Reform of the ETS
Background Paper on the envisaged reform of the EU Emissions Trading Scheme, specifically touching upon the proposal to implement a Market Stability Reserve
Two decades of technological advancement have led to drastic declines in the cost of power from wind and photovoltaic (PV) systems. Indeed, the feed-in tariffs for PV have fallen by 80% in Germany in the past five years alone. Yet how competitive are wind and solar systems in comparison to other CO2-free technologies? The environmental benefits of renewable energy are clear. However, the role that renewable energy can play in CO2 abatement depends crucially on its cost effectiveness.
"New wind and solar power systems can generate electricity up to 50% cheaper than new nuclear power plants," says Patrick Graichen, executive director of Agora Energiewende. This figure emerges from a study conducted by Prognos AG on behalf of Agora Energiewende, a think tank funded by Stiftung Mercator and the European Climate Foundation. The study examines feed-in tariffs for new nuclear power plants in the UK as well as feed-in tariffs for green power provided under Germany's Renewable Energy Act. The study concludes that nuclear power as well as Carbon Capture and Storage (CSS) – a technology not currently available in Europe – are both more expensive than wind and solar power as a strategy for preventing climate change.
In addition to examining the specific costs of power generation, the study estimates the overall costs of a power production system that uses reserve-capacity power plants fired by natural gas to make up for weather-dependent shortfalls in power generation from wind and solar. It concludes that a reliable power system based on wind, solar, and natural-gas power plants would be 20% cheaper than a power system based on nuclear. ?
"The winner in battle over the cheapest means of CO2-free power generation has been decided," says Graichen. "In the future wind and solar will play an ever greater role in countries across the world as a source of power. Together with other countries and regions taking the lead on preventing climate change, Germany has an opportunity to showcase how stable and cheap power production can be based on wind and solar."
Power from wind, solar, nuclear or CCS: What is the cheapest option?