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Selected Abbreviations CCUS-Carbon capture utilization and storage eROI-Energy return in energy invested VRE-Variable renewable energy, such as wind and solar HELE-High efficiency, low emission IEA-International Energy Agency in Paris FCOE-Full cost of electricity LCOE-Levelized cost of electricity PES-Primary energy supply or PE for primary energy PV-Photovoltaic USC-Ultra-super-critical VRE-Variable renewable energy ~-Approximately Abstract 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 challenges, 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, and as a result practically every wind mill or solar panel requires either a backup or storage which adds to system costs. 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 pathways 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. A c c e p t e d M a n u s c r i p t Full cost of electricity 'FCOE' and energy returns 'eROI' 2
Full cost of
electricity ‘FCOE’
and energy
returns ‘eROI’
By Dr. Lars Schernikau, Prof. William Hayden Smith, Prof. Rosemary Falcon (Vers. 05/2022)
Accepted manuscript for publication at Journal
of Management and Sustainability Vol. 12,
No. 1, June 2022 issue at Canadian Center of
Science and Education
About the authors:
Dr. Lars Schernikau is an energy economist,
entrepreneur, and commodity trader.
Afliation: TU Berlin, Germany
Prof. William Hayden Smith is Professor of
Earth and Planetary Sciences at McDonnell
Center for Space Sciences at Washington
University, St. Louis, MO, USA.
Prof. Emeritus Rosemary Falcon is recently
retired DSI-NRF SARChI Professor from the
Engineering Faculty at the University of the
Witwatersrand, Johannesburg, South Africa.
Available at:
energy, electricity, fossil fuels, natural gas, coal,
nuclear, wind, solar, renewables, energy, energy
policy, clean coal technology, USC
Selected Abbreviations
CCUS – Carbon capture utilization and storage
eROI – Energy return in energy invested
VRE – Variable renewable energy,
such as wind and solar
HELE – High efciency, low emission
IEA – International Energy Agency in Paris
FCOE – Full cost of electricity
LCOE – Levelized cost of electricity
PES – Primary energy supply
or PE for primary energy
PV – Photovoltaic
USC Ultra-super-critical
VRE – Variable renewable energy
~ – Approximately
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 eorts 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, insucient electricity generation from wind and solar, and geopolitical challenges,
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, and as a result practically every wind
mill or solar panel requires either a backup or storage which adds to system costs.
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
conrms “…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
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 neg-
atively 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 eciencies.
Therefore, the authors suggest energy policy makers to refocus on the three objectives,
energy security, energy aordability, and environmental protection. This translates into two
pathways for the future of energy:
(1) invest in education and base research to pave the path towards a New Energy Revo-
lution where energy systems can sustainably wean o fossil fuels.
(2) In parallel, energy policy must support investment in conventional energy systems
to improve their eciencies 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 eects of current energy transition pathways on global energy security.
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 2
1. Introduction (Today’s
global electricity systems)
In 2019, fossil fuels – in order of importance –
oil, coal, and gas made up ~80% of global
primary energy (“PE”) production totaling
~170.000 TWh or ~600 EJ. Despite Covid
and signicant wind and solar capacity
additions, the percentage has not changed in
2021, quite the contrary, coal made a come-
back (IEA 2022a). Coal and gas made up
~60% of global gross electricity production
totaling ~28.400 TWh in 2021. It is important
to note that global electricity production
makes up ~40% of primary energy with
transportation, heating, and industry ac-
counting for the remaining ~60% (Figure 1).
Current energy policy focuses on the
electrication of energy, thus signif-
icantly increasing electricity’s share
of primary energy by using electricity
more for transportation (see EVs), heating
(see heat pumps), and industry (see DRI,
producing steel using hydrogen). Therefore,
this paper focuses on electricity. For a more
comprehensive discussion on transporta-
tion, the authors recommend Kiefer 2013
Twenty-First Century Snake Oil, that includes
details on hydrocarbons and biofuels for
transportation which are not covered herein
in greater detail.
Despite trillions of US dollar spent globally
on the “energy transition”, the proportion of
fossil fuels as part of total energy supply has
been largely constant at around 80% since
the 1970s when energy consumption was
less than half as high (WEF 2020). Also in
Europe, fossil fuels share is still above 70%.
Kober et al. 2020 among others, conrm that
total primary energy consumption more
than doubled in the 40 years between 1978
to 2018. At the same time, energy intensity
of GDP improved by a little less than 1%
conrming Jevon’s Paradox that energy ef-
ciency improvements are always oset by
higher energy demand (Polimeni et al. 2015).
Variable “renewables” in the form of
wind and solar – while not the subject of
this paper – accounted for ~3% of global
primary energy and ~8% of global gross
electricity production in 2019, and this was
largely unchanged in 2020 and 2021 (refer to
Schernikau and Smith 2021 for more details
on solar). Other forms of energy supply
usually categories as “renewables” – such
as biomass, hydro, geothermal, or tidal
power – are not detailed further as they are
not considered variable and have a dierent
quality. For comparison, coal and gas com-
bined accounted for ~50% of global primary
energy and ~60% of global gross electricity
production. Thus, fossil fuels still exceeded
wind and solar by a “Fossil to Wind-Solar
Factor” of 27x for primary energy and 8x for
electrical power production (IEA 2021a).
Figure 1: Overview of Global Primary Energy and Electricity
(1) Only the portion of industry/transport/building that is not included under electricity; (2) assumed worldwide net efciency of about 33% for nuclear,
37% for coal, 42% for gas, assume avg. ~40% efciency => 27.000TWh becomes 68.000 TWh or ~40% of ~170.000TWh
Sources: Schernikau Research and Analysis based on BP 2021, IEA 2021a
Energy (in Watt-hour or Wh, in German “Arbeit oder Energie”) vs. Power (in Watt or
W, in German “Leistung”)
Energy is the capacity to do work. Power is energy per unit of time. Thus, energy
is what makes change happen and can be transferred form one object to another.
Energy can also be transformed from one form to another. Power is the rate at which
energy is transferred.
Once you know both the energy storage capacity (i.e, MWh) of a battery and the
output power (i.e., MW), you can simply divide these numbers to nd how long the
battery will last.
Energy is stored in a Tesla battery (i.e., 100 kWh). “Horse-” power, let’s say 150 kW,
is what moves the car forward. The battery, lled with energy (kWh), drains over
time depending on how much power (kW) is required for moving the car, which
depends on how you drive and the surrounding conditions.
Capacity Factor “CF” (in German “Nutzungsgrad”) is the percentage of power output
achieved from the installed capacity for a given site, usually stated on an annual basis.
Capacity factor is dierent from the eciency factor. For comparison, eciency
measures the percentage of input energy transformed to usable or output energy.
In Germany, photovoltaics (“PV”) achieves an average annual capacity factor of
~10 to 11%, while California reaches an annual average CF of 25% (Schernikau and
Smith 2021). Thus, California yields almost 2,5x the output of an identical PV plant
in Germany.
It is important to distinguish between the average annual capacity factor and the
monthly or better weekly and daily capacity factor, which is very relevant when
keeping an electricity system stable that requires demand to always equal supply
for the electric frequency to remain stable.
Conservation of Energy – the 1st Law of Thermodynamics essentially states that
energy can never be created from nothing nor lost into nothing, only converted from
one form to another. Dierent forms of energy include thermal, mechanical, electrical,
chemical, nuclear, and radiant energy.
Entropy of Energy – the 2nd Law of Thermodynamics essentially distinguishes be-
tween useful energy (low entropy) that can perform work and less useful energy (high
entropy) that cannot easily perform work.
Entropy is a measure of randomness, disorder, or diusion in an energy system
where greater disorder = greater entropy.
Whenever energy is converted from one form to another, there is always some frac-
tion of useful energy that becomes useless (entropy/disorder increases).
Planck said in other words “Every process occurring in nature always increases the
sum of the entropies of all bodies taking part in the process, at the limit – for reversi-
ble processes – the sum remains unchanged.”
