In this guide, we discuss whether renewable energy might make electricity cheaper, or more expensive.
We look at general factors relating to renewable energy that might impact electricity prices, and also look at real examples of countries and regions around the world that use renewable energy, and how it’s specifically impacted their electricity prices.
Summary – Does Renewable Energy Make Electricity Cheaper, Or More Expensive?
Overall, Does Renewable Energy Make Electricity Cheaper, Or More Expensive?
Overall, it appears as though having renewable energy in an energy mix for a city or town is just one of a range of factors that can impact electricity prices over a certain time period.
Renewable energy may sometimes be the factor that impacts electricity prices the most, but, other times other factors may impact electricity prices as much, or more.
We provide more context and information on this potential answer to this question in the guide below.
General Factors That Can Impact Electricity Prices
The energy sources used for electricity is just one factor that might impact prices – there are many general factors that can cause electricity prices to increase and decrease. The same can be said for electricity prices on a country and State specific level
Local Factors That Can Impact Electricity Prices
Ultimately, what impacts electricity prices is country, State and often city specific
There are different factors and variables impacting electricity prices over any one time period, in any one place.
For example, the factors impacting electricity prices in California may be different to other States in the United States
Instances Where Renewable Energy Specifically Might Impact Electricity Prices
There are countries and States in the world with renewable energy in their electricity mix that have higher than average electricity prices.
In some of these countries and States, there might be strong evidence that the introduction and expansion of renewable energy into the energy mix has correlated with electricity prices increasing significantly.
Some of this increase might be from the overall service of providing electricity from energy sources that include renewable energy, while some of this increase can be from renewable or green energy related taxes and subsidies, or support schemes that customers have fund as part of their electricity bills
In other instances, some reports indicate that renewable energy has lead to more competitive electricity prices
In some places in the world such as South Australia, it’s been claimed that renewable energy like wind and solar has lowered and stabilised electricity prices for consumers in an energy mix with natural gas.
Parts of the MidWest in the US may have experienced a similar thing.
So there might be several renewable energy related factors that contribute to electricity price increases or decreases
Sometimes Renewable Energy May Lead To No Change In Electricity Prices
There are also countries and States that have experienced no real change to electricity prices with renewable energy in the energy mix
Factors Other Than Renewable Energy That Might Impact Electricity Prices
Some countries and States in the world have seen their electricity prices increase because of several other factors other than renewable energy
Examples might include an overall lack of supply of electricity compared to demand, high costs of electricity generation (such as high gas prices), network and infrastructure investment and costs (poles, wires, transmission equipment), and other factors
The Type Of Renewable Energy Matters
Different specific types of renewable energy may impact electricity prices differently
For example, hydropower may be more cost effective as an energy source than variable energy sources like solar or wind in some countries
Taking Into Account Change In The Energy Sector Over Time
The energy sector changes over time, and this can impact electricity prices.
For example, costs for solar and wind technology could continue to drop in the future, and this may impact the cost to provide renewable electricity from these sources.
Coal power plants may get more expensive to build and operation, with requirements for plants that manage carbon emissions and minimise air pollution, in addition to things like carbon penalties/taxes, polluters taxes, and more.
These changes over time should be taken into consideration.
*Note About This Guide
In this guide, we mainly refer to retail electricity prices, and not wholesale, commercial or industrial prices.
Also note, some households have their own solar, or other type of renewable energy set up.
This guide considers electricity from the grid only.
Providing power from an individual set up would obviously require a comparison of set up and running costs, feed in credits, taxes, and other factors, compared to obtaining electricity from the grid only.
Overall, Does Renewable Energy Make Electricity Cheaper, Or More Expensive?
Overall, it appears as though the having renewable energy in an energy mix for a city or town is just one of a range of factors that can impact electricity prices over a certain time period.
Renewable energy may sometimes be the factor that impacts electricity prices the most, but, other times other factors may impact electricity prices as much, or more.
To find out what factors are having the most impact on electricity prices in a specific geographic location, over a specific time period, an individual assessment for that location and time period might be required.
It might not be accurate enough to simply assume that renewable energy does or doesn’t impact electricity prices in a specific way.
