Access to energy is a key pillar for human wellbeing, economic development and poverty alleviation. Ensuring everyone has sufficient access is an ongoing and pressing challenge for global development.
However, our energy systems also have important environmental impacts. Historical and current energy systems are dominated by fossil fuels (coal, oil and gas) which produce carbon dioxide (CO2) and other greenhouse gases– the fundamental driver of global climate change. If we are to meet our global climate targets and avoid dangerous climate change, the world needs a significant and concerted transition in its energy sources.
Balancing the challenge between development and environment therefore provides us with an ultimate goal of ensuring everyone has access to enough sustainable energy to maintain a high standard of living.
In this entry we attempt to cover the fundamental pillars we need to understand global and regional energy systems: their evolution through time in terms of consumption, relative sources, and trade; progress in global energy access and our transition towards low-carbon sources; and crucially the main development, economic and health drivers behind the energy choices we make. It is intended to provide a fundamental background to the macro-trends in our historical and current energy systems, with key learnings on how we can use this understanding to shape pathways towards a sustainable future.
Let’s first take a look at how global energy production- both in terms of quantity and source- have changed over the long-term. In the visualisation below, we have plotted global energy consumption from 1800 through to 2015. Note that you can use the absolute/relative toggle on the chart to view these in absolute numbers or as the percentage of the global total.
If we start back in 1800 we see that nearly all of the world’s energy was produced from traditional biomass (essentially burning wood and other organic matter). The world (predominantly the UK) was using a small amount of coal- only around two percent. Our expansion into oil consumption didn’t begin until around 1870. Two decades later it was followed by natural gas and hydroelectricity. By 1900, coal consumption had increased significantly, accounting for almost half of global energy (the other half remaining biomass, since oil, gas and hydroelectricity remained small).
By the mid-20th century, the energy mix had diversified significantly; coal overtook traditional biofuels and oil was up to around 20 percent. By 1960 the world had moved into nuclear electricity production. Finally, today’s renewables (modern biofuels, wind, and solar) are relatively new, not appearing until the 1980-90s. Other renewable sources, such as geothermal and marine technologies, have not been included because levels of production are so small.
In 2015, the world consumed 146,000 terawatt-hours (TWh) of primary energy- more than 25 times more than in 1800. But it is often today’s energy mix, rather than levels of consumption that people find surprising. While some may have the impression that renewables account for a large share of global energy consumption, their total contribution in fact remains small.1 Even if we include modern biofuels and hydropower, it is still less than five percent. We have a long way to go if we are to transition from a fossil fuel dominated energy mix to a low-carbon one. Investment and the production of renewable technology is growing, however, as we show in this entry.
How are total levels of consumption distributed across the world’s regions? In the chart below we see primary energy consumption from 1965-2015 aggregated by continental regions. Note that this dataset only includes commercially-traded fuels (coal, oil and gas), nuclear, and modern renewables. This means traditional biofuels are not included; as a result, figures are likely to be a small underestimate for regions (predominantly Africa and developing Asia) where populations still strongly rely on traditional biomass as a primary fuel source.
In 1965 the bulk of total energy was consumed North America, Europe and Eurasia- collectively, they accounted for more than 80 percent of global energy consumption. Although energy consumption has increased in these regions since the 1960s, their relative share of the total has declined significantly. Consumption across the rest of the world has been increasing, most dramatically in the Asia Pacific where the total consumption increased more than 12-fold over this period.
As a result, in 2015 Asia Pacific was by far the largest regional consumer with 42 percent- this was about the same as North America, Europe and Eurasia combined (at 43 percent). The Middle East, Latin America and Africa account for around seven, five and three percent, respectively.
As well as comparing the total quantity of primary energy consumed, we can also breakdown the contribution of different sources across the regions. In the chart below we can see how North America’s energy mix has evolved through time. You can use the ‘change region’ function on this to see the contributions in other regions.