The 2nd Law of Thermodynamics thus explains why perpetual motion machines are
not possible
Thus, the more complex energy processes are, the more useful energy is lost
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 3
Germany is the foremost industrialized
nation in the move toward decarbonization
and has invested at least EUR ~360 billion
since 20001 in the “energy transition” re-
ducing the share of nuclear and fossil fuels
(BfWE 2020). It shall be noted that nuclear
is the most energy ecient (see section 2 on
eROI) and least polluting way of produc-
ing electricity but faces other challenges.
However, as Europe has been reducing its
production of fossil fuels, the continent’s
dependence on energy raw material imports
increased signicantly, mostly from Russia
over the past two decades.
With the money invested in the “energy
transition” – until 2021 – Germany has
reached a wind/solar share for gross
electricity production of ~28%. The primary
energy2 share of wind and solar, however,
was still only 5%. To achieve this “transi-
tion” Germany’s installed power capacity
had to double (Figure 2). Consequently, the
renewable energy sector grossly underper-
formed, compared to its investment in real
energy terms, and Germany’s electricity
prices reached the highest among the G20.
This underperformance, however, is due
to the low capacity factor, low energy e-
ciency, and other inherent shortcomings of
variable renewable energy discussed herein
(Figure 3), not due to bad implementation or
bad intent.
During the 20 years from 2002 to 2021,
Germany’s installed power capacity
almost doubled from 115 GW to 222 GW
while total electricity consumption was
essentially at and primary energy fell
over 15%2 (Figure 2). Over the next decades,
Germany expects a signicant increase in
electricity consumption for the electrication
of transportation, heating, and industrial
processes to satisfy increased demand from
consumers and industry as required by the
German “Energiewende”.
The global average looks slightly better.
Of the total 2020 global installed energy
capacity of ~8.000 GW or 8 TW (Figure 10),
about 18% or ~1.400 GW was wind and
solar which contributed ~8% to global elec-
tricity and ~3% to primary energy (BP 2021,
IEA 2019b, IEA 2021a). After installation of
almost 200 GW of solar PV in 2021, in March
2022, the world celebrated the rst 1 TW of
installed solar capacity (PV-Mag 2022).
Figure 2 illustrates the substantial discon-
nect between installed capacity and gener-
ated electricity. It appears that in countries
such as Germany, given the average capacity
factors for wind and solar, a doubling in in-
stalled capacity will lead to less than 1/3rd
of electricity supply and less than 10% con-
tribution to primary energy. The reasons for
this disconnect are multifold and impact the
world of electricity in many ways. Figure 3
1 Note: the numbers include only „EEG-Gesamtvergütung“ (EEG compensation package), but no other investments, research, subsidies, etc.
2 The fall of primary energy, among others, has to do with the assumed 100% efciency of wind and solar electricity when calculating its share in PE. In other words, it is mistakenly assumed that wind and solar electricity genera-
tion was converted, conditioned, balanced, and transmitted at 100% efciency without any losses or energy costs, or at least at the same efciency as conventionals, which is not the case. If one were to assume a more realistic
lower net efciency, the primary energy share of wind and solar would increase and reported total primary energy in Germany wouldn’t fall as much.
© HMS Bergbau Group Lars Schernikau
not to be copied or distributed without written consent Page 1d 2021-09-14 Policy Primer.pptx
Figure 2
Power generation in TWh
(72, 12%)
Wind & solar
(168, 28%)
∑= 598 TWh
(370, 11%)
Wind & solar
(175, 5%)
∑= 3.407 TWh
∑= 4.008 TWh
German energy sources’ share in primary energy consumption (2002-2021)
Gross power production in Germany (2002-2021)
(256, 43%)
(2.588, 76%)
(69, 12%)
(210, 6%)
Primary energy consumption in TWh
∑= 587 TWh
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Wind &
122 GW (55%)
Capacity in GW
∑= 222 GW
∑= 115 GW
Installed net power generation capacity in Germany (2002-2021)
75 GW
Wind & solar:
12 GW
8 GW
22 GW
79 GW
Hard coal
Other renewables
Wind & Solar
∑ = ~8.000 GW in 2020
Total global installed capacity
Figure 2: German Installed Power Capacity, Electricity Production, and Primary Energy
Notes: (1) CAGR: +3,5%; (2) CAGR: +0,1%; (3) CAGR -0,9%; (4) Including hydro & biomass
Source: Schernikau Research and Analysis based on Frauenhofer 2022, AGE 2021, Agora 2022, see footnote2
Figure 3: Summary of Shortcomings of Variable Renewable Energy for Electricity Generation
Source: Schernikau Research and Analysis
lists the shortcomings of variable renewable
energy (VRE) for electricity generation in the
form of wind and solar which explain the
reasons for the apparent disconnect. These
deciencies of VRE can only partially be re-
duced through technological improvements.
Despite the sun’s immense power, the
energy available per m2 from natural wind
and solar resources are limited and too small
to allow ecient electricity generation at
grid scale (low energy density). Additional
negative eects of wind and solar on vegeta-
tion, local climate, animal life, seaways, bird
yways, and bird, bat, and even insect popu-
lations also must be considered. These eects
originate primarily from the required large
land area (Schernikau and Smith 2022b).
Technological advances will further increase
net eciencies of wind and solar installa-
tions. However, physical boundaries, as
described by the Betz Law and Schock-
ler-Queisser Limit, dismiss the possibility
of ten-fold improvements. There is no
prospect of a paradigm shift in energy from
PV or wind as is promised for quantum
computing. One cannot compare energy
with computing, they follow dierent laws
(Figure 7).
The 33% quantum eciency Schock-
ler-Quiesser Limit can be exceeded with
multi-layer PVs which so far are unstable
and less durable than silicon PV panels.
Today, they already surpass mono-crystal-
line silicon’s quantum eciency by about
50%, but 20-year operational life for mul-
tilayer PV are not in reach. Technological
improvements and new materials, such as
perovskites and quantum dots, may over-
come the stability and durability problems
in time, but 100% quantum eciency is the
absolute physical maximum that will never
be reached.
Thus, technological improvements may
improve PV’s quantum efciencies by
a factor of two, but not by the required
multiple to compete with conventional
energy generation and to surpass the
required eROI hurdle rate at grid scale. Be
reminiscent that also conventional energy
generation improves its eciency over time.
© HMS Bergbau Group Lars Schernikau
not to be copied or distributed without written consent Page 2d 2021-09-14 Policy Primer.pptx
Figure 3
Capacity Factor
Energy Density
Space Requirements
Energy Efficiency
Correlated Wind/Solar
Low energy densities, i.e., low availability of wind and solar irradiance per m2. Thi s results in large space
requirement increasing “Room Costs”, affecting also animal life.
Low energy efficiencies and resulting economic losses from power generation, conversion, condi tioning, and
transmission. Note, this statement applies to electricity generation at grid scale.
Continental sized areas of highly correlated wind speeds and solar availability.
Low-capacity factors due to site characteristics (resulting in intermittency and unpredict ability of wind/solar).
eROI and
Material Efficiency
Short lifetime of wind and solar installations becoming shorter because of “repowering”.
Critical requirement for and underutilization of backup power stations or long-duration backup energy storage systems
that needs to equal essentially 100% of wind and solar installed capacity.
Natural resource and energy demand for mining, transportation, processing, manufacturing, and recycling of w ind &
solar installations and required backup/storage systems.
All the above translates to inadequate energy return on investment and low material efficiency,
accounting for all embedded energy of the total energy system.
Mineral Resources
8. Increased recycling challenges due to complex chemistry and short lifetime affecting economics and the environment.
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 4
2. Literature review,
methodology, and results
(Cost of electricity
and eROI)
The authors have completed a total of over
70 interviews in Europe, Africa, Asia, and
North America during the past 3 years. Dis-
cussions have taken place at various minis-
tries, economic government organizations,
with universities, and industrial conglom-
erates. The overarching theme from these
interviews was a lack of understanding of
the true full cost of electricity and continued
misuse of the marginal cost measure LCOE
to compare costs of VRE with convention-
al sources of power. In all interviews, the
overarching desire – especially in develop-
ing nations – was to support a sustainable
yet economically viable energy policy to
transition away from fossil fuels as fast as
possible. The costs and downsides asso-
ciated with such transition were rarely
understood or researched.