Several reports might have a similar conclusion that multiple factors have potential to impact electricity prices, and it’s not always just renewables …
From finder.com.au:
Electricity prices have become a political hot potato …
Electricity retailers find fault with governments, and renewable energy advocates point the finger at … old fossil-fuel generators.
The right-wing commentariat blames renewables, while the federal government blames everyone but itself.
The truth is there is no silver bullet [and] No single factor or decision is responsible for electricity prices … Rather, it is the confluence of many different policies and pressures at every step of the electricity supply chain.
From energycouncil.com.au:
Despite the impact of renewable charges on electricity bills it remains one component of many and is not always the cause of higher prices …
General Factors That Can Impact Electricity Prices
We have put together a separate guide on the general factors that can impact electricity prices:
General Factors That Impact Electricity Prices
Country Or City Specific Factors That May Impact Electricity Prices
We’ve put together a separate guide with examples of country or city specific factors that can impact electricity prices:
As you can see, different countries and States have different factors that might be impacting their electricity prices in a major way at any one time.
– Renewables May Sometimes Contribute Significantly To An Increase In Electricity Prices
For example, places like Denmark, Germany and Belgium look to have significant taxes related to renewable or green energy development and support attached to their electricity prices.
Phasing out and closing down of competitive or low cost energy sources (in favor of renewable energy) such as nuclear could also be an issue in some countries.
– Factors Other Than Renewables May Sometimes Contribute Significantly To An Increase In Electricity Prices
On the other hand, a place like South Australia may be suffering from other problems such as government energy policy in need of improvement, high network (poles and wires) costs, paying premium prices for existing energy sources (which are also restricted in supply in numerous ways, and pushing prices up as demand increases), inefficient and/or old existing power plants, and so on.
– Assessing Different Countries & Cities Individually For Factors That Impact Electricity Prices
If you want to do your own assessment on your own State or country, this guide may help you in determining what factors might be most responsible for impacting electricity prices where you live.
Renewable Energy May Sometimes Be Beneficial For Electricity Prices
In some places in the world such as South Australia, renewable energy like wind and solar has already had the economic benefit of both lowering and stabilising electricity prices for consumers in an energy mix with natural gas.
Parts of the MidWest in the US are seeing a similar trend with their emphasis on wind energy.
Using more renewable energy can lower the prices of and demand for natural gas and coal by increasing competition and diversifying our energy supplies (ucsusa.org)
Renewable Energy May Sometimes Lead To Electricity Price Increases
[Countries with highest variable solar and wind % tend to have highest electricity prices] (europeanscientist.com)
And unreliability requires solar- and/or wind-heavy places like Germany, California, and Denmark to pay neighboring nations or states to take their solar and wind energy when they are producing too much of it (forbes.com)
High levels of renewable energy penetration make electricity expensive around the world … [and not just in one country] (environmentalprogress.org)
Electricity Prices In Countries That Use The Most & Least Renewable Energy For Electricity
Below, we outline different countries’ renewable energy as a % of electricity production, and their average electricity prices.
This reason we’ve done this is to see if there is some kind of link between renewable energy use for electricity, and electricity prices in different countries.
From these lists, we can see that not all the countries who use the most renewable energy as part of their electricity generation energy source mix have the highest electricity prices, and vice versa for countries that use far less renewable energy for their electricity generation.
But, some countries with higher renewable energy share of electricity generation do have higher than average electricity prices, and some of them very high prices.
There are a number of countries with very low renewable energy shares that have very low electricity prices too.
This could be due to using cheaper fossil fuel plants that don’t have newer air pollution and carbon emission reduction technology fitted i.e. they could be making use of cheap, dirtier fossil fuel energy (but, this is purely speculative without doing an individual analysis of each country).
In the below figures:
Electricity Prices = average electricity price as of 2019, in terms of US Dollars/cents, per kWh (kilowatt hour) of electricity.
Prices are obtained from globalpetrolprices.com, but also wikipedia where otherwise stated.
Additional prices can also be seen at wikipedia.org
Renewable Energy % = renewables as a % of total electricity generation in a given year (most of the stats are from 2016). %’s are obtained from wikipedia.org
As a benchmark, note that the average electricity price globally in March 2019 was 0.14 U.S. Dollar [14 US cents] per kWh (globalpetrolprices.com)
Also note that we have listed every country, but some of the most notable ones.