What is perhaps more surprising than the relative difference in the energy mix between regions is how regional mixes have changed (or rather, haven’t changed much) through time. This is more clear when using the ‘relative’ toggle on the chart, which presents each source’s contribution as the percentage of the total. If we look at the relative contribution of different energy sources in North America, Europe and the Asia Pacific, for example, the rate at which the energy mix has changed with time is fairly slow. With the exception of the onset of nuclear electricity, the energy mix has, for the most part, been fairly constant for at least half a century.
This is a key point from Vaclav Smil’s book on energy transitions; shifts in energy systems have historically been a slow process, particularly when coupled to long-term infrastructure.2 This may explain the slow and marginal progress we have made in the transition to modern renewables, and is a challenge we must acknowledge if we are to achieve a large-scale shift in our global energy systems.
While most people associate the advent of energy with the uptake of coal, it’s important to understand what modern fuels have replaced by taking a long-term perspective on the evolution of human energy systems. In the chart below we see long-term trends in energy transitions in Italy; this figure has been developed based on data from Gales et al. (2007).3 Similar data across a range of countries in Europe and the Americas has been made available at the Energy History project at the Joint Center for History and Economics, Harvard University and University of Cambridge you can explore these trends using the “change country” function in the chart below.
These trends provide an additional energy dimension: human and animal power. The inclusion of muscle, food for labour and animal feed reminds us of the important earlier transition in these economies from human and animal labour to industrialised energy production. In high-income countries, the uptake of fossil fuels- and later, the integration of renewable and nuclear technologies- has effectively eliminated the use of human or animal labour. In some low-to-middle income nations, the contribution of a human labour force (especially in agricultural and manufacturing sectors) is still significant, but continuing to progress through the composition shifts we see in the figures below.
Measuring the share of people with electricity access is therefore an important social and economic indicator. There is no universally-adopted definition of what ‘access to electricity’ means. However, most definitions are aligned to the delivery of electricity, safe cooking facilities and a required minimum level of consumption. The International Energy Agency (IEA) definition entails more than just the delivery to the household. It also requires households to meet a specified minimum level of electricity, which is set based on whether the household is rural or urban, and which increases with time. For rural households, this minimum threshold is 250 kilowatt-hours (kWh) per year and for an urban household it is 500 kWh per year.5
At a global level, the percentage of people with access to electricity has been steadily increasing over the last few decades. In 1990, around 71 percent of the world’s population had access; this has increased to 87 percent in 2016.
High-income countries – or countries defined by the UN to be ‘developed’ are assumed to have an electrification rate of 100% from the first year the country entered that category. Therefore, the increasing global share has primarily been driven by increased access in low and middle-income economies. In many countries, this trend has been striking: access in India, for example, increased from 43 percent to almost 85 percent. Indonesia is close to total electrification (sitting at almost 98 percent) – up from 62 percent in 1990. For countries with strong population growth, such improvements in the share of the population with access is even more impressive.
Whilst the trend is upward for most countries, a number are still severely lagging. At the lowest end of the spectrum, only 8.8 percent of Chad’s population has electricity access. For some countries, significant improvements in access will remain a pressing challenge over the next few decades.
Despite population growth, the absolute number of those without electricity access has also been declining as shown in the chart below: the number without access has decreased from 1.5 billion in 1990 to less than one billion (940 million) in 2016
During this 26 year period, the number of people with access to electricity increased by 2.7 billion. This means that on average the number of people with access to electricity increased by around 285,000 every single day over this period.6
In the chart below we see the total number of people without access to electricity, grouped by world region.
Here we see a regional shift in electricity access over the past few decades: in 1990, nearly half (45 percent) of people in the world without access lived in South Asia. By 2016 this had shifted significantly: the largest share now lives in Sub-Saharan Africa (which is now home to nearly two-thirds of the world population without electricity access).
This data is also available to explore by country in the map below.
