Electricity in Europe: exiting fossil fuels?

Abstract

There are many options for generating electricity with low carbon emissions, and the electrification of heat and transport can decarbonise energy use across the economy. This places the power sector at the forefront of any move away from fossil fuels, even though fossil-fuelled generators are more dependable and flexible than nuclear reactors or intermittent renewables, and vital for the second-by-second balancing of supply and demand. Renewables tend to supplement, rather than replace, fossil capacity, although output from fossilfuelled stations will fall and some will have to retire to avoid depressing wholesale power prices. At times of low demand and high renewable output prices can turn negative, but electricity storage, long-distance interconnection and flexible demand may develop to absorb any excess generation. Simulations for Great Britain show that while coal may be eliminated from the mix within a decade, natural gas has a long-term role in stations with or without carbon capture and storage, depending on its cost and the price of carbon. JEL classification: Q4, L94 * We would like to thank Dieter Helm, John Feddersen, an anonymous referee and participants at the Oxrep seminar for helpful comments. Funding from the Engineering and Physical Sciences Research Council, through the UKERC Phase III project, and from the Alan Howard Charitable Trust, is gratefully acknowledged.

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