%’s and prices for other countries can always be viewed by following through the links in the resources list.
Electricity Prices In Countries That Use High %’s Of Renewable Energy For Electricity (50% Or Higher)
Iceland – 100%, 16 (US) cents
Norway – 97.2%, 14 cents
New Zealand – 83.9%, 21 cents
Brazil – 80.4%, 18 cents
Austria – 74.3%, 22 cents
Nepal – 65.5%, 8 cents
Canada – 65%, 11 cents
Denmark – 60.5%, 34 cents
Switzerland – 59.8%, 21 cents
Sweden – 57.1%, 20 cents
Electricity Prices In Countries That Use Medium %’s Of Renewable Energy For Electricity (20% To 49%)
Finland – 44.2%, 19 cents
Spain – 38.1%, 25 cents
Italy – 37.3%, 26 cents
Turkey – 32.9%, 10 cents
Pakistan – 32.7%, 5 cents
Germany – 29%, 35 cents
United Kingdom – 27.9%,
Ireland – 24.7%, 23 cents
China – 24.5%, 8 cents
Argentina – 21.5%, 9 cents
Electricity Prices In Countries That Use Low %’s Of Renewable Energy For Electricity (20% Or Lower)
France – 17.5%, 19 cents
Russia – 16.9%, 6 cents
India – 16.88%, 8 cents
Belgium – 16.6%, 32 cents
Mexico – 15.3%, 8 cents
Japan – 15%, 29 cents
United States – 14.7%, 14 cents
Australia – 14.5%, 25 cents
Poland – 13.7%, 17 cents
Hungary – 10.1%, 13 cents
Egypt – 8.2%, 3 cents
Ukraine – 5.6%, 5 cents
South Korea – 2.8%, 10 cents
United Arab Emirates – 8 cents
Countries With The Most Expensive, & Also The Cheapest Electricity Prices
You can also see some general electricity prices worldwide for notable countries in this guide:
Comparison By US State: Renewable Energy % Of Electricity Production vs Average Electricity Price vs CO2 Emissions vs Air Pollution
Below, we compare each US State by the following indicators:
– What % share of overall electricity production is made up by renewable energy
– Average electricity price (retail price, in cents per kWh)
– Carbon intensity of electricity production (in terms of grams of CO2 emitted per kWh produced)
– And, level of air pollution/air quality (in terms of the amount of small particulate matter in the air)
Purpose Of This Information
There’s a few reasons that this information might be useful
The first reason is to see whether the % share that renewables energy makes up of overall electricity production is significantly impacts electricity prices in any consistent way
A second reason is that electricity generation is usually one of the key sectors that is linked to CO2 emissions, with the transport sector another one. Both still use fossil fuels at this point in time.
It should be noted though that it is not only the electricity sector that contributes to air pollution and greenhouse gas emissions.
The burning of fossil fuels and activity in other sectors such as transport, heating and cooling, agriculture, industrial, residential, and more can contribute to them.
Considering The Potential Tradeoffs Of Renewable Energy
In States where renewable energy might be linked to higher electricity prices in a particular State (or a country), these States may want a guarantee that the renewable energy is leading to lower CO2 emissions from electricity and also lower air pollution levels, as a tradeoffs for the higher electricity prices
What We Generally Found
When we break it down to State level from the national level, not all the States in United States who use the most renewable energy as part of their electricity generation energy source mix have the highest electricity prices, and vice versa for countries that use far less renewable energy for their electricity generation.
But, some States with higher renewable energy share of electricity generation do have higher than average electricity prices, and some of them very high prices.
Using One State As An Example
California is perhaps an example of a State that might want to ask questions about their electricity sector and how much value they are getting out of their renewable energy
They have one of the highest renewable energy % shares for electricity production, but higher than average electricity prices, and poor air quality in several parts of the State (although other sectors and activities are likely responsible for the air quality)
Having said that, their CO2 emissions from electricity production are lower than average, which means they may be benefiting from lower greenhouse gas emissions
Other Notable States From The Data In This Guide
– State With The Highest Renewable Energy Share
Vermont
– States With The Highest CO2 Levels
West Virginia and Kentucky
– State With The Most Expensive Electricity
Hawaii
– State With One Of The Highest Air Pollution Levels (in terms of Particulate Matter exposure)
California
– State With One Of The Lowest Air Pollution Levels (in terms of Particulate Matter exposure)
New Hampshire
Change Over Time
It’s worth noting that greenhouse emissions, air pollution levels, renewable energy share and electricity prices can all change over time.