Whilst access to electricity is an important metric to monitor (especially within a development context) it is insufficient in itself as a true measure of energy equity. Besides the fact that electricity is only one dimension of energy consumption (the others being transport and heating fuel), electricity access metrics provide no measure of levels of consumption. As discussed later, electricity is typically more dependent on national infrastructure development; the development of effective and inclusive grid or decentralised delivery networks. In some cases, this does not provide an accurate indication of electricity or energy affordability at the individual or household level. Indeed, many households may only consume the minimum threshold of electricity usage necessary to be considered ‘electrified’ as a result of personal finance constraints.7 If a household consumes only small quantities of electricity (despite having access), it is unlikely to gain the range of social and economic benefits that come with it.
Below we see trends in per capita energy use from 1960-2014; this is inclusive of all dimensions of energy (electricity plus transport and heating), not exclusively electricity (with energy normalised kilowatt-hour equivalents per year). There are several important points to note. Firstly, global average per capita energy consumption has been consistently increasing; between 1970-2014, average consumption has increased by approximately 45 percent.
This growth in per capita energy consumption does, however, vary significantly between countries and regions. Most of the growth in per capita energy consumption over the last few decades has been driven by increased consumption in transitioning middle-income (and to a lesser extent, low income countries). In the chart below we see a significant increase in consumption in transitioning BRICS economies (China, India and Brazil in particular); China’s per capita use has grown by nearly 250 percent since 2000; India by more than 50 percent; and Brazil by 38 percent.
Whilst global energy growth is growing from developing economies, the trend for many high-income nations is a notable decline. As we see in exemplar trends from the UK and US, the growth we are currently seeing in transitioning economies ended for many high-income nations by over the 1970-80s period. Both the US and UK peaked in terms of per capita energy consumption in the 1970s, plateauing for several decades until the early 2000s. Since then, we see a reduction in consumption; since 2000, UK usage has decreased by 20-25 percent.
Nonetheless, despite this decline in high-income countries, large global inequalities still exist. The average US citizen still consumes more than ten times the energy of the average Indian, 4-5 times that of a Brazilian, and three times more than China. The gulf between these and very low-income nations is even greater- a number of low-income nations consume less than 500 kilograms of oil equivalent per person.
If we want to continue growing economically, increasing prosperity, and working towards poverty elimination (which most countries and individuals do) whilst efficiently managing energy resources (and reducing greenhouse gas emissions), ‘energy intensity’ becomes an important metric for tracking progress. Energy intensity measures the quantity of energy needed to produce one unit of gross domestic product (GDP) growth. It’s typically measured in kilowatt-hours of energy needed to produce one dollar of growth (kWh per dollar). It is essentially a measure of the energy efficiency of economies; we want to achieve economic growth with as low an energy input as possible.
In the chart below we show how the energy intensity of economies have changed since 1990 (measured in kWh per 2011 international-$). Here, we see a distinct downward trend- at the global level, as well as across all income-level brackets. Note that you can view trends for individual countries on the interactive chart, and get a global overview using the ‘map’ tab.
In 1990, as a global average, it took 2.1 kWh of energy to produce one international dollar of economic output; in 2014 this had declined to 1.5kWh. This represents a 30 percent reduction. Efficiency gains have been seen across all income-levels. High-income economies typically have the lowest energy-intensity (i.e. they are more energy efficient per unit of economic output), and a large efficiency gap exists between lowest-income nations and the rest of the world. The relative energy intensity of economies is strongly linked to their composition, and more specifically the share of services versus industry and manufacturing output. The links between energy intensity and economy composition are discussed later in this entry.
The distribution of energy resources can have an obvious impact on energy trade across the world. The other important factor in energy trade is domestic levels of energy consumption. If you are a country rich in resources but also have high domestic levels of consumption, you may have little energy left to export. Similarly, if a country has low levels of energy consumption, if may still be a net exporter of energy despite have comparatively low levels of natural resources. Other influences on energy trade may be geopolitical: for example, some countries may want to converse fuel resources to maintain levels of energy security into the future.
