Full Cost of Electricity ‘FCOE’ and Energy Returns ‘eROI’

Reprint of Peer-reviewed paper, DOI: 10.5539/jms.v12n1p96 https://www.ccsenet.org/journal/index.php/jms/article/view/0/47241 Journal of Management and Sustainability; Vol. 12, No. 1; 2022 ISSN 1925-4725 E-ISSN 1925-4733 Published by Canadian Center of Science and Education

12 Pages Posted: 16 Mar 2022 Last revised: 20 Jun 2022

See all articles by Dr. Lars Schernikau

Dr. Lars Schernikau

Independent

William Smith

Washington University, Saint Louis

Rosemary Prof. Falcon

University of the Witwatersrand, Johannesburg, South Africa

Date Written: March 1, 2022

Abstract

Reprint of Peer-reviewed paper
https://www.ccsenet.org/journal/index.php/jms/article/view/0/47241
Journal of Management and Sustainability; Vol. 12, No. 1; 2022
ISSN 1925-4725 E-ISSN 1925-4733
Published by Canadian Center of Science and Education

Abstract:
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Understanding electricity generation’s true cost is paramount to choosing and prioritizing our future energy systems. This paper introduces the full cost of electricity (FCOE) and discusses energy returns (eROI). The authors conclude with suggestions for energy policy considering the new challenges that come with global efforts to “decarbonize”.

In 2021, debate started to occur regarding energy security (or rather electricity security) which was driven by an increase in electricity demand, shortage of energy raw material supply, insufficient electricity generation from wind and solar, and geopolitical changes, which in turn resulted in high prices and volatility in major economies. This was witnessed around the world, for instance in China, India, the US, and of course Europe. Reliable electricity supply is crucial for social and economic stability and growth which in turn leads to eradication of poverty.

We explain and quantify the gap between installed energy capacity and actual electricity generation when it comes to variable renewable energy. The main challenge for wind and solar are its intermittency and low energy density, as a result practically every wind mill or solar panel requires either a backup or storage.

LCOE is inadequate to compare intermittent forms of energy generation with dispatchable ones and when making decisions at a country or society level. We introduce and describe the methodology for determining the full cost of electricity (FCOE) or the full cost to society. FCOE explains why wind and solar are not cheaper than conventional fuels and in fact become more expensive the higher their penetration in the energy system. The IEA confirms “…the system value of variable renewables such as wind and solar decreases as their share in the power supply increases”. This is illustrated by the high cost of the “green” energy transition.

We conclude with suggestions for a revised energy policy. Energy policy and investors should not favor wind, solar, biomass, geothermal, hydro, nuclear, gas, or coal but should support all energy systems in a manner which avoids energy shortage and energy poverty. All energy always requires taking resources from our planet and processing them, thus negatively impacting the environment. It must be humanity’s goal to minimize these negative impacts in a meaningful way through investments – not divestments – by increasing, not decreasing, energy and material efficiencies.

Therefore, the authors suggest energy policy makers to refocus on the three objectives, energy security, energy affordability, and environmental protection. This translates into two paths for the future of energy,
(1) invest in education and base research to pave the path towards a New Energy Revolution where energy systems can sustainably wean off fossil fuels.
(2) In parallel, energy policy must support investment in conventional energy systems to improve their efficiencies and reduce the environmental burden of generating the energy required for our lives.

Additional research is required to better understand eROI, true cost of energy, material input, and effects of current energy transition pathways on global energy security.

Keywords: energy, electricity, primary energy, fossil fuels, natural gas, coal, nuclear, wind, solar, renewables, methane, CH4, LNG, GHG emissions, airborne emissions, CO2, carbon dioxide, greenhouse gases, anthropogenic global warming, energy, energy policy, global warming, clean coal technology, HELE, USC

Suggested Citation

Schernikau, Lars and Smith, William and Falcon, Rosemary, Full Cost of Electricity ‘FCOE’ and Energy Returns ‘eROI’ (March 1, 2022). Reprint of Peer-reviewed paper, DOI: 10.5539/jms.v12n1p96 https://www.ccsenet.org/journal/index.php/jms/article/view/0/47241 Journal of Management and Sustainability; Vol. 12, No. 1; 2022 ISSN 1925-4725 E-ISSN 1925-4733 Published by Canadian Center of Science and Education, Available at SSRN: https://ssrn.com/abstract=4000800 or http://dx.doi.org/10.2139/ssrn.4000800

William Smith

Washington University, Saint Louis ( email )

One Brookings Drive
Department of Earth and Planetary Sciences
St. Louis, MO 63130-4899
United States
3149355638 (Phone)

Rosemary Falcon

University of the Witwatersrand, Johannesburg, South Africa ( email )

1 Jan Smuts Avenue
Johannesburg, GA Gauteng 2000
South Africa

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