We were wondering: how much will the energy transition in the electricity sector actually cost?

 ...and, what if we move faster?

Summary:

• Moving faster saves money - it is simply cheaper than dragging our feet.

• Clearly, moving faster means less CO2 in the atmosphere

An energy transition for the electricity sector, boils down to rigorously shutting down all fossil-fuelled generation, compensating owners for accelerated depreciation, and replacing the capacity with renewables, while strengthening the grid and adding storage.

We estimate the net effect of capex, financing and opex costs, and savings in fuel and emissions allowance costs, is equivalent to a saving of Eur 28  for every MWh consumed.

Obviously, faster is more effective in terms of reducing CO2 emissions. Our conclusion, based on verifiable data, is that a faster transition will also be cheaper. Clearly, a lot of money needs to be invested.  That said, the amounts seem manageable, and the financial effect is positive in the long run, even after compensating the owners of fossil-fuelled power stations for early closure.  A faster transition requires higher compensation payments but this is dwarfed by the savings in fuel and emissions costs.

The electricity sector represents some 20% of the world’s energy demand. Most analyst scenarios show the electricity sector completing its transition to renewable energy over a period of 20 years or more. Completing this transition in 5 years rather than 20 years, saves

• 6.9 trillion Euro (7.2 trillion US dollars), equivalent to 3 to 4 weeks of global GDP

• 111 gigatonnes of CO2 emissions, equivalent to more than 2 years’ worth of worldwide greenhouse gas emissions

We’re looking for inputs to improve our estimates…Interested in sharing your ideas?