In the two charts below, we have graphed energy imports and exports, both by income level and by region. Note that you can also manually select countries to compare. Here we have measured energy imports and exports as a percentage of domestic energy use, where a positive percentage indicates a country or region is a net importer of energy, and negative is a net exporter. For example, collectively high-income nations in 2014 imported nearly five percent of consumed energy.
In terms of income level, we see that there is a distinct flow of energy resources from low, middle and upper middle income to high-income nations (with the exception of lower middle income). On a continental basis, we see the dominance of energy exports from the Middle East & North Africa (being a net exporter of 127 percent of its consumption levels). Interestingly, Sub-Saharan Africa is also a net exporter of energy (despite having low levels of coal reserves and only moderate levels of oil and gas)- this is most likely a result of low levels of domestic consumption. North America and Europe & Central Asia reach approximately energy parity (effectively balancing consumption with trade). South Asia is a net importer of energy, importing approximately one-third of its energy consumption.
If we want to reduce our global greenhouse gas emissions, the world has to transition from an energy system dominated by fossil fuels to a low-carbon one (this is what most countries have set long-term targets to achieve within the Paris climate agreement).8 With the exception of carbon capture and storage (CCS) technology (described later in the entry), we have two options to achieve this: renewable technologies (including bioenergy, hydropower, solar, wind, geothermal, and marine energy) and nuclear energy. Both of these options produce very low CO2 emissions per unit of energy compared with fossil fuels. We call this process of transitioning from fossil fuels to low-carbon energy sources ‘decarbonisation’.
In the first section of this entry, we saw that our progress in decarbonising our total energy system (including transport, heat and electricity) has been slow. Fossil fuels are still the dominant energy source. If we focus on our electricity sector in particular, are we performing any better?9
Our progress over the last decade tells an interesting story which we have covered in its own blog post. These trends can be explained in the four charts below which map the share of renewable, nuclear and fossil fuel sources in global electricity production. As a brief summary: over the last decade (2005-2015) the share of renewables in our electricity mix has increased by approximately 5-6 percent. This is good news. However, over this same period, the share from nuclear production has decreased by almost exactly the same amount (5-6 percent).
Overall, this means that our total share of low-carbon electricity production is almost exactly the same as a decade ago (as shown in the third chart below). In fact, if we compare the share of electricity produced by low-carbon sources (renewables and nuclear) in 2015 to that of 1990 , we see that it has dropped by around three percent. Progress on electricity decarbonisation has been stalled over the last decade as a result of a growing aversion to nuclear energy.
The final chart below provides a breakdown of fossil fuel sources in our electricity mix. Since 2005, natural gas and coal have increased their share by one and two percent, respectively whereas the contribution from oil has declined by two percent. Nonetheless, overall, the relative mix of electricity sources has changed very little over the last few decades.
Shifting our energy systems away from fossil fuels towards renewable technologies will require significant financial investment. But how much are we really investing in the sector, and how is this finance distributed across the world?
In the graph below we see global investments in renewable technologies from 2004 to 2015 (measured in billion USD per year). In 2004, the world invested 47 billion USD. By 2015, this had increased to 286 billion USD, an increase of more than 600 percent. Investment has grown across all regions, but at significantly different rates. Note that you can use the ‘absolute/relative’ toggle on the chart below to compare regions on relative terms. Growth has been greatest in China, increasing from 3 billion USD in 2004 to 103 billion USD by 2015 (an increase of 3400%). China is now the largest single investor in renewable technologies, investing approximately the same as the United States, Europe and India combined.
Combining Chinese and Indian investment with its neighbours, Asia & Oceania is the largest continental investor. Europe’s investment has been through a significant growth-peak-reduction trend, peaking in 2011 at 123 billion USD before declining to 49 billion USD in 2015. Investment in the Middle East & Africa remains relatively small, but has shown significant growth over the last ten years (after investing only 0.5 billion USD in 2004).
