Towards a green economy

Energy source

Power generation technology Production cost of electricity (COE)

State-of- the-art 2007

Open cycle gas turbine (GT)

Natural gas

Oil

Combined cycle gas turbine (CCGT)

Internal combustion diesel engine

Combined cycle oil-fired turbine

Pulverised coal combustion (PCC)

Coal

Circulating fluidised bed combustion (CFBC)

Integrated gasification combined cycle (IGCC)

Nuclear

Bio- mass

Wind Hydro Solar

Nuclear fission Solid biomass Biogas

On-shore farm Off-shore farms Large Small

Photovoltaic Concentrating solar power

- -

CCS -

- -

CSS - -

CSS - - - - - - - - -

€ 2005/MWH 65-75b

50-60 n/a

100-125b 95-105b

40-50 n/a

45-55 45-55

n/a 50-85

80-195 55-215 75-110 85-140 35-145 60-185 520-850 170-250d

Projection for 2020 € 2005/MWH

90-95b 65-75 85-95

140-165b 125-135b 65-80

80-105 75-85 70-80

75-90 45-80

85-200 50-200 55-90

65-115 30-140 55-160 270-460 110-160d

Projection for 2030 € 2005/MWH

90-100b 70-80 80-90

140-160b 125-135b 65-80

75-100 75-85 70-80

65-85 45-80

85-205 50-190 50-85 50-95

30-130 50-145 170-300 100-140d

efficiency 2007

38% 58% 49%c

45%

53% 47%

35%c

40% 45%

35%c 35%

24%-29% 31%-34% - - - - - -

Net

emissions Kg CO2

/MWh

530 350 60

595

505 725

145 850 755

145 0 6 5 0 0 0 0 0

120d

Direct (stack)

Life cycle GHG emissions Kg CO2

Indirect emissions eq/MWh

110 70 85

95

80 95

125 110 100

125 15

15-36 1-240 11 14 6 6

45 15

Table 6: Energy technologies for power generation in the EU – moderate fuel price scenario Source: European Commission (2008)

Kg CO2

Life cycle emissions eq/MWh

640 420 145

690

585 820

270 960 855

270 15

21-42 6-245 11 14 6 6

45 135d

Fuel price sensitivity

Very high Very high Very high

Very high

Very high Medium

Medium Medium Medium

Medium Low

Medium Medium

Nil Nil Nil Low

a. Assuming fuel prices as in “European Energy and Transport: Trends to 2030 – Update 2007” (barrel of oil US$ 54.5 (US$-2005) in 2007 and US$ 63 (US$-2005) in 2030). b. Calculated assuming base load operation. c. Reported efficiencies for carbon capture plants refer to first-of-a-kind demonstration installations that start operating in 2015. d. Assuming the use of natural gas for backup heat production.

full range of externalities from carbon emissions such as air pollution-related health hazards were included in carbon pricing, the relative position of renewable energy would be strengthened considerably. Minimum standards on fossil-fuel plants, which would raise the production costs of fossil fuels, could also increase the competitiveness of renewable energy.

The competitive position of renewable energy would be strengthened if subsidies for fossil fuels were also phased out. In many developing countries, government support to the energy sector is used to decrease the price of energy consumption to below market levels in the belief that this will reduce poverty and spur economic growth. Economically, the most efficient approach to making renewable energy attractive for large-scale market penetration is to remove all subsidies on fossil fuel and impose a price on carbon (for example through fossil-fuel taxes), and then to use the proceeds to subsidise renewable energy for a set duration and to

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provide targeted subsidies to poor households. Phasing out fossil-fuel subsidies is difficult because doing so has impacts throughout the economy and affects those with vested interests. Any politically-viable reform would thus have to be well planned and probably phased in gradually.

Using a price-gap methodology, IEA estimated that fossil-fuel-related consumption subsidies amounted to US$ 342 billion in 2007 (IEA 2010d), US$ 557 billion in 2008 (IEA, OPEC, OECD and World Bank 2010), when fossil-fuel prices rose to particularly high levels, and US$ 312 billion in 2009 (IEA 2010d). Subsidies for producers of fossil fuels are estimated to be in the order of US$ 100 billion per year (GSI 2009). This support, totalling approximately US$ 500-700 billion per year, for conventional energy (mostly fossil fuels) creates an uneven playing field for the adoption of renewable energy. By comparison, the IEA (2010d) estimated government support for electricity from renewables and