the Paris agreement.

The study concludes that a power system based almost completely on renewable energy has lower or similar costs as a fossil based electricity system and has also the added value of shielding the economy from increasingly volatile fossil fuel prices.