Levels of absolute investment tell an important story, but are disadvantaged by the fact that they take no account of the size of investments relative to a country’s economy. We might expect that the largest economies would also be the largest investors. If we want to assess which countries are making a fair ‘contribution’ or ‘share’ to investment in clean energy, it is useful to assess investment contributions as a percentage of a country’s gross domestic product (GDP). We have calculated this (as a percentage of GDP) and plotted it for the largest single-country investors in the second chart below.
This tells a slightly different story. Most countries invest less than one percent of GDP in renewable technologies (with the exception of South Africa and Chile, which make an impressive contribution at 1.4 percent). When normalised to GDP, China remains one of the largest investors, at 0.9 percent. Interestingly, despite being the second largest investor in absolute terms, the United States invested only 0.1 percent of its GDP in 2015.
Indeed, when it comes to relative contributors to renewable energy, low-to-middle income transitioning economies typically invest more than high-income nations. This may be partly explained by the fact that these nations are likely to be investing a higher percentage of their GDP into energy provision and expansion overall (whereas high-income nations typically have well-established energy systems). Nonetheless, most high-income nations have set ambitious greenhouse gas reduction targets in their commitments to the Paris climate agreement.10 Achieving these targets will require significant investments in low-carbon technologies.
We have looked at investment trends by region, but which renewable technologies are receiving the largest investment? In the chart below we have shown global investment trends by energy source, through to 2016. Note that large hydropower is not included in these figures. Again, you can switch between the ‘absolute/relative’ toggle to see comparisons in each.
In 2016, solar and wind energy both received 47 percent of investment (combining to account for 94 percent of global finance). These two technologies have been taking an increasing share, especially over the last five years. In 2006, bioenergy (both in the form of biomass and liquid biofuels) took a sizable share of global investment, peaking at 36 percent. This has dwindled over the last decade, receiving less than four percent in 2016. These trends suggest that investors see solar and wind energy as the dominant renewable technologies of the future.
Beyond renewable and nuclear technologies, we have one additional option for energy decarbonisation: carbon capture and storage (CCS). CCS has received less focus in this entry relative to the other options predominantly because global progress in this area is lacking. Nonetheless, as it remains a viable technology for decarbonisation, it’s worth brief discussion.
Carbon capture and storage (CCS) is a low-carbon technology which captures CO2 from large point sources (coal and gas-fired power stations, as well as industrial facilities which emit CO2 as a waste product), and transports it via pipeline for safe and permanent storage underground. This effectively prevents 90 percent of CO2 from being emitted to the atmosphere, meaning that we could avoid the negative CO2 impacts of fossil fuel combustion.11
A number of CCS projects have been constructed, although collectively their impact on CO2 emissions has been small. By the end of 2016, the Global CCS Institute report that CCS installations had a collective mitigation potential of 40 million tonnes per year.12 For context, global CO2 emissions in 2016 were approximately 36 billion tonnes- CCS may have therefore averted around 0.1 percent.
There are a number of economic barriers to CCS development. Installation of CCS technology incurs an energy penalty of 10-40 percent. This means an electricity producer would have to increase inputs by 10-40 percent just to achieve the same energy output as a conventional power plant. In addition, CCS technology can be capital-intensive- it is typically one of the most expensive carbon mitigation options.
Nonetheless, it’s important to note that the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) still regard CCS to be a crucial element in meeting our global carbon targets.13
Energy has a crucial role to play in a global development context. The potential for energy to improve living standards, whether through the freeing of time from household chores (for example, washing clothes or cooking); increased productivity; improved healthcare and education services; or digital connections to local, regional and global networks.
The link between energy consumption and economic growth has been a topic of wide discussion. A large number of studies have attempted to derive the causal relationship between energy consumption and economic growth, however no clear consensus has emerged.14 This can be partly attributed to the fact that the link between energy and prosperity is not always unidirectional. Gaining access to electricity and other energy sources may provide an initial increase in GDP, but having higher GDP may in turn drive higher energy consumption. Additionally, progress in development outcomes can be complex: a number of parameters may be improving at the same time. If, for example, energy access and consumption, nutrition, education, health, and sanitation are all improving simultaneously (and having complex relationships with one another), it can be hard to directly attribute improvement in living standards back to a single parameter.
