European Analysis Shows Huge Value from Renewables

The cost of generating electricity in Europe from coal is up to 120 times more expensive than wind, when only ‘environmental costs’ are considered, according to a major EU analysis.

BRUSSELS, Belgium, BE, 2001-08-15 [] The cost of generating electricity from coal is up to 120 times more expensive than wind, according to a major analysis conducted for the European Commission. It is also ten times more expensive than generating from solar photovoltaics, but only double the cost of generating from biomass. The study quantifies what would happen to the cost of generating electricity from various fuel sources if environmental damage, health damage and other external costs were taken into account. The EC contributed 10 million eurodollars to analyze 20 research projects from the past decade, and all member states of the European Union participated, as well as the United States. Denmark was the only country to calculate the cost to generate from PV panels, with a final external cost of EUR 0.6 cents per kilowatt-hour. The cost to generate from wind turbines was 0.05¢/kWh while, by comparison, the cost to generate from oil was 5 to 8¢/kWh, 3 to 6¢ from coal, 3¢ from biomass, 1 to 2¢ from natural gas, and 0.2¢/kWh from nuclear. The analysis was conducted for 15 countries, with Belgium showing the highest cost to generate power, at up to 15¢/kWh from coal., followed by France at 10¢ for coal and 11¢ from oil. Among the nations, coal generation ranged from 2 to 15¢, while oil ranged from 3 to 11¢. Natural gas ranged from 1 to 4¢ and biomass ranged from 0.2 to 3¢. Peat would cost 2 to 5¢ but was calculated in two countries only, while nuclear ranged from 0.2 to 0.7¢. Hydroelectric generation ranged from 0.03 to 1¢, with wind ranging from Denmark’s low of 0.05¢ to a high of 0.2¢ among the six countries that analyzed wind. Overall, the cost to generate electricity from coal or oil would double, while the cost of production from natural gas would increase by 30 percent if external costs were taken into account, concludes the report. These costs would add up to 2 percent of the EU’s Gross Domestic Product, not including the cost of global warming. “They have to be covered by society at large, since they are not included in the bills which electricity consumers pay,” notes the report, which is the first research project to calculate financial costs against damages resulting from different sources for the entire continent using socio-environmental costs. The cost to generate electricity across Europe currently is 4¢/kWh, with external costs higher in urban areas. The cost of environmental and health damage could be addressed by taxing damaging fuels and technologies, suggests the report, which would result in a “substantial increase” of energy prices in the majority of the EU member states. A second option is to “encourage or subsidize cleaner technologies that allow avoiding socio-environmental costs.” Since taxation on a continental level is difficult to achieve, the Commission has agreed to encourage renewables. In February, it published guidelines on state aid for environmental protection, which explicitly said “Member States may grant operating aid to new plants producing renewable energy that will be calculated on the basis of the external costs avoided.” The amount of the aid granted to renewables must not exceed 5¢/kWh. “Wind and hydro energy present the lowest external costs,” concludes the report. Nuclear involves relatively low external costs due to its low influence on global warming and its “low probability of accidents” in the European reactors. The main organizations behind the EXTERNE project were the University of Stuttgart (Germany), the Association for Research & Development of Industrial Methods & Processes (France), the Foundation Eni – Enrico Mattei (Italy), the Flemish Institut for Technological Research (Belgium), the Risoe National Laboratoy (Denmark), AEA Technology (Britain), and the Centre for Energy, Environment & Technological Research (Spain). The EC will build on the results of this analysis with its recent launch of the NEWEXT (new elements for the assessment of external costs from energy technologies) research project, which will study additional elements for the evaluation of external costs, including the monetary valuation of mortality risk, evaluation of acidification and eutrophication on the ecosystem and biodiversity, and effects of major accidents in non-nuclear fuel chains, such as oil spills.
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