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New Report
2’778 billion in 2013: The cost of not having a renewable energy infrastructure
Perceptions stick: a majority of people today seem to believe (or worse: accept) that we cannot afford renewable energy technologies.
This notions suggests that the alternative – maintaining the existing fossil energy infrastructure – is cheap. Or at least less expensive in comparison. However, a look at the data shows
- Due to the lack of a meaningful competition, fossil energy enjoys a monopolistic market position, i.e. we have to pay whatever the cost. We can’t buy an alternative product
- As a consequence, global expenditure for energy rose from 0.86% in 1995 to 1.43% of World gdp in 2013.
- Had the investments allocated to fossil extraction allotted to renewables instead from 1995 onwards, renewable energy cost would be significantely below today’s price of fossil energy, saving us U$ 2’778 billion in 2013.
Total global expenditure for energy rose significantly faster than global energy consumption over the past 20 years due to rising cost of fossil fuels. (Data: BP, IMF, World Bank)
While we move to more challenging locations to extract the remaining fossil resources – the arctic, deep under the ocean surface, cooking tar sands and fracking rock deep under the surface – exploration is becoming increasingly expensive. At the same time, the cost of renewable energy is dropping with technology development and mass production. Cost reduction is a function of investment volume (the higher the investments, the faster the cost reduction). An interesting question is therefore – what would happen if we decided to kick-start a renewable transformation now?
Comparative analysis of two different scenario, a business-as-usual scenario based on BP’s Energy Outlook to 2030, and a Renewable Energy Marshall Plan scenario, shows:
- Renewable energy is fast becoming cost competitive, and in some cases (wind power) already cheaper than fossil alternatives.
- Renewable energy cost of other technologies, including storage, could be reduced drastically with economics of scale (investment-induced mass production and deployment)
- At the same time, fossil energy carriers have to be extracted from more challenging locations (tar sands, ultra-deep sea, fracking, arctic drilling, etc.), i.e. costs of fossil fuels are rising.
- Not investing in large-scale renewable energy development and infrastructure NOW will cost us and additional U$ 500 billion in 2020, in excess of U$ 3’000 billion by 2025, and more thereafter. Every single year.
Global expenditure for energy needs is rising further in the future in line with increasing demand and rising cost of fossil energy extraction. However, if we abandon current policies favoring the fossil and nuclear industries in favor of renewables, coupled with strategic technology development and deployment, global energy expenditure would start to drop after 2020. By 2040, a renewable Energy Marshall Plan would save us 1% of World GDP compared to a Business-as-usual approach.
Remember the Stern Report that suggested it would cost us 1% of World gdp to avoid climate change? Sterns was wrong. It will cost us 1% of global GDP every year to maintain the status quo –before subsidies, and before starting to consider the cost of actual impacts of climate change and increasing extreme weather events. We cannot afford maintaining the out-dated fossil-based energy infrastructure.
Download the Report: The Cost of the Fossil Energy Infrastructure vs. A Renewable Energy Framework (PDF, 32 pages, 2 MB)
About SolaVis
SolaVis Sustainability Intelligence is a sustainability think-tank and provides advice for sustainable leadership, based in Zurich, Switzerland. SolaVis is the continuation of Korea-based sustainability consultancy SolAbility. SolAbility has designed sustainable management strategies and management tools that have helped 3 Korean clients to become Sustainability Supersector leaders according to the Dow Jones World Sustainability Index (DJSI)
For further information, please visit our website.
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