The authors have contacted energy think
tanks such as the IEA, the IEEJ, and the
ACE (ASEAN Center for Energy) and
discussed some of the above topics in
detail. The conclusions herein are also a
result from these interchanges. The political
component inherent in the work at all of the
mentioned organization was removed and
attention was put on the economic impacts
of the proposed transition to VRE. The liter-
ature researched is referenced at the specic
elements detailed in the paper.
The cost of electricity is important for a
country’s global competitiveness and a key
element for economic development as well
as the discussion on energy policy at large.
Electricity systems are complex, which is
also driven by the fact that a function-
ing electricity system can only supply
usable power if and only if electricity
demand equals electricity supply at all
times, every second. This unique character-
istic of electricity systems drives costs. We
need to dierentiate between cost, value,
and price, which are not the same. Further
below we discuss only cost.
Cost – the resources and work required
for production
Value – the intrinsic value or utility to
the consumer for a particular application
as compared to its alternatives
Price – what consumers or the market
are willing to pay. The price is inu-
enced, or distorted, by government or
company intervention, such as laws,
mandates, subsidies, geopolitics, and
The true full cost of electricity, FCOE, is
detailed in the following section. Cost of
electricity has been studied in detail by
several government organizations and uni-
versities. The Full cost of electricity donated
as FCe- was described in a number of white
papers published at the University of Texas
2018. UT however focuses on transmission
and distribution, paying less attention to
backup, storage, and the intermittency of
VRE. Also, the lower asset utilization of
backup systems is not discussed in greater
The OECD (OECD NEA 2018) referenc-
es the full cost of electricity separating
between (a) plant-level costs, (b) grid-level
system costs, and (c) external or social cost
outside the electricity system. The argument
is that that the full cost must include all
three categories, which the authors agree
with. The OECD study pays more attention
to higher volatility and complexity with
added VRE in the system, but for instance
energy required or cost for recycling is not
considered. In the OECD’s discussion on
pollution and GHGs, the life-cycle emission
and non-emission impact of energy systems
is not considered, the focus is on combus-
tion/operation and CO2 (OECD NEA 2018,
p101). The study also only marginally
considers resource and space consideration.
On costs the following OECD statements
are important:
“When VREs increase the cost of the total
system, … , they impose such technical
externalities or social costs through increased
balancing costs, more costly transport and
distribution networks and the need for more
costly residual systems to provide security
of supply around the clock” (OECD NEA
2018, p39)
“From the point of view of economic theory,
VREs should be taxed for these surplus costs
[integration costs above] in order to achieve
their economically optimal deployment.”
(OECD NEA 2018, p39)
Various other electricity-cost-metrics exist3
Integrations Costs of VRE, etc. For a com-
plete cost picture, the authors introduce
the full cost of electricity to society, FCOE.
The authors’ FCOE falls into ten dierent
categories that illustrate its complexity and
many are not easily measurable (see Figure
5). The authors have not yet found these 10
categories considered in full by any energy
economic institutions, government, univer-
sity, private company, or any of the media.
Usually only one or two categories are
discussed, and levelized cost of electricity
(LCOE) is erroneously used most often. The
socio-economic and environmental benets
of understanding the methods for electric-
ity cost determination are substantial and
require further study.
2.1. Full Cost of Electricity – FCOE
Since the question of electricity is one at
society level, or at least at country level,
the authors attempt to dene the true full
cost of electricity FCOE. Ten cost categories
determine what we refer to as the Full Cost
of Electricity ‘FCOE’ to society:
1. Cost of Building electricity generation/
processing equipment such as a solar
panel, power plant, a mine, a gas well,
or a renery, etc. (often referred to as
investment costs).
2. Cost of Fuel, such as oil, coal, gas,
uranium, biomass, or wind (which has
a zero cost of fuel). This would include
processing, upgrading, and transporting
the fuel through pipelines, on vessels,
rail, or trucks. It would also include costs
for rehabilitating the source of the fuel,
such as mines or wells. LCOE often as-
sumes that the price for CO2 is part of the
Cost of Fuel, but to be correct we dene a
separate category 7. Cost of Emissions.
3. Cost of Operating and maintaining the
electricity generation/processing equip-
4. Cost of (Electricity) Transportation/
Balancing systems to the end user, such
as transmission grids, charging stations,
load balancing, smart meters, other IT
technology, and its increasing threat
from cyber-attacks. Refer to BCG Guide
to Cyber Security (BCG 2021a) and the
March 2022 cyber-attack on satellite in-
frastructure targeting German windmills
(Willuhn 2022).
5. Cost of Storage, if required medium
and long-term (dierent from load
balancing), that should include cost of
building and operating, for example,
pumped hydro, batteries, hydrogen, etc.
Keep in mind that oil, coal, gas, urani-
um, and biomass are storage of energy in
a. Full Cost of Storage must include just
for storage alone (1) Cost of Build-
ing, (3) Cost of Operation, (7) Cost
of Emissions, (8) Cost of Recycling,
and (10) other metrics MIPS, lifetime,
6. Cost of Backup technology; electricity
systems include redundancy in case
something happens to a power plant or
equipment. All reliable electricity sys-
tems are overdesigned, usually by ~20%
of the highest (peak) power demand. In
a. Every single VRE installation equip-
ment such as wind and solar require
100% backup, storage, or combination
of both as by nature they are not
dispatchable or predictable.
3 LCOE = Levelized Cost of Electricity; VALCOE = Value-Adjusted Cost of Electricity; LACE = Levelized Avoided Cost of Electricity; LCOS = Levelized Cost of Storage; VRE = Variable Renewable Energy.
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 5
b. Conventional power plants are often
used as a backup for VRE. The higher
the share of VRE in the electricity
system, the less such backup capacity
will be used causing lower asset
utilization. Thus, the cost of backup
increases logarithmically as the VRE
share in the energy system increases
beyond a certain point (see also IEEJ
2020, p124).
c. Thus, backup capacity may and
currently does substitute long-term
storage and is included herein as a
separate category since it has a dier-
ent quality and cost. It is important to
avoid double counting.
7. Cost of Emissions includes the true
cost (not arbitrary taxes or subsidies) of
all air-borne emissions from power gen-
eration technology along the entire value
chain. This would include but not be
limited to particulate matters, SOx, NOx,
as well as life cycle greenhouse gases in-
cluding from building and recycling the
equipment. Benets of CO2 because of its
proven fertilization eects for all plant
life would also have to be incorporated
(Zhu et al. 2016, NASA 2019, WEF 2019).
For cost of global warming the authors
refer to Nordhaus 2018, Lomborg 2020,
and Kahn 2021.
8. Cost of Recycling, decommissioning,
or rehabilitation of electricity generation
and, separately as part of point 6. above,
backup equipment after its lifetime
expired. See also The Hidden Cost of
Solar Energy published by INSEAD and
Harvard (Atasu et al. 2021).
9. Room Cost (sometimes called land
footprint or energy sprawl) is a new cost
category relevant for low energy density
“renewable” energy such as wind, solar,
or biomass. Due to the low energy den-
sity per m2 of wind, solar, or biomass,
they take up signicantly more space
than conventional energy generation
installations where room costs tend to
be negligible, at least relatively to VRE.
These larger space requirements nega-
tively impact our environment and need
to be considered.
a. Room cost includes direct costs and
opportunity costs related to the larger
space required and the impact on, i.e.,
sea transportation routes, crop land,
forests, urban areas, aected bird and
animal life, changing wind and local
climate, increasing temperatures, in-
creasing water scarcity in aridic areas,
noise pollution, etc.
b. Climatic and warming eects of
large-scale wind and solar installa-
tions are well documented but remain
mostly ignored by the industry,
policy makers, and investors (see
Barron-Gaord et al. 2016, Miller and
Keith 2018, Lu et al. 2020, Schernikau
and Smith 2022b).
c. A new coal power plant in India
would require about 2,8 km2 per 1
GW installed capacity plus the space
for the coal mining (Zalk and Behrens
2018, CEA 2020). A new solar park
would take about 17 km2 per 1GW
installed capacity, plus the space for
mining the resources to build solar.
