Environmental and Sustainability Indicators (Sep 2023)
Monetization of policy costs and sustainability benefits associated with renewable energy in fossil fuel-rich countries (FFRCs)
Abstract
The electricity sector in Middle Eastern fossil fuel-rich countries (FFRCs) is characterised by the high electricity subsidies that result in a large price gap between Feed-in Tariffs (FiT) and consumer electricity prices, which inhibits electricity generation from renewable energy sources (RES-E). Meanwhile, RES-E development could reduce GHG emissions, allow fossil fuel to be sustainably commercialised or processed, and save water consumption in thermal power plants as an alternative solution in FFRCs. This study aimed at monetarizing those benefits and evaluating the performance of RES-E policy in a FFRCs framework by defining the benefit-cost ratio as a sustainability indicator, considering Iran as a case study scenario. Results showed that the FiT purchase price was seven times higher than the average consumer price of electricity, which implied a $US 345 million cost for renewable energy support during the 2009–2019 time window. Conversely, benefits from the use of renewable energy were estimated in $US 68 million. The resulting benefit-cost ratio of RES-E policy was found to be 0.2, which indicates that FiT policy was inefficient and only 20% of the expenditure could be recovered. To make RES-E policies more efficient and foster renewable energy deployment, limiting the electricity subsidy that widens the price gap between FiT and market price has been suggested. Furthermore, carbon price was identified to have high impact on the benefit-cost ratio indicator. A policy framework setting a 100 $US/t CO2 would balance RES-E policy costs and benefits. This evidence could aid in decision-making for RES-E implementation in FFRCs.