So, this data has to be re-checked and confirmed over time as these variables change
% Of Electricity Production That Is Renewable Energy vs Electricity Prices vs CO2 Emissions In Each US State
Below is a list of all US States.
The numbers in the list represent the following metrics:
First Line – Renewable Energy % Of Electricity Production (including hydro) in 2017
Second Line – Average Electricity Price (US cents per kWh) in 2017
Third Line – Carbon Intensity Of Electricity (CO2 Emissions in grams per kWh) in 2016
The following list is paraphrased from information found in the wikipedia.org, and also eia.gov reports:
Vermont – 99.6%, 14.6 US cents, 2 grams of CO2
Idaho – 81.6%, 8.26 cents, 83 CO2
Washington – 80%, 7.94 cents, 83 CO2
Oregon – 76.3%, 8.81 cents, 130 CO2
Maine – 75.9%, 13.02 cents, 130 CO2
South Dakota – 73.1%, 10.05 cents, 226 CO2
California – 47.2%, 16.06 cents, 186 CO2
Montana – 45.1%, 8.92 cents, 578 CO2
Iowa – 38.8%, 8.73 cents, 454 CO2
Kansas – 36.2%, 10.60 cents, 521 CO2
Oklahoma – 36.1%, 8.20 cents, 449 CO2
Alaska – 33.3%, 19.10 cents, 444 CO2
North Dakota – 31.8%, 8.78 cents, 763 CO2
New York – 27.8%, 14.74 cents, 206 CO2
Minnesota – 24.9%, 10.27 cents, 445 CO2
Nevada – 24.8%, 8.76 cents, 349 CO2
Colorado – 23.4%, 9.99 cents, 649 CO2
New Hampshire – 19.9%, 16.17 cents, 124 CO2
Nebraska – 19.3%, 9.08 cents, 581 CO2
New Mexico – 17.7%, 9.59 cents, 699 CO2
Texas – 16.0%, 8.38 cents, 457 CO2
Hawaii – 14.2%, 26.05 cents, 667 CO2
Arizona – 11.8%, 10.64 cents, 408 CO2
Utah – 11.6%, 8.60 cents, 722 CO2
Wyoming – 11.6%, 8.28 cents, 867 CO2
Tennessee – 11.2%, 9.45 cents, 453 CO2
Massachusetts – 10.5%, 17.12 cents, 334 CO2
North Carolina – 10.3%, 9.04 cents, 388 CO2
Maryland – 9.8%, 11.98 cents, 462 CO2
Wisconsin – 9.3%, 10.76 cents, 592 CO2
Alabama – 9.2%, 9.83 cents, 388 CO2
Arkansas – 8.8%, 8.26 cents, 500 CO2
Michigan – 8.3%, 11.28 cents, 492 CO2
Georgia – 7.9%, 9.83 cents, 431 CO2
Rhode Island – 7.2%, 16.42 cents, 394 CO2
Kentucky – 6.9%, 8.57 cents, 904 CO2
Illinois – 6.6%, 9.49 cents, 355 CO2
Virginia – 6.4%, 9.18 cents, 363 CO2
Indiana – 6.0%, 9.77 cents, 822 CO2
South Carolina – 5.9%, 9.97 cents, 284 CO2
West Virginia – 4.60%, 9.00 cents, 906 CO2
Pennsylvania – 4.35%, 10.13 cents, 382 CO2
Missouri – 4.24%, 10.03 cents, 785 CO2
Louisiana – 4.15%, 7.79 cents, 336 CO2
Connecticut – 3.46%, 17.55 cents, 192 CO2
New Jersey – 2.89%, 13.32 cents, 254 CO2
Mississippi – 2.6%, 9.09 cents, 412 CO2
Florida – 2.53%, 10.92 cents, 444 CO2
Ohio – 2.48%, 9.84 cents, 678 CO2
Delaware – 1.68%, 10.91 cents, 414 CO2
Air Pollution By US State
Particulate matter is a major one, but, ozone and nitrogen dioxide are examples of others
With this in mind, it’s good practice to check exactly what the air quality status monitors, or air pollution ratings are tracking.