1 GW installed solar capacity would
generate much less electricity due to
solar’s low capacity factor. Adjusting
for a 16,5% average Spanish solar
capacity factor, this would translate
to a comparable 93 km2 for solar, or
a multiple of 33x compared to coal.
Additional space is required for
backup and/or storage due to solar’s
intermittent nature (Schernikau and
Smith 2021).
d. The room costs per installed MW of
VRE increases the higher the installed
capacity reaches. The reason has to
do with reduced capacity factor for
wind in larger wind farms (see wake
eect) as well the reduced value of
additional VRE beyond an optimal
penetration level (Schernikau and
Smith 2022b, NEA 2018, p84).
10. Other Metrics: Three more elements
of the Full Cost of Electricity FCOE are
metrics that are not measured in US$
but are important for environmental
eciency of electricity generation. None
of these metrics are included in LCOE.
a. Material Input Per Unit of Ser-
vice (MIPS): measures the material
or resource eciency of building
energy equipment in tons of raw
materials per MW capacity and per
MWh produced electricity. MIPS for
energy equipment thus measures an
important element of environmen-
tal impact. The US Department of
Energy DOE and the IEA document
the high material input for renewable
technology and capacity (see Figure 4,
DOE 2015, IEA 2020d, p6).
b. Lifetime: measures how long the
equipment is used before it is retired
or replaced. We need to consider that
“repowering” or better early replace-
ment of wind and solar signicantly
reduces the designed lifetime.
c. Energy Return On Investment
(eROI): in a way summarizes a large
portion of all measures mentioned
above. eROI also accounts for the
energy eciency of building, oper-
ating, and recycling the equipment.
It includes all embedded energy. An
eROI of 2:1 means investing 1 kWh in-
put energy for every 2 kWh of output
energy. As per Weissbach et al. 2013,
solar and biomass in Northern Europe
have a buered eROI of about 2-4.
Nuclear has an eROI of about 75, and
coal and gas about 30. Roman culture,
the most ecient pre-industrial civili-
zation, reached an eROI of 2:1. Much
uncertainty remains about actual eROI
The authors emphasize here that the Full
Cost of Electricity “FCOE” to society
does not include taxes or subsidies
which in fact are arbitrary4. Governments
sometimes impose government set prices
or taxes in an attempt to emulate such true
costs or to support research & development.
FCOE will account for all “true costs” and
therefore may not be the right metric for
all investment decisions that do have to in-
corporate taxes, subsidies, or prices (rather
than costs) of certain elements.
FCOE attempts to estimate the true cost to
society that is relevant when estimating the
global cost of the energy transition to the
global cost of any human-caused climatic
4 The IMF reported about US$ 450 billion of global “explicit” fossil fuel subsidies in 2020 and about US$ 5,5 trillion in so called “implicit” subsidies for fossil fuels (IMF 2021). IRENA estimates that renewables received around US$
130 billion of subsidies in 2017 (IRENA 2020), thus per MWh signicantly more than fossil fuels. The EU spends already more subsidies on renewables than on fossil fuels in absolute terms (EC 2022, p30). The authors dismiss
the logic of implicit subsidies as virtually any number can be calculated depending on the assumptions made, and all forms of energy receive “implicit” subsidies, whether it be solar, wind, biomass, hydro, gas, coal, or nuclear. For
example, wind and solar are not CO2-taxed even though their production and recycling emit signicant amounts of CO2. For projected cost of global warming, please refer to Nordhaus 2018, Lomborg 2020, and Kahn 2021. To
truly compare subsidies, they will always have to be baselined on a per unit of output energy basis and include the full value chain, which is rarely done.
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Figure 4
Materials (ton/TW)
Coal Gas Nuclear Hydro Solar Wind Geothermal
Figure 4: Base-Material Input per 1 TW Generation
Note: Other includes iron, lead, plastic, and silicon.; Schernikau assumes this is based on average US capacity factors
Source: Adapted from DOE 2015, Table 10.4, p390
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 6
changes. Therefore, fossil fuel subsidies are
not included as a separate item4. Neither
are subsidies for wind and solar included,
such as missing CO2 taxes even though the
production and recycling of solar and wind
capacity and backup systems incur high
relative CO2 per kWh. Please note that to
date, CO2 or “carbon” taxes include only
direct CO2 emissions from fuel-combustion
leaving out life-cycle emissions along the
entire value chain, such as methane and
other GHGs (see Schernikau and Smith
2022a on Climate Impacts of Fossil Fuels).
Therefore, CO2 taxes are misleading and
wrong, causing economic and environ-
mental undesired distortions, such as
the switch from coal to gas for climate
reason, dismissing the higher climate im-
pact of methane emissions associated with
gas and especially LNG production.
From the above analysis, it can be conclud-
ed that Levelized Cost of Electricity LCOE
– which only includes Cost of Building
(1), Cost of Fuel (2), Cost of Operation (3),
and sometimes certain CO2 taxes (part of
Cost of Emissions, 7) – is not a reliable nor
environmentally or economically viable
measure with which to evaluate dierent
forms of energy generation at country or so-
ciety level. Only FCOE includes all relevant
economic and environmental costs from
emissions and non-emissions, though its
true value is dicult – but not impossible –
to determine.
Renowned energy think-tanks such as
the International Energy Agency (IEA) in
France, the International Energy Economics
Institute (IEEJ) in Japan, the OECD, or the
US Energy Information Agency (EIA)
have pointed out the incompleteness of
LCOE multiple times. Yet LCOE con-
tinuous to be widely used despite its
failings, usually without clear disclaimers
and notes, even by these agencies them-
selves, by governments, banks, institutions,
NGOs, companies, many scientists, and the
common press.
Undesirable eects occur when convention-
al fuels and variable renewable energy VRE
(wind and solar) are mixed to provide a
country’s electricity. These eects would be
measured completely by FCOE categories
1-10 above. For instance, beyond a certain
point, usually about a 10-20% share, the
cost to a nation’s electricity system always
increases with higher shares of variable
renewable energy VRE, such as wind and
solar (IEEJ 2020, p124, IEA 2019a, and
IEA 2020c, p13). The reasons include but
are not limited to the previously discussed
dierential energy density and eciency,
intermittency and thus backup/storage
requirement, low-capacity factors, inter-
connection costs, material and energy
costs, low eROI, eciency losses of backup
capacity, room costs for the space required
and plant/animal life destroyed, recycling
needs, and so forth.
The IEA conrmed in December 2020 (IEA
2020c, p14): “…the system value of variable
renewables such as wind and solar decreases
as their share in the power supply increases”.
This would also remain true if the price
of renewable capacity (cost item 1: Cost
of Building) continues to reduce or even
were to reach zero. For example, it doesn’t
change the conclusion even if the price of
solar panels produced with coal power in
China partially using forced labor reaches
zero. This would also remain true if wind
or solar technology would reach impossible
100% quantum eciency.
LCOE is inadequate to compare intermittent
forms of energy generation with dispatcha-
ble ones, and therefore when making energy
policy decisions at a country or society level.
LCOE may, however, be used selectively to
compare dispatchable generation methods
with similar material and energy inputs,
such as coal and gas. Using FCOE, or the full
cost to society, wind and solar are not cheap-
er than conventional power generation and
in fact become more expensive the higher
their penetration in the energy system. This
is also illustrated by the high cost of the so
called “green” energy transition especially
to poorer nations (McKinsey 2022 and Wood
Mackenzie 2022). If wind and solar were
truly cheaper – in a free market economy –
they would not require trillions of dollars of
government funding or subsidies, or laws to
force their installation.
