The Competitiveness of Renewables: An Analysis of Magnitude, Geography, and Drivers

Abstract

While renewable energy sources are the fastest-growing electricity generation technology globally, their competitiveness is still the subject of controversy. This paper presents an electricity system model for investment and dispatch to determine the cost-optimal shares of renewable energy sources. We compute and analyse renewable generation shares in market equilibrium for Germany and Texas, using annual data for 2015 to 2024, and in five-year intervals for 2030 to 2050. Furthermore, we identify the key drivers of the renewable competitiveness and quantify their contribution through parameter variations. Our results show that renewable generation achieves considerable market shares even without subsidies. In Germany, the increase in renewable generation is primarily driven by CO2 pricing, complemented by declining investment costs for renewable