The following is a list of States measured by particulate matter in the air only.
In 2018, from the healthiest State to least healthy state for Air Pollution, in terms of Average exposure of the general public to particulate matter of 2.5 microns (PM2.5) or less in size (3-year average):
North Dakota (least air pollution)
New Hampshire
Wyoming
Vermont
South Dakota
Hawaii
New Mexico
Massachusetts
Maine
Colorado
Idaho
Montana
Wisconsin
Kansas
New York
Arkansas
Florida
Minnesota
Nebraska
Iowa
Virginia
Alaska
North Carolina
South Carolina
Mississippi
Rhode Island
Connecticut
Oregon
Tennessee
West Virginia
Missouri
Oklahoma
Louisiana
Washington
Kentucky
Maryland
Michigan
New Jersey
Utah
Alabama
Delaware
Georgia
Texas
Indiana
Nevada
Ohio
Illinois
Arizona
Pennsylvania
California (most air pollution)
– See the full list by following the americashealthrankings.org resource
Other resources on the most and least polluted States and cities in the US are the lung.org resources, and the qz.com and wikipedia.org resources
Comparison By Australian State: Renewable Energy % Of Electricity Production vs Average Electricity Price
The same thing might apply to the different States of Australia as applies to the different States of the US.
Below, we compare by each Australian State:
– The renewable energy % of electricity production (what share renewables make up of electricity production)
– Average electricity price (retail price, in cents per kWh)
We compare these things because people often want to know whether renewable energy % share of electricity production has an impact on electricity prices (whether it can help make them higher or lower)
It Australia’s case, renewables seem to be only one component of electricity prices.
There seems to be many other perhaps more significant factors impacting electricity prices in several States.
National energy policy, the cost for poles and wires, and the cost to generate electricity, all seem to be big factors – but the factors can vary State to State.
Renewable Energy % Of Electricity Production vs Average Electricity Prices In Each Australian State
Below is a list of the Australian States. What the list shows is:
First Line – Renewable Energy % Of Electricity Production in 2018
Second Line – Average Retail Electricity Price (Australian cents per kWh) in 2018 [note: as of August 2019, 50 AUD cents equals 34 USD cents]
The list is:
Tasmania – 96%, 25.90 AUD cents per kWh (mostly hydro power)
South Australia – 53%, 43.67 AUD cents per kWh
Victoria – 21%, 27.56 AUD cents per kWh
Western Australia – 16%, 28.33 AUD cents per kWh
NSW – 15%, 33.33 AUD cents per kWh
Queensland – 10%, 29.01 AUD cents per kWh
Northern Territory – unknown %, 25.67 AUD cents per kWh
– cleanenergycouncil.org.au, and gobulk.com.au
(the cleanenergycouncil.org.au’s 2019 report on page 45 outlines what makes up these prices – it’s mainly poles and wires, and the cost to generate electricity, with electricity company costs and environmental costs in third and fourth by a fair distance)
‘The Australian Competition and Consumer Commission’s (ACCC) review of the retail electricity market in Australia addressed what they called a broken National Electricity Market’ (cleanenergycouncil.org.au)
View the ACCC’s report (with recommendations to reduce Australian electricity prices) at https://www.accc.gov.au/media-release/accc-releases-blueprint-to-reduce-electricity-prices
Additional Notes – What Does Air Pollution & CO2 Look Like In Australia, & By State? &, Why Does It Matter?
Electricity production is one of the key sectors that is linked to CO2 emissions along with the transport sector (both use fossil fuels), but also other sectors
If renewable energy can be linked to higher electricity prices in a particular State, they may want a guarantee that at least these higher prices are contributing to lower CO2 emissions from electricity and also lower air pollution levels (so there is at least an environmental benefit being received for the higher prices being paid)
NOTE: as mentioned above, it is not only the electricity sector that contributes to air pollution and greenhouse gas emissions.
The burning of fossil fuels and activity in other sectors such as transport, heating and cooling, agriculture, industrial, residential, and more can contribute to them.