2.2. Energy return on energy
invested ‒ eROI
The authors suggest that environmental
eciency of energy is more complex than
emissions alone. Especially energy return
on energy invested, or energy return ‒
eROI, material input, lifetime, and recy-
cling efciency need to be considered
as they determine other very important
environmental and economic elements
for evaluating electricity generation.
eROI measures the energy eciency of
an energy gathering system. Higher eROI
translates to lower environmental and
economic costs, thus lower prices and
higher utility. Lower eROI translates to
higher environmental and economic costs,
thus higher prices and lower utility. When
we use less input energy to produce the
same output energy, our systems become
environmentally and economically more
viable. When we use relatively more input
energy for each unit of output energy,
we risk what is referred to as “energy
starvation” (see Appendix on energy
shortages). At an eROI of 1 or below we are
running our systems at an energy decit.
Note: Vaclav Smil’s “Energy and Civiliza-
tion – a History” (Smil 2017) is an excel-
lent, highly-acclaimed book on the subject of
energy. In addition, the authors recommend
Kiefer 2013 and Delannoy et al. 2021 for
more detailed discussions on eROI. Kis
et al. 2018 approach eROI by using GER
(Gross Energy Ratio) and GEER (Gross
External Energy Ratio). Kis et al. dene
GEER as life-cycle eROI and nd a global
average for GEER of approx. 11:1. Due to
the complexity of eROI more research is
required in harmonizing the approach for its
The eROI is generally higher for wind than
for solar, also driven by the higher aver-
age capacity factor. According to Carba-
jales-Dale et al. 2014, the average solar PV
from a net energy eciency point of view
can only “aord” 1,3 days of battery storage
“before the industry operates at an energy
decit”. Wind, from a net energy eciency
point of view, can “aord” over 80 days
of geological storage (12 days of battery
storage). However, for the mentioned net
energy eciency calculations, the research-
ers made the simplifying yet unrealistically
generous assumption that a generation
technology is supplied with enough energy
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Figure 5
10a: eROI energy Return On energy Invested
10b: MIPS Material Input Per Unit of Service
10c: Lifetime
Non-USD Metrics
1. Cost of Building
2. Cost of Fuel
3. Cost of Operating
4. Cost of Transportation/Balancing
5. Cost of Storage
6. Cost of Backup
7. Cost of Emissions
8. Cost of Recycling
9. Room Costs
Incomplete LCOE
Figure 5: Full Cost of Electricity to Society – A Complete Picture
Note: Age cartoon original from Alexandra Martin; energy cliff from eROI for beginners; MIPS cartoon from, eROI Weissbach et al. 2013.
Source: Schernikau Research and Analysis
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 7
ow (either wind or sunlight) to deliver 24h
of average electrical power output every
day. This means days or weeks with no sun
or wind would multiply the storage require-
ment and therefore further diminish the net
energy eciency or eROI. Carbajales-Dale
et al. included the proportion of electricity
output consumed in manufacturing and
deploying new capacity.
It can be concluded that wind and solar
have a very low eROI and are therefore
a step backward in history in terms of
system energy eciency. Their grid-scale
employment risks energy starvation and
is therefore not desirable economically nor
environmentally. The authors would like to
point out that for certain application, i.e.,
heating a pool that is not connected to the
grid or heating water for personal use in
remote areas, solar and wind may be a de-
sirable complement to our energy systems.
The installation of wind and solar does
reduce the amount of fossil fuels combusted
assuming no increase in power demand,
which is the only positive of their employ-
ment. This positive aspect comes at high
costs summarized illustratively in Figure 3:
Summary of shortcomings of variable renewable
energy for electricity generation.
The industrial revolution reduced human-
ity’s dependency on biomass, hydro, and
wind. Based on the new-found high-eROI-
coal-energy, this energy revolution allowed
for the dramatic increase in standards of
living, industrialization, decrease of heavy
human labor, and abandonment of slavery.
This revolution and its positive impact on
human life was only possible due to a dras-
tic increase in energy availability, energy
eciency, or eROI. The energy revolution
came with a diversication away from
biomass burning towards fossil fuels, hydro,
and later nuclear.
Prior to the industrial revolution human
development peaked during the Roman
Empire at an estimated sustained eROI
of around 2:1 (Figure 6). During the 20th
century, petroleum’s high eROI, higher
energy density, and versatility enabled the
transportation revolution with cars, aircraft,
and rockets. To appreciate the magnitude
of this energy revolution, consider that
three tablespoons of crude oil contain
the equivalent of eight hours of human
labor (Kiefer 2013 and footnote5). Figure 6
schematically illustrates the concept of eROI
in today’s electricity systems and the impact
of CCUS or hydrogen storage on energy
eciencies (Supekar and Skerlos 2015).
Dr. Euan Mearns 2016 based on Kiefer’s
work explains eROI and points out that
modern life requires a minimum eROI of
5-7 while most solar and many wind instal-
lations depending on location have a lower
eROI and are therefore inherently energy
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Figure 6
Energy Return on Investment (eROI)
$$$ $$ $ $$$$
Coal &
Material Input1(MIPS)
Full Cost of
Electricity (FCOE)
Space Requirement2
min eROI for modern Society: 6-10x
Only from excess or
unutilized “renewables”
~20 to 30%
Figure 6: The Concepts of eROI and Material Efciency ‒ Illustrative
Note: white arrows illustrate future technological improvements, red arrows illustrate loss of energy and therefore loss of eROI from CCUS or “green”
H2 systems; (1) Material Input MIPS measures the resource efciency, i.e., material input required per unit of output, here for example MW capacity or
MWh of produced electricity. (2) Space requirement measures the land footprint per unit of electricity produced.
Source: Schernikau Research and Analysis
insucient to support society at large. As
per Weissbach et al. 2013, solar and biomass
in Northern Europe have a buered eROI
of about 2-4. Kiefer denes “The Net Energy
Cli” which demonstrates how – with
declining eROI – society would commit
ever larger amounts of available energy to
energy gathering activities.
One example is employment. Below an
eROI of 5-7, such great numbers of people
would be working for energy gathering
industries that there would not be enough
people left to ll all other positions our
current altruistic society requires. Some,
however, may argue that this is desirable
due to articial intelligence’s long-term
threat to human labor. IEA’s recent World
Energy Outlook (IEA 2021b) conrmed
that global employment would rise from
“renewable” energy systems, therefore
providing evidence for the lower eROI of
“renewable” technologies. McKinsey 2018,
though not considering the eROI concept,
argues that automation will replace low
level workers; this trend is already well
underway. Those without higher technical
and intellectual skills may become unem-
ployable in the future workforce. In essence,
McKinsey does not seem to see a problem
with a higher employment in energy related
The principle of energy return on invest-
ment eROI is at the core of society’s
energy efciency which is at the core of
humanity’s development and survival.
2.3. The 2nd Law of Thermo-
dynamics’ impact on energy
The preface already introduced the 1st and
2nd Law of Thermodynamics. Figure 7 tries
to summarize the laws’ function. The 1st Law
is simple as it basically states that energy
can never be lost, only be converted from
one form to another..
The 2nd Law introduces the concept of en-
tropy, another word for usefulness or value
of energy (high entropy = high disorder,
or low value of energy). Essentially, the 2nd
Law explains why in a natural state heat
always moves from warm to cold and not
the other way around. When energy is
converted from one from to another, entro-
py always increases, or ‘useful’ energy is
lost. The logical conclusion for our modern
energy systems is that we need to avoid
conversion and storage of energy as well
as complexity of our energy systems as
much as possible, as all of these result in
loss of useful energy.
5 Based on Kiefer 2013: eROI for humans and oxen as ratio of max work output divided by food calorie input calculated from Homer-Dixon’s online data as 0,18:1. EROI for Roman wheat as ratio of food calorie output divided by
labor and seed grain inputs was 10,5:1. EROI for alfalfa was 27:1. Humans eating wheat yield heavy labor eROI of 0,18 x 10,5 = 1,8:1. Oxen eating alfalfa yield eROI of 0,18 x 27 = 4,7:1. Teaming humans with oxen and applying
reductions for idle time and for light work/skilled labor versus heavy labor gives 4,2:1 peak eROI and 1,8:1 sustained eROI.
