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The Global Relative Costs of Energy Sources

Fuels that are fossil-based, such as natural gas, oil, and coal provide about 85% of all the energy use in the world. The issue with this, as anyone at Texas Electricity Ratings would be able to confirm, is that these resources are being depleted, and their replacement would be much too lengthy to make it practical. Another issue with these fossil fuels is that their use for energy leads to the creation of by-products, also known as emissions. These emissions have a very powerful, negative effect on the environment, leading to climate change.

On the other hand, renewable energy sources are able to be replenished naturally, and cannot be exhausted. Using them leads to an environmental impact that is much lower than fossil fuels. Now, while they do come with undeniable benefits, the issue of cost may be a different one. Let’s explore the cost aspect more.

Renewable Energy Sources

Before diving into the costs associated with different forms of renewable energy, let’s first see an overview of what those sources are. The first is sunlight, as the photon coming from the sun can be converted into chemical energy, electricity or heat. Another option is water, as the kinetic and potential energy found in flowing water can be used for mechanical tasks or to produce energy.

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Yet another popular option is wind, as the air’s motion can be harvested and converted into electricity. The internal heat of the Earth can be used for producing electricity and heating. Finally, biomass can be used for heating or producing electricity.

Cost Comparison

As you may already be aware, raw forms of energy are not only infinite but also free to produce. However, equipment and materials are required in the processes of collecting, processes and transporting the energy. As things stand now, costs associated with renewable resources are usually higher than those of fossil-based sources. In addition, advancements in technologies used for renewable energy require quite a bit of investment. Now, while these are indeed drawbacks, in comparison to the benefits these sources provide, they are much less important.

When comparing costs associated with energy, economists use something known as the LCOE, which is the levelized energy cost. This includes all the costs associated with production, such as the initial capital needed, the return of investment, an operation that is continuous, fuel, maintenance, and carbon capture and sequestration (CCS). The cost per kilowatt-hour for both non-renewable and renewable sources, in dollars, are as follows:

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Coal with CCS- $0.12-0.13

Combined Cycle Natural Gas Powerplant- $ 0.05

Combined Cycle Powerplant with CCS- $0.075


Onshore Wind-$0.059

Offshore Wind-$0.139

Solar Photovoltaic- $0.063

Solar Thermal- $0.165

Geothermal- $0.045

Biomass- $0.095

Hydro- $0.062

As we can see from the above comparison, natural gas, coal and geothermal are the most economic sources of fuel. Photovoltaic options are more expensive than the ones from fossil fuels. However, it is important to keep in mind that the costs associated with photovoltaic energy are falling every single year. Finally, keep in mind that this comparison offers the production price, but the retail price is going to be higher than this.

Things to Consider

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Each method of generating power comes with its advantages and disadvantages. Renewable resources are, as mentioned earlier, inexhaustible, and don’t lead to environmental damage. In addition, small power generators using renewable resources that are integrated into the grid help by reducing the blackouts’ impacts.

Of course, all forms of renewable energy come with disadvantages. For starters, renewable resources are not always accessible everywhere they are needed. For instance, hydropower is constrained by geographical limitations, and are often found in areas that are remote. As such, in order for these to be used, electric lines have to be installed, and this can get quite expensive.

Wind and solar power are, by nature, not always present. This brings up another issue, which has to do with storage. As things stand right now, renewable energy cannot be stored for later use in large quantities in a manner that is efficient. Finally, while these types of sources definitely don’t produce quite as much air pollution as fossil fuels, they do produce some, leading to a negative impact on the environment which, while it may not be as big, is still present.

Even accounting for all of the short-coming connected to renewable energy sources, if investments are made to help them improve, they can become a better and even cheaper option in the future. Of course, by their very nature, they are also going to be friendlier to the environment, which is a crucial point to keep in mind.