– CO2 Emissions & The Electricity Sector In Australia
The electricity sector produces the most emissions in Australia, followed by stationary energy, and transport (theguardian.com)
– Air Pollution By Australian State
‘The air quality in Australia is generally considered ‘good’ by international standards … [and a] notable portion – approximately 75 percent – of air pollution is from motor vehicle emissions’
[and, in terms of annual mean PM10, all Australian major cities have lower air pollution than several notable major cities globally]
– allianz.com.au
Also note though – there are different sizes of particulate matter, along with other types of air pollution contaminants like ozone, nitrogen dioxide, etc. that can be measured.
Different Renewable Energy Sources May Impact Electricity Prices Differently
For example:
– Hydropower
Has traditionally been seen a low cost way to provide consistent power
Can deliver consistent power supply when water is available year round
– Solar & Wind
Solar and wind are variable sources of energy
They might require additional provisions and infrastructure to deal with this variable energy
– Geothermal
Has a more consistent power output than solar and wind
Why Using More Renewable Energy In The Future Could Lead To Higher Electricity Prices
Using more renewable energy (i.e. using renewable energy in a higher % share of an energy mix for electricity generation) might mean higher electricity prices in the future.
To discuss this point further, below:
– We paraphrase and summarise a relevant article about potential impact on electricity prices from Forbes.com
– There’s also reference to a post by joannenova.com.au which we’ve commented on and summarised
You can read the full articles by following the links in the sources section at the bottom of this guide.
Summary
Even when certain forms of renewable energy technology gets cheaper (across the LCOE), electricity prices can get more expensive
Fossil fuels and the closure of nuclear power plants might be ruled out as causes of these price rises in some places
A major cause might be the variable nature of solar and wind energy
When there’s an energy surplus, you might need to pay to get rid of an energy surplus, and to prepare for an energy deficit, either backup energy sources have to be set up (usually fossil fuel back ups), or a city has to invest in energy storage technology (such as big storage batteries)
What all this indicates is that supplying energy is a service – and a service takes into account all costs and requirements to deliver that service.
Renewable energy doesn’t stand alone by itself in this instance.
Where for example a fossil fuel energy technology might be able to supply energy on it’s own, renewable energy needs extra investment to deal with it’s unique variability
There’s other side effects of variable power sources like renewables as well
A backup gas generator for example could have to charge more for their electricity supply to make up the money they lose when solar is feeding the grid.
Either that, or governments have to subsidize them – which comes out of taxes
So, how renewable energy affects other energy sources supplying power to a city or town is also a consideration that can add to the service of providing electricity with this type of energy source
However, it should be noted that we might see a different picture in different cities in regards to energy sources and electricity prices.
There’s reports that in a number of cities worldwide, wind and solar has lowered and stabilized electricity prices
There’s also the consideration that renewable energy can continue to develop in the future, and electricity prices can naturally become more affordable as the cost to deliver the service lowers
Alongside this, new cleaner coal plants are more expensive, and may also make electricity more costly.
So, improvements in the cleanliness of fossil fuels should be compared alongside the developments in renewables, and not just the cost of electricity from older dirtier fossil fuel plants
Ultimately, each city or town needs to be analyzed individually for the main factors influencing their electricity prices
Paraphrased & Summarised Information From forbes.com
Paraphrased and summarised from Forbes.com with some key points:
Wind and solar technology is getting cheaper, but in some countries (like Germany), and states in the US (like California), electricity prices are getting more expensive
[In these countries and States] fossil fuels (who’s prices have decreased), and closure of nuclear power – have both been ruled out as causes of prices rises
The reason [for price rises] has been isolated to the fact that wind and solar are unreliable power sources – you rely on the sun to shine and for there to be wind blowing to generate energy.