Figure 7: 1st and 2nd Law of Thermodynamics
Source: Schernikau, graphs from (link)
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1st Law of Thermodynamics
(energy is never lost)
2nd Law of Thermodynamics
«Entropy always increases» or energy loses
‘value’ with conversion
Conversion or storage of energy always means loosing useful energy
Internal Energy
Entropy increases when melting
Entropy decreases when freezing
Block of ice ΔS increase
Puddle of water
ΔS decrease
Higher Entropy = higher disorder
or lower value, irreversable
«Laws of Energy» do NOT follow the «Laws of
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 8
This loss of useful energy is important
because it directly translates into reduced
system energy eciency. It directly results
in lowering the eROI when we convert
wind power to hydrogen, when we store
hydrogen, when we convert hydrogen back
to power. It also directly results in warming
of our biosphere. The net eciency of a gas
or coal-red power plant is also the result
of the 2nd Law of Thermodynamics. Every
process that takes place in the boiler, the
turbine, or the generator “costs” energy
that is lost in form of low value heat to our
We established in chapter 2 that the “green”
energy transition towards variable renew-
able energy in form of wind and solar will
substantially increase the cost of electric-
ity. The rise in cost will primarily burden
poorer people and developing nations
(McKinsey 2022 and Wood Mackenzie
2022). With the concept of the 2nd Law of
Thermodynamics, we can now demonstrate
part of reason why the “green” energy
transition will increase global energy ine-
ciencies, because they require more complex
energy systems and increased storage. The
IEA summarized the issue of increasing
complexity in their article Energy transitions
require innovation in power system planning
(IEA 2022a, see Figure 8) as follows:
Shifting away from centralized thermal
power plants as the main providers of elec-
tricity makes power systems more complex.
Multiple services are needed to maintain
secure electricity supply.
In addition to supplying enough energy,
these include meeting peak capacity require-
ments, keeping the power system stable
during short-term disturbances, and having
enough exibility to ramp up and down in
response to changes in supply or demand.
More importantly the 1st Law of Ther-
modynamics proves that most of our
produced and consumed energy will
end up in low-value or high-entropy heat
and thus warms our biosphere adding
to measured temperature increase. The
authors note that there is also embedded en-
ergy in the products that we produce that is
not released in form of heat. These products
are primarily used for housing or end up
being consumables. The well documented
heat island eect is also a manifestation of
the heat emitted from our energy systems to
our surroundings.
When we produce energy from sources
such as nuclear, oil, coal, gas, or even
geothermal, then we take energy that is
“inside our planet” and in the end convert
it to low-value heat warming our biosphere.
When we use energy from solar radiation
by employing photovoltaic, we will not
“net” warm our planet only if we disregard
the warming from solar panel’s absorption
and shifting atmospheric circulation (Lu et
all. 2020), and if we disregard the energy
for building and recycling the equipment
or systems required to extract and use solar
energy. Taking the energy from wind has
additional climatic warming consequenc-
es as detailed by Miller and Keith 2018.
High CO2 emitting forms of producing
energy such as coal or gas partially o-set
the warming of the biosphere through
CO2-driven fertilization and greening that
reduces solar warming (solar radiation can
only do one thing, grow a plant, or warm
the Earth, see Schernikau and Smith 2022a).
3. Discussion
(projected future of ener-
gy and suggestions for a
revised energy policy)
To allow for a “clean energy transition”,
The Boston Consulting Group (BCG 2021b)
projects global wind and solar power
capacity to increase similar to Germany’s
past 20-year overbuilding (see Figure 2 and
Figure 9). 2020 global power generation
capacity totaled about 8.000 GW, of which
over 1.400 GW were wind and solar. In 8
years (at time of writing), by 2030, BCG
projects that wind and solar alone will have
to reach 8.600 GW, doubling today’s entire
global electricity capacity, the same as what
happened in Germany from 2002 until 2021.
Based on 2021 IRENA outlook data, BCG
also forecasts that global wind and solar
installed capacity must reach 22.000 GW
by 2050, almost quadruple today’s entire
global electricity generation capacity. It
is the authors’ opinion that these name-
plate capacities will not be reached as
the world would run out of energy, raw
materials, and money before it happens,
and if they were reached, the economic and
environmental impact to society would be
distressing as explained in this paper.
Such dramatic expansion of wind and solar
will result in more fragile and expensive en-
ergy systems. It will also negatively impact
the environment (see space requirements,
backup, material input, eROI, recycling
needs, local climate impacts, etc.) osetting
any desired – entirely modeled – positive ef-
fects on the global climate from GHG emis-
sions reductions. On the positive side, in the
authors’ view the only positive aspect, such
expansion will limit the use of fossil raw
materials mined. The question is, however,
if it would truly reduce total raw material
use when honestly and truly accounting for
the entire life cycle from resource mining,
via material transportation, processing,
manufacturing and operation, to recycling
(Figure 4 and Figure 11). Further research is
required here.
After having risen from ~2 billion to ~8
billion in the past 100 years, the UN projects
that global population will rise further from
currently ~8 billion to ~10 billion until 2050
(OurWorldInData 2021). Population may
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Figure 8
China in Announced Pledges Scenario, 2060China in 2020
“Shifting away from
centralized thermal
power plants as the
main providers of
electricity makes
power systems
more complex.
Multiple services
are needed to
maintain secure
electricity supply.”
Figure 8: Current and Future Energy Security in China
Source: Based on IEA 2022a
Figure 9: Wind/Solar Capacity Forecast for 2050 to be Almost 4x Today’s Total Capacity
Source: Schernikau Research and Analysis based on 2021 IRENA 2021 and BCG 2021b
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Figure 9
2019 2030 2040 2050
∑ = ~8.000 GW in 2020
total global installed capacity
(Coal, Gas, Nuclear, Hydro,
Biomass, Wind, Solar, Other) Wind onshore
Solar PV
Wind offshore
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 9
peak around 11-12 billion by the end of the
century. Despite continued improvements in
energy eciencies, rising living standards in
developing nations are forecasted to increase
global average annual per capita energy
consumption from ~21.000 kWh to ~25.000
kWh by 2050 (Lomborg 2020, BP 2019)
As a result, and as illustrated in Figure
10, global primary energy consumption
could rise by up to 50% by 2050 (~25%
population increase and ~20% PE/capita
increase translates to ~50% PE demand
increase). Energy demand growth is fueled
by developing nations in Asia, Africa, and
South America. Developed nations are
expected to consume less energy in the
decades to come, driven by population de-
crease/stagnation and eciency increases.
However, historically, energy eciency
improvements have always increased ener-
gy demand (see Jevons Paradox, Polimeni
et al. 2015). To illustrate, please refer to the
authors recommended book Life After Google
(Gilder 2018) explaining the increased re-
quirement for energy for global computing.
The authors reiterate that recent models by
McKinsey estimate that global primary en-
ergy demand will only increase by 14% by
2050, while IEA’s 2021 Net-Zero Pathway
models a reduction by ~10% in primary en-
ergy by 2030, in 8 years from writing of this
paper, although this is questioned by the
energy industry and the authors (IEA 2021e,
McKinsey 2021). The same reports estimate
that global electricity generation will almost
double from 2020 to 2050 also driven by the
projected electrication of transportation.
The Institute for Energy Economics in Japan
(IEEJ 2021) predicts global primary energy
demand to increase by 30% by 2050 while
the American EIA predicts a ~50% increase
(EIA 2021). Kober et al. 2020 compare
various energy scenarios and point out that
essentially all energy scenarios assume a
decoupling of economic growth and energy
consumption in the future.
Growth in electricity demand will sur-
pass primary energy growth partially due
to the global electrication of operations.