Chontanawat et al. (2008) carried out a systematic study across 100 countries to try to reach a common consensus on the energy-GDP link.15 Akinlo (2008) did similarly across 11 Sub-Sahara African countries to define a common relationship.16 Neither found a causal relationship which was true in all contexts. For some countries, the relationship was unidirectonal (energy consumption was a direct and long-term driver of economic growth), others are bidirectional; some are cointegrated with other factors; and for some there was actually no clear link between the two. Nonetheless, for most countries, there is an important relationship between energy and prosperity. However, the exact dynamics of each is complex and context-dependent.
What does our data suggest of this link between the two? In the chart below we have plotted per capita energy consumption (on the y-axis) versus per capita GDP (PPP-adjusted) (on the x-axis) for the year 2015. Indeed, we see a strong trend: typically the higher a country’s average income, the more energy it consumes. In our second chart we present the percentage of the population with access to electricity (y-axis) versus GDP per capita (x-axis). If we press play and watch how these trends evolve through time, we see a similar trend: both electricity access and prosperity increase for most countries through time. However, in both of these visualisations, it’s challenging to differentiate how much of this trend can be explained by energy-led growth, and how much is a result of growth-led energy consumption.
In our final chart below we have plotted the relationship between per capita energy consumption (y-axis) and the share of the population in extreme poverty (x-axis). In general, we see a trend of poverty alleviation with higher energy consumption levels. However, this does not necessarily hold as a direct relationship for all countries.
As discussed earlier in the entry, access to electricity has been increasing globally, with most of this increase coming from low-to-middle income economies. However, access to electricity is not equally distributed between rural and urban demographics. In the chart below, we have plotted the percentage of the rural population with electricity access (on the y-axis) versus the percentage of the total population with access (x-axis). Countries which lie below the solid line have lower electricity access in rural populations relative to access across the total population. Nearly all countries lie below this line, meaning that for most nations electrification in urban areas is higher than in rural regions. For example, in 2014 61 percent of Senegal’s population had access to electricity, however this was only 33 percent for its rural population.
Connecting rural populations can often have greater infrastructural and economic barriers relative to urban populations.17 The economic case for investing in infrastructure to connect small, remote communities is arguably smaller and more challenging than developing localised systems for large urban populations.
Efforts towards rural electrification have been primarily driven by World Bank efforts. In 2008 it made a strong economic case for investment in rural electrification, concluding that the financial benefits for rural households outweigh average long-term supply costs.18 The World Bank has several evaluation criteria for investment, including cost effectiveness, proximity to a grid, the population density of rural communities. For rural populations farthest from a grid connection, sometimes the most viable solution is the implementation of small off-grid systems.
Falling costs of renewable technologies (such as solar PV) may hold potential in developing more de-centralised systems for remote communities. In fact, in order to achieve universal electricity access by 2030, the International Renewable Energy Agency (IRENA), utilising data from the IEA, UNDP and UNIDO, suggest that only 42 and 37 percent of electricity in Africa and developing Asia will come from traditional on-grid energy resources (as shown below). The majority is projected to be produced by local mini-grid or household/community stand-alone production systems.
Estimated source of additional generation required to achieve universal electricity access by 203019
The World Bank acknowledges that its coverage of rural electrification in Sub-Saharan Africa and South Asia in particular, is low.20 Nonetheless, there is still some visual evidence of progress: this India Lights application from the World Bank shows progress in Indian rural electrification, capturing 600,000 villages from space over the past twenty years. The World Bank provides several data-driven applications aimed at aiding projects related to rural electrification.
In the earlier section of this entry, we saw that across the world, energy intensity (the amount of energy we consume to produce one unit of GDP) has typically been falling. There are two defining features of these trends which can be explained in terms of determining drivers.