When you are in energy surplus, you have to pay neighbouring countries to take your excess energy
[Because of the variable nature of] solar and wind, [they] require that natural gas plants, hydro-electric dams, batteries or some other form of reliable power [such as another state’s power grid] be ready at a moment’s notice to [provide] electricity
Supplying energy is a service – you have to think about not only the energy source itself, but how it is prepared and delivered [what is required to deliver the electricity while also having an increased input from renewables – compared to if you took renewables and their variables and features out of the picture]
[For the above reasons – a higher % of renewable energy supply to a state’s total electricity supply comparative to other energy sources could mean higher electricity prices]
[It may be worth looking at countries and States that also happen to be] nuclear energy leaders [like] Illinois, France, Sweden and South Korea [that have] some of the cheapest electricity in the world [for an idea of how to achieve lower electricity rates]
[The environmental and other benefits of an increased supply % of renewable energy sources comparative to other sources needs to considered seeing as electricity is a basic need and requirement for most people]
[The price of electricity in any one state ultimately depends on their energy supply set up, and whether or not they are connected to the grid of another state and their arrangement with that state, amongst other factors – so it’s an individual/situational approach as to figuring out why rates/prices rise and what the best energy strategy is in any one place]
Paraphrased & Summarised Information From joannenova.com.au
Solar and renewables, in some parts of the world, are only cheap when compared to other more expensive forms of electricity
Solar generation cost is estimated at around $70 to $80 per Mwh, but this could be low.
The reason is that ‘Unreliable power makes the other baseload generators more expensive, adding $30/MWh to gas generators for example. Because the back up generators have to be there, not earning money while solar feeds in, they have to charge more to recoup those costs in a shorter working period’. So, these costs have to be added to solar as well.
Comparatively, some brown coal power stations in Australia sell electricity for around $30 per Mwh
In some regions, renewable energy and solar energy can be sold for cheaper prices because of the Renewable Energy Targets in place, and a host of other subsidies
Our Own Notes
Even though the cost of some types of renewable energy is cheap over it’s lifetime in terms of LCOE (because sunshine and wind is free, and operating costs are very low) … the service of providing renewable energy can be expensive because you have to run other sources of energy generation (that have to be turned on and off, and ramped up and down – which impacts profit and other economic factors), and you may also have to have energy storage like batteries to cope with variability/intermittency of energy sources like wind and solar (and energy storage batteries aren’t cheap)
ourworldindata.org also has a good graph which compares the relative cost of renewable forms of energy vs fossil fuels in 2016 (taking into account both set up and operational costs).
What we see is that costs can be context specific, but most renewables fall within a competitive range, even if their higher range prices can extend to be quite expensive.
Read more at ourworldindata.org
Providing Electricity As A Service
The price of electricity might be impacted by the total cost to provide electricity as a service from different energy sources
What this means is that there might be other costs to consider in providing/delivering electricity as a service (transporting and distributing electricity from a power plant or power generation site, to the end user), other than key costs like capital costs or operating costs
As one potential example of this, solar and wind can have a low LCOE compared to other energy sources
But, solar and wind may be a more expensive energy source to provide electricity with where additional provisions/supporting equipment and infrastructure are required, like backup energy sources, and also large energy storage batteries are required (huge commercial energy storage batteries are expensive)
There may also be other costs that get added onto the price of electricity such as the cost to upgrade the power grid, the cost to add transmission lines, the cost to convert or integrate new energy sources to the power grid, retailer costs, taxes and subsidies, and so on
Other energy producers may even have to restrict their own power to prevent overloading the grid or oversupplying electricity
Fossil fuels and nuclear may not have some of these same costs
The Cost Of Electricity Might Have Benefits & Drawbacks To Consider
More expensive electricity may sometimes come with benefits, and cheaper electricity can sometimes mean it comes with drawbacks
Why More Expensive Electricity May Have Benefits
Like many products and services, a higher price can mean the electricity supply comes with certain benefits, including but not limited to:
– Better Quality/Reliability
For example, Denmark has one of the best rated electricity services in the world according to some indexes.
– Environmental & Also Social Benefits
For example, the combustion of fossil fuels have been linked to air pollution (which may impact human health), and also greenhouse gas emissions.
Renewable energy and greener forms of energy might be more expensive in some cases, but may also be more sustainable in some ways, and have potential social benefits
Where the price of electricity is higher though, consumer may want transparent information that shows a clear link between the electricity service they are paying for, and it’s claimed benefits.
Why More Expensive Electricity Might Be A Sign Of Problems Or Unnecessary Costs
On the flip side, expensive electricity can be a sign of problems or unnecessary costs like:
Extra provisions made for variable energy sources
Government controls or tools that support one energy source over another, or that penalise one energy source over another
Ideally, energy sources are able to compete in a more free market (as opposed to a restricted or controlled one).