Electricity’s share of primary energy will
also increase because our lives become more
computerized and “gadgetized”. Electric-
ity is also planned to replace signicant
non-electricity energy consumption for
transportation (i.e, EVs), heating (i.e, heat
pump), and industry (i.e., DRI for steel
Despite hoped-for technological improve-
ments, it is a prudent assumption that
wind and solar alone will not be able
to generate enough total electricity to
match the expected demand increase
from 2020 to 2050. This is conrmed by the
IEEJ 2021 forecasting an absolute increase
in fossil fuels share in primary energy in its
© HMS Bergbau Group Lars Schernikau
not to be copied or distributed without written consent Page 9d 2021-09-14 Policy Primer.pptx
Wind, Solar, other renewables
~3% in 2021
~80% in 2021
Figure 10
Figure 10: Global Primary Energy from 1750 to 2050
Note: Primary electricity converted by direct equivalent method. Exa-Joule (EJ), where 600 EJ approximates 170.000 TWh.
Source: Schernikau Research and Analysis based on data compiled by J. David Hughes. Post-1965 data from BP, Statistical Review of World Energy
(link). Pre-1965 data from Arnulf Grubler (1998): “Technology and Global Change: Data Appendix” (link), and World Energy Council (2013): World
Energy Scenarios Composing energy futures to 2050 (link).
reference case by 2050. In July 2021, the IEA
conrmed that “…[renewables] are expected to
be able to serve only around half of the projected
growth in global [electricity] demand in 2021
and 2022” (IEA 2021c). For primary energy
growth, the renewable share will be only a
fraction, perhaps 20%, as today about 2/5th
of primary energy is consumed in electricity
Even if wind and solar were to full all
future increases in primary energy demand,
it becomes evident that for the next 30 years
and beyond we will continue to depend on
conventional energy resources for a large
portion, if not the vast majority, of our
global energy needs. For recent “Net-Zero”
pathways (IEA 2021e) and scenarios to
succeed on paper, they require a number of
highly optimistic, often unrealistic, assump-
tions related to rapid advances in technol-
ogy development, hydrogen penetration,
demand curtailments, raw materials with
controllable prices and supply availability,
and so forth. They also largely dismiss
eROI, material input, lifetime, and realistic
recycling assumptions and thus “renewa-
bles’” negative economic and environmen-
tal impact.
4. Conclusions and future
research (Future energy
Energy policy is of utmost importance and
has three objectives:
(1) Security of supply,
(2) Aordability of supply, and
(3) Environmental protection.
Today’s energy policy, however, focuses
primarily on reducing anthropogenic
(human-caused-energy) CO2 emissions
to limit or reduce future global warming
(Figure 11). As demonstrated by Glasgow’s
COP26 meeting results from November
2021 including but not limited to the “Global
Coal to Clean Power Transition Statement”
(UN-COP26 2021), many nations’ energy
policy decisions today pay less attention on
objectives (1) and (2), and even most aspects
of (3) such as plant/animal life, land/space
use, material & energy input, recycling ef-
ciency (see Figure 3, Figure 11, and Figure
12). The 2022 Russia/Ukraine crisis has
put new focus on energy security at least
in Europe which to a large extent has relied
on Russian energy raw material supply
Figure 11: Environmental Impact of Energy Systems - Why Carbon Taxation Leads to Distortions and Undesired
Source: Schernikau Illustration
© HMS Bergbau Group Lars Schernikau
not to be copied or distributed without written consent Page 10d 2021-09-14Policy Prim er.pptx
Processing Transportation Recycling
§Includes upgrading, refining §Any mode transportatation
along the entire value chain
§Includudes combustion
§Includes raw materials
§All waste handling,
processing, disposal
Figure 11
Environmental Impact
Particulte matter
Energy input
Raw Materials
etc., etc., etc.
Current Focus
of Energy Policy
CO2= Sole Focus of
“Carbon” Taxation
etc., etc., etc. Carbon taxation leads to distortions
and undesired consequences
Because it dismisses other emission and
non-emission impacts on the environment
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 10
and spent 20 years reducing its own energy
independence (see Germany’s political
decisions to abandon coal and nuclear and
the EU’s extensive initiatives to divest from
reliable fossil fuel energy sources). This new
focus, however, seems rather ad-hoc than
The objective of global investments in the
“energy transition” should be to meet all
three prime goals of energy policy, not only
one sub-goal, to reduce human-energy CO2
emissions. Today’s misguided energy
investment focus on wind and solar
increases the risk of energy starvation
with all its consequences (see Appendix).
The full cost of electricity FCOE and eROI
illustrate that wind and solar are unfor-
tunately not the solution to humanity’s
energy problem. At grid scale, they will lead
to undesired economic and environmental
outcomes. The use of LCOE for the purpose
of discussing the “green” energy transition
must cease because it continues to mislead
decision makers. Governments, industries,
and educational institutions are urgently
encouraged to spend additional time on
leaning and discussing energy economic
realities before forcing the basis of today’s
existence away from proven and relatively
aordable energy systems. It takes only
energy to solve the food and water crisis,
it takes only energy to withstand natural
disasters, it takes only energy to eradicate
It must be understood that the dramatic
planned increase in installed solar and
wind capacity as detailed in Figure 9 has
one advantage, it reduces the amount of
required fossil or nuclear fuel consumed,
assuming no increase in power demand.
However, this one advantage comes at
signicant costs to our environment and
economies that have been detailed herein.
The costs to the environment originate from
the intermittency and inherent low eROI
of VRE when considering the entire value
chain and life-cycle (Figure 11).
The New Energy Revolution is a point
in time where humanity can sustainably
wean o fossil fuels. Such new energy
system may be completely new, possible
a combination of fusion or ssion, solar,
geothermal, or most likely some unknown
“sci-” energy source (see also Manheimer
2022). It would likely harness the pow-
er of the nuclear force, the power of our
planetary system (i.e., sun), and the energy
from within our planet. It will have little
to do with today’s wind and photovoltaic
technologies due to the physical limits of
energy density, or energy available per m2,
and intermittency.
Figure 12: Variable Renewable Energy Does not Full Objectives of Energy Policy
Source: Schernikau Illustration
Figure 13: Investments in Coal Less Than Half of Wind/Solar, While Coal Provides 4x More Power
Note: Right side includes investments in fuel supply and power; for gas it is assumed that 50% of total “oil & gas” fuel supply investments went into
gas (511 B$ x 0,5 = 255 B$).
Sources: Schernikau Research and Analysis based no IEA and BNEF Data; IEA’s World Energy Investment 2020
© HMS Bergbau Group Lars Schernikau
not to be copied or distributed without written consent Page 11d 2021-09-14 Policy Primer.pptx
Plants & Animals
Land & Space
Material Input
Energy Input (eROI)
Recycling efficiency
Providing Basis for
Healthy Life and Growth
Affordability of
energy supply
Security of
energy supply
Figure 12
The authors suggest that to reach this New
Energy Revolution, more must be invested
in education and base research (energy
generation, material extraction & process-
ing, storage, superconductors, etc.). Just as
important is the second suggestion for con-
tinued simultaneous investment in conven-
tional energy to make it more ecient and
environmentally friendly. It must be noted,
however, that non-CO2 emitting forms of
energy generation will have no heat-oset
in the form of greening and fertilizing CO2
(see Harverd et al. 2019 and Idso 2021 for an
extensive list of peer-reviewed literature).
The reduced energy eciency of VRE and
the increased generation of energy from
non-fossil origins will logically cause an
increase in low-value or high-entropy heat
that will continue to warm our planet even
if no GHGs were emitted.
The authors suggest that future research
and development should concentrate on
understanding the true eROI of energy
systems to aid prioritization, and on reduc-
ing emissions and non-emissions environ-
mental impact of existing energy systems.
Future research should detail and quantify
FCOE and eROI for conventional and var-
iable renewable energy systems, this work
requires funding, a larger team, and will be
a global eort.
