Solar, fossil fuels cost gap narrowing: expert

August 2017

The external cost of power generation by fossil fuels, mostly related to the environment and public health, has been shown to be the same or more than the cost of generating electricity by solar power, said an industry expert.

In 2013, the external cost of fossil fuel-based energy production was equal to $150/ton of carbon dioxide (CO2 ), explained Jochen Wermuth, founder and CIO of Wermuth Asset Management.

Globally, in 2014, power plants produced an average of 519 grams of CO2 to generate 1KWh of electricity, or 519kg for 1 MWh. One ton of CO2 therefore accrues when producing 1.92 MWh of electricity, with a cost of $150 paid by society. This translates into external costs of around $78 per one MWh electricity produced by the global power plant mix. This is greater than the actual cost of renewable power generation.

For example, in the Middle East, the US and Latin America, renewable power has been sold as low as $30/MWh. In Germany, solar power prices have hit EUR 68/MWh; wind parks achieve similar cost levels.

Wermuth continued: “The current process of energy transition produces economic opportunities and directly benefits both the environment and society. Progress in developing countries, such as the use of solar power for village markets, tangibly and positively changes communities.”

“Investors who want to be a part of the Green Industrial Revolution’s success story need to take advantage of this relatively nascent industry. Growth companies that offer ways to increase resource efficiency are becoming more prominent. The more investment they receive, the quicker this industry will mature and bear fruit,” Wermuth added.

“At the recent G20 Summit in Hamburg, we saw public discontent towards the US stance toward the environment, as well as protests on the subject of global wealth and income inequality. Both issues are cause for grave concern, but in our opinion, it will be market forces and not politics that really drive momentum for renewable energy and resource efficiency.”

The main players in this green industrial revolution are the agile SMEs, which are not yet listed. Wermuth Asset Management focuses on growth companies that offer highly profitable projects without subsidies for renewables.


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