Changes To The Energy Sector Could Impact Electricity Prices In The Future
The energy sector will experience changes in the future, and this could impact electricity prices.
Some factors to consider for the future that may impact electricity prices and the various energy sources are:
– Coal Power Plants
New types of coal power plants, more environmentally friendly coal plant technology (like carbon capture storage, or air pollution capture devices), and government tools like carbon taxes, polluter pays taxes, and more, may all make fossil fuel energy more expensive in the future.
– Solar & Wind
May become cheaper in the future with continued investment, demand, economies of scale, etc.
Home solar setups may help more home owners generate their own electricity in the future too instead of having to draw electricity from the grid, and this may impact their electricity costs
– More Information On Using More Renewables In The Future
You can read more in these guide about the considerations of moving towards renewable energy, and the challenges in moving towards renewable energy.
There’s also this guide that outlines whether it’s possible to completely replace fossil fuels with renewable energy.
Potential Solutions For Making Electricity Prices More Affordable In Different Countries & States In The Future
We consider potential solutions in this guide:
Solutions For Making Electricity Prices Cheaper & More Affordable In Different Countries & States
In a place like Denmark, as their renewable energy supply has increased, there may be little reason for their taxes on electricity to remain so high given that renewable energy share of electricity is now at a certain level.
So, we have to ask the question – what are we paying for in our renewable or green energy electricity taxes, and at what point have they served their goals or purpose?
Sources
1. Various ‘Better Meets Reality’ guides
2. https://www.finder.com.au/australian-electricity-prices-rising-decade
3. https://www.energycouncil.com.au/analysis/electricity-prices-around-the-world-what-is-the-impact-of-renewable-charges/
4. https://reneweconomy.com.au/does-more-renewable-energy-mean-higher-prices-10310/
5. https://www.globalpetrolprices.com/Democratic-Republic-of-the-Congo/electricity_prices/
6. https://en.wikipedia.org/wiki/Electricity_pricing
7. https://en.wikipedia.org/wiki/List_of_countries_by_electricity_production_from_renewable_sources
8. https://www.cleanenergycouncil.org.au/resources/resources-hub/clean-energy-australia-report
9. https://gobulk.com.au/australian-electricity-prices/
10. https://www.canstarblue.com.au/electricity/electricity-costs-kwh/
11. https://www.theguardian.com/australia-news/2019/jul/09/australias-emissions-reach-the-highest-on-record-driven-by-electricity-sector
12. https://www.allianz.com.au/life-insurance/news/air-pollution-and-health
13. https://assets.cleanenergycouncil.org.au/documents/resources/reports/clean-energy-australia/clean-energy-australia-report-2019.pdf
14. https://www.accc.gov.au/media-release/accc-releases-blueprint-to-reduce-electricity-prices
15. https://www.americashealthrankings.org/explore/annual/measure/air/state/ALL
16. https://en.wikipedia.org/wiki/Air_pollution_in_the_United_States
17. https://www.lung.org/our-initiatives/healthy-air/sota/city-rankings/most-polluted-cities.html
18. https://www.lung.org/our-initiatives/healthy-air/sota/city-rankings/cleanest-cities.html
19. https://qz.com/1604654/the-us-cities-with-the-worst-air-pollution-are-in-california/
20. https://www.eia.gov/electricity/state/
21. https://www.forbes.com/sites/michaelshellenberger/2018/04/23/if-solar-and-wind-are-so-cheap-why-are-they-making-electricity-more-expensive/#7b8664b01dc6
22. http://joannenova.com.au/2019/04/solar-power-at-70-is-still-twice-the-price-of-brown-coal/
23. https://ourworldindata.org/energy-production-and-changing-energy-sources
24. https://www.ucsusa.org/clean-energy/renewable-energy/public-benefits-of-renewable-power
25. https://www.europeanscientist.com/en/features/the-belgian-electricity-industry-in-chaos/
26. https://www.forbes.com/sites/michaelshellenberger/2019/04/22/unreliable-nature-of-solar-and-wind-makes-electricity-much-more-expensive-major-new-study-finds/#2781e09c4f59
27. http://environmentalprogress.org/big-news/2018/2/12/electricity-prices-rose-three-times-more-in-california-than-in-rest-of-us-in-2017