To further optimize conventional energy
systems, the authors suggest that ultra-su-
per-critical power plants (USC) and HELE
technologies should be further researched
and implemented for increasing their
eciencies. USC technology would have
an immediate positive eect on nature
at signicantly lower costs than install-
ing grid-scale variable renewable energy
systems with the required backup (see also
Tramosljika et al. 2021). Investment in –
not divestment from – fossil fuel is the
logical conclusion not only to eradicate
(energy) poverty, improve environmental
and economic efciency of fossil-fuel-in-
stalled capacity (whether it be for transpor-
tation, heating, or generating electricity),
but also to avoid a prolonged energy crisis
that started in second half of 2021.
6 Sources in order: (1) Telegraph 2 March 2022 (link), (2) Vaclav Smil, 28 Feb 2021 (link), (3) The N24, 24 Feb 2022 (link); (4) CNN, 18 Nov 2021 (link), (5) Wikipedia 5 Dec 2021 (link), (6) Bloomberg, 5 Oct 2021 (link) ; (7) Globe
and Mail, 1 Oct 2021 (link); (8) Bloomberg, 18 Sep 2021 (link); (9) Nikkei Asia, 27 Sep 21 (link); (10) Moneyweb, 8 Aug 2021 (link);
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 11
Energy shortages,
impacts and causes
The apparent energy shortage in Europe
and other parts of the world starting in 2021
illustrates FCOE and the explained high cost
of variable renewable energy. The lack of
investment in conventional forms of energy
resulted in undersupply while at the same
time wind and solar were not able to satisfy
increased demand. Germany’s highest
consumer power prices of any industrial-
ized nations is further evidence of FCOE
and thus also driven by the relatively high
penetration of VRE.
BCG and IEF International Energy Forum
warned in their December 2020 Energy
report Oil and Gas Investment in the New
Risk Environment that “… by 2030, invest-
ment levels [in oil and gas] will need to rise
by at least US$ 225 billion from 2020 levels
to stave o a [energy] crisis” (BCG and IEF
2020). The press started to pick up this sub-
ject in the third quarter of 2021 when energy
resources and electricity prices started to
soar and rst signs of a global energy short-
ages surfaced. Investments in coal are pro
rata lower than in oil and gas (Figure 13).
The 2022 Russian invasion of the Ukraine
also illustrated the fragility of global energy
systems and how intertwined energy and
politics are, especially when it comes to oil,
gas, and nuclear. Of the dispatchable forms
of energy, coal, hydro, and geothermal
energy are the least political. Below a list
of selected press articles on the topic of the
“new energy crisis”, for links see footnote6.
1. Bjarne Schieldrop, chief commodities
analyst at SEB, Mar 2022: “The global
economy is facing energy starvation right
now’ and ‘demand destruction will set a limit
to the upside eventually.”
2. Vaclav Smil wrote in Feb 2022 referring
to the Russian invasion to the Ukraine:
This war will have many long-term conse-
quences, but possibly none more important
than its eects on the future of the European
energy supply.”
3. The N24 wrote in Feb 2022: “The worst
energy crisis since 1973.”
4. CNN wrote in Nov 2021: “… anti-poverty
organizations and environmental campaign-
ers have warned that millions of people across
Europe may not be able to aord to heat their
homes this winter ...”
5. Wikipedia set up a separate page and ref-
erenced the 2021 Global Energy Crisis in
November 2021: “The 2021 global energy
crisis is an ongoing shortage of energy across
the world, aecting countries such as the
United Kingdom and China, among others.”
6. Bloomberg wrote in Oct 2021: The world
is living through the rst major energy
crisis of the clean-power transition. It
won’t be the last.”
7. The Globe and Mail wrote in Oct 2021:
India’s coal crisis brews as power demand
surges, record global prices bite.”
8. Bloomberg wrote in Sep 2021: “Europe is
short of gas and coal and if the wind doesn’t
blow, the worst-case scenario could play out:
widespread blackouts that force businesses
and factories to shut. The unprecedented en-
ergy crunch has been brewing for years, with
Europe growing increasingly dependent on
intermittent sources of energy such as wind
and solar while investments in fossil fuels
9. Nikkei Asia wrote in Sep 2021: “Key
Apple, Tesla suppliers halt production amid
China power crunch.”. Bloomberg follows
in the same month that China may be div-
ing head rst into a power supply shock that
could hit Asia’s largest economy hard just
as the Evergrande crisis sends shockwaves
through its nancial system.”
10. Bloomberg quoted a gas executive in
Aug 2021 warning that current energy
policy could disrupt delivery of adequate
and aordable fuel supply to consumers:
The lack of capital investments in future
natural gas projects does not lead us to an
energy transition, but instead leads us down
an inevitable path toward an energy crisis.”
The human and economic costs from short-
ages in electricity supply are apparent from
several examples worldwide. A European
example includes the 28th September 2003
Italian power outages. That day, the North
of Italy experienced up to 3h outage and
the South (Sicily) up to 16h. A loss of 200
GWh to customers resulted in an estimated
EUR 1,2 billion economic loss (Baruya 2019,
former IEA Clean Coal Center). Baruya
summarizes “In developing regions, such as
sub-Saharan Africa, shortages in energy supplies
impede business and economic growth. In ad-
vanced economies, failure in the power grid and
generating capacity has also led to measurable
economic losses, such as those seen in Italy in
recent years”. Another direct impact of elec-
tricity outages will be loss to human lives
and health. It must be noted, that none of
the “Net-Zero” models or scenarios account
for any cost resulting from energy shortage
or starvation.
We have shown that the “energy tran-
sition” to variable renewable forms of
energies such as wind and solar will
result in higher electricity costs. Ener-
gy-transition-supporting strategy consultant
McKinsey 2022 summarizes “A Net-Zero
transition would have a signicant and often
front-loaded eect on demand, capital allocation,
costs, and jobs”. Research shows that a rise in
electricity prices impacts economic output.
Baruya 2019 summarized the impact of
rising electricity costs to industries in China,
the US, Russia, Mexico, Turkey, and Europe
based on scientic research. The coecients
of elasticity between economic output and
electricity prices were irrefutably negative.
Output declined faster in the non-metallic
minerals (cement) sector, metal smelting
and processing, chemical industry, and
mining and metal products. For example, in
Vietnam, impacts of an increase in the elec-
tricity tari on the long-run marginal cost of
products manufactured using electricity-in-
tensive processes were examined in 2008. An
increase in taris drove price ination of all
aected goods and services (Baruya 2019)
Baruya 2019 continues and conrms the au-
thors’ analysis how the retirement of fossil
fuel-red power plants without adequate,
reliable, and aordable alternatives will
“reduce the amount of backup power to less than
the amount required to meet capacity shortages
during peak electricity demand”. Developing
and industrializing nations, such as India,
Indonesia, Bangladesh, and Pakistan will be
negatively aected by the cessation of fund-
ing from Western nancial institutions. Al-
ternative funding may lead to the adoption
of less ecient generating technologies re-
sulting in increased environmental burden.
Consequently, industrializing countries that
do not invest in high-eciency, low-emis-
sions (HELE) conventional fuel technologies
could face higher costs of generation, higher
emissions reducing their competitiveness,
and as a result slowing economic growth.
If investments in fossil fuels will not
increase substantially and very soon,
a prolonged global energy crisis will
be difcult to avoid this decade. This
remains true, even if all sustainability goals
are achieved and wind and solar capacity
continues to increase as planned or hoped.
Global energy markets during the 2021
Covid recovery in Europe and Asia and the
Russian/Ukrainian war in 2022 are testimo-
nies to the impact of energy shortages.
The authors refer to Kiefer 2013 and reiterate
that oil, coal, gas, and uranium are the
primary energy sources that nourish rather
than starve governments and economies. A
true primary energy source, like a true food
source, need not be subsidized. It must, by
denition, yield many times more energy
(and wealth) than it consumes, or else it is
a sink, not a source. It is not by subsidies,
but rather by the merits of eROI, material
eciency, and energy density, and in spite of
heavy taxation and erce competition with
other energy alternatives, that oil, coal, gas,
and nuclear have grown to dominate the
global energy economy by over 80%.
Accepted Manuscript
Full cost of electricity ‘FCOE’ and energy returns ‘eROI’ 12
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