The first is the driving force between this decline in energy intensity with time. Note that this downward trend occurs across all income levels. So: why is our economic growth more energy efficient than it was in the past? A number of studies have attempted to disentangle the numerous potential drivers of this decline. Voigt et al. (2014) assessed the energy intensity trends and potential drivers across 40 major economies from 1996-2007 to try to identify the key determinant in each case.21 Although regional structural change across economies had an impact in some cases, they found that the majority of this decline was attributed to technological change. The adoption and evolution of technologies have overall made our economies more productive, and more energy-efficient. The impact of technological economies of scale have also had an impact on creating more efficient economic output.
The second trend we have to explain is the differences (sometimes large) in energy intensity across countries and regions. On average, high-income countries have the lowest energy intensity, and low-income the highest. Why is this the case? Some of this variation can also be explained by technological change. High-income countries typically adopt the most efficient, productive technologies allowing for a relatively low energy intensity. In contrast, lower-income economies are typically slower in the adoption of modern technological advancements, resulting in more energy-intensive economies. If we want to accelerate this decline in energy intensity at a global level, technological transfer, promotion of economies of scale and knowledge sharing of best practice between regions is crucial.22
However, technological change is not the only differentiating factor between economies. The structure and sectoral contribution of economies can also have an important impact.23 Economies which have a strong reliance on manufacturing output (which can be highly energy-intensive) are more likely to have a higher energy intensity than service-based economies. This has been an important transition for high-income countries. As our colleagues at Our World in Data, Esteban Ortiz-Ospina and Nicolas Lippolis, have discussed in a blog post, many high-income countries have went through a period of ‘de-industrialisation’. As is shown for the United States in the chart below, countries have transitioned to an economy where 80-90 percent of employment is focused in service-based sectors. Relative to countries with manufacturing-dominant economies, the average energy intensity is likely to be lower.
Prices can strongly influence our choice of energy sources. In this regard, it is the relative cost between sources which is important. This is true in higher-income countries (we want low energy bills), but is increasingly important in low and middle-income economies. For many countries, increasing the share of the population with access to electricity and energy resources is a key priority, and to do so, low-cost energy is essential.
How do we compare the relative cost of energy? The dominant energy source in the transport sector is liquid fuels (diesel and gasoline) for which relative costs are less important than changes in price through time. Let’s therefore focus on the relative costs of energy sources in the electricity sector.
To do this, we compare costs based on what we call the ‘levelised cost of electricity’ (LCOE). The LCOE attempts to provide a consistent comparison of electricity costs across sources but taking the full life-cycle costs into account. It is calculated by dividing the average total cost to build then operate (i.e. both capital and operating costs) an energy asset (for example a coal-fired power station, a wind farm, or solar panel) by the total energy output of that asset over its lifetime. This gives us a measure of the average total cost per unit of electricity produced. Measuring sources on this consistent basis attempts to account for the fact that resources vary in terms of their capital and operating costs (for example, solar PV may have higher capital costs, but lower operating costs relative to coal over time). Note that this cost of energy production has an obvious impact on electricity prices for the consumer: the LCOE represents the minimum cost producers would have to charge consumers in order to break-even over the lifetime of the energy project.
To be truly competitive, renewable technologies will have to be cost-competitive with fossil fuel sources. In the chart below, sourced from IRENA’s latest Rethinking Energy report, we see the LCOE (measured in 2016 USD per megawatt-hour of electricity produced) across the range of renewable technologies in 2010, and in 2016.24
Levelised cost of electricity (LCOE) 2010 and 201625
It’s important to acknowledge that the relative costs of energy are context-dependent and vary across the world. For example, the relative cost of solar PV is likely to be lower in lower latitude countries than at high-latitudes because they will produce more energy of their lifetime. This can produce very different LCOE figures by region (and indeed the country-specific LCOE charts can vary significantly). For our global chart below, this range of costs is represented as vertical bars for each technology. The white line in each represents the global weighted average cost per technology.
