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Externalized Cost Results from the Seeking Consensus Project

Introduction

This article will add the externalized costs to internalized costs determined in the previous section of the Seeking Consensus project. To ensure that results accurately reflect current costs, solar and wind learning rates of 20% and 10% will be applied from the time when the internalized cost articles were published (about 3 years ago).

The individual externalized cost articles for different technologies can be accessed here: Oil, Coal, Gas, Nuclear, Hydro, Wind, Solar, Bioenergy, and Efficiency & Conservation. The externalized cost of storage (batteries, synfuels and pumped hydro or compressed air) was generally less than 5% of the internalized costs, so it will not be repeated here.

Electricity

Results for the total cost of electricity are shown below (blue = internalized costs and red = externalized costs).

After externalized costs are added, efficiency becomes the clear winner with a cost of only $20/MWh due to the significant externalized benefit of avoided energy consumption. Hydro comes next with a total cost of $47/MWh. Unfortunately, both of these cheap options face obvious restrictions regarding the potential scale of future deployment.

Among the more scalable options, coal remains the cheapest (mainly because it is deployed almost exclusively in the developing world), followed by nuclear and gas. Wind and solar are close behind, with utility PV becoming cheaper than onshore wind on an overall cost basis. This is because the current low market share of PV imposes almost no externalized intermittency costs, while this cost is already significant for onshore wind. Other energy options remain too expensive for large-scale deployment.

Heat

Overall costs for heat from different energy sources are displayed below:

As before, the externalized benefit of efficiency makes it the cheapest option. Even though externalized costs more than double the cost of heat from coal, it comfortably remains the next cheapest option, followed by biomass, gas and oil. Next is solar thermal, followed by all the electricity production technologies.

Transportation fuel

The overall cost of producing fuel from the different energy sources is shown below.

Once more, efficiency emerges as the cheapest option. Transportation may be the area where the most potential for further gains from efficiency exists, so this presents a good opportunity that should be exploited through intelligent policy. Unsurprisingly, oil is easily the cheapest of the supply side options. Biofuels remain twice as expensive as oil.

Energy conservation

Energy conservation is here defined as follows: reductions in energy consumption achieved through behavioural choices that have a negligible or positive effect on the number of happy life years achieved. In other words, it involves dropping the excesses that our consumerist society tells us we need, but ultimately result in stress, excessive complexity and financial insecurity.

As shown below, conservation is in a totally different ballpark in terms of cost-effectiveness. Considering the amount of wasteful excess in our consumerist culture, it also has an impressively large scope for deployment.

Conservation can be promoted in two primary ways: 1) accurately internalizing the externalized costs of all forms of consumption, and 2) accelerating the ongoing shift in culture from one chasing happiness through consumption to one striving to make a meaningful contribution to society. Hopefully, we will manage to make significant progress here in the medium term future.

Commenting

Feel free to point out any numbers that seem unrealistic and to suggest more accurate numbers (preferably with a linked source). If there is some consensus about a desired change, I will update the article accordingly.

Schalk Cloete's picture

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Recent Comments

Nathan Wilson's picture
Nathan Wilson on March 16, 2018

For residents of the US, it is important to remember that our experience of cheap windpower is different than most of the world, and in fact, average US windpower prices are pulled down because our fleet distribution is heavily weighted towards the windy central plains. The wind electricity cost in the graph above probably is representative of places other than the US central plains.

For the cost of heat graph, I don’t think the non-dispatchable technologies (wind & solar) really even belong on the graph: heating demand has a very large peak that only lasts for a few weeks per year. In many places, the heating demand peak is the annual peak, so that adding enough PV for heat means curtailing PV the entire rest of the year. Effectively, electric heat is always the grid’s dispatchable peaking power source, whether that be coal, gas, or hydrogen (i.e. not batteries, because they are not seasonally dispatched).

The exception for heat is that with a district heat network, waste heat from thermal power plants can be dispatched and used, so the cost is about 10% of the cost of electricity, before adding the cost of the distribution network (i.e. similar in cost to a hydrogen distribution network, but safer).

Bas Gresnigt's picture
Bas Gresnigt on March 17, 2018

The shown costs for offshore wind are far off those we now see at the North Sea.
A level of $100(now) – $35 (2021) per MWh seems now more appropriate.

Last April Germany contracted 1380MW of offshore wind without any subsidy to be up and running in 2023/4. Average German whole sale prices <€30/MWh.

Last December several parties**) sent bids for a 700MW offshore wind farm ~30km off the Dutch coast to be operational in 2021 in response to a Dutch tender which stated that a bid will be invalid if it demanded any subsidy or guarantee.*)

Last year av. Dutch whole sale prices were ~€31/MWh. Dutch govt estimated ~ a year ago that Dutch whole sale prices in 2035 (~halfway the 30years license to use that part of the sea) will be ~€29/MWh.

_____
*) Note that bidders are obliged to decommission the wind farm decently in 2052. Furthermore the illustration states that they have to show financial guarantees, the design (detailed), business & project plans, etc. So Dutch govt can be assured that the wind farm will be operational in Dec.2021 and will be decently maintained and managed.

**) At least Vattenfall and Statoil, as those published that they sent bids.
Note that Statoil also operates the world’s first offshore floating wind farm (Hywind for the coast of Scotland in ~100m deep water). They state that their floating design can operate in water up to 800meter deep,

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