Similarly, the cost of fossil fuels can very depending on the fuel quality, ease of extraction and regional resources. The average range of fossil fuel costs is shown below as the grey horizontal block.
What we see is that in terms of the 2016 weighted average cost, most renewable technologies are within a competitive range of fossil fuels. The key exception to this is solar thermal which remains about twice as expensive (although is falling). Hydropower, with the exception of traditional biomass, is our oldest and well-established renewable source: this is reflected in its low price (which can undercut even the cheapest fossil fuel sources). Note however that although the weighted average of most sources is competitive with the average fossil fuel cost, the wide range of potential costs means that this is not true for all countries. This is why the selection of particular technologies need to be considered on a local, context-specific basis.
If we consider how the average cost of technologies changed from 2010-16, we see that both solar PV (and to a lesser extent, solar thermal) dropped substantially. This cost reduction in solar PV has been dramatic over the past few decades, as shown in the chart below. The price of solar PV modules has fallen more than 100-fold since 1976. On average, the technology has had a learning rate of 22 percent; this means that the cost falls by 22 percent for every doubling in solar PV capacity (although progress has not necessarily been constant over this period).
One of the considerations which has- and will continue to- have an influence on our choices is the relative health and safety implications of energy sources. This health concern manifests itself in a range of forms and over various timescales. In the near-term, the key concerns are related to accidents in the production of energy, potential nuclear incidents, and local air pollution. Over the longer-term, these health concerns relate the relative energy drivers of climatic change (which can affect health and safety in various forms, including food access, water resources, sea-level rise, extreme weather events and disease distribution).
We have covered this issue in detail in two blog posts; one summarising the range of estimates on the death toll from the Chernobyl and Fukushima nuclear incidents; the other covering the relative energy safety of our major energy sources. The key conclusion can can be summarised in the chart below; if we define safety based on the death rate per terawatt-hour (TWh) of energy production, coal is the least safe form of traditional energy. As a result of its minimal contribution to air pollution, nuclear is measured to be the safest.
The History Database of the Global Environment (HYDE)
- Geographical coverage: Global – by world region
- Time span: Since 1800
- Available data:
Correlates of War
- Data: ‘Primary Energy Consumption’ (thousands of Metric-ton Coal Equivalent)
- Geographical coverage: Global – by country
- Time span: 1816-2007
- Available at: Online at www.correlatesofwar.org
- The original data source for data after 1970 is the United Nations’ Energy Statistics Database UNESD. Data for the time before 1970 is taken from Mitchell International Historical Statistics. See the codebook on page 61.
The Shift Project (TSP)
- Data: Historical Energy Consumption Statistics and Historical Energy Production Statistics
- Geographical coverage: Global – by country and world region
- Time span: Since 1900
- Available at: Both datasets are online at www.tsp-data-portal.org.
IEA – International Energy Agency
- You have to pay to access the IEA databases. But some data is available through Gapminder, for example Residential Energy Use (%). (for few countries since 1960, for more countries since 1971 or 1981)
Energy Information Administration
- Data: Total and crude oil production, oil consumption, natural gas production and consumption, coal production and consumption, electricity generation and consumption, primary energy, energy intensity, CO2 emissions and imports and exports for all fuels
- Geographical coverage: Global – by country
- Time span: Annual data since 1980
- Available at: Online at ww.eia.gov
- EIA is a US government agency.
BP Statistical Review of World Energy
- Data: BP publishes data on Oil, Gas Coal, Nuclear Energy, Hydroelectricity, Renewables, Primary Energy Consumption, Electricity Generation, Carbon Dioxide Emissions
- Geographical coverage: Global – by country and region
- Time span: Annual data since 1951
- Available at: Online at www.BP.com
World Development Indicators – World Bank
- Many more related indicators.
- Data: Production & consumption of energy.
- Geographical coverage: Europe
- Time span:
- Data on: Energy production and imports – Consumption of energy – Electricity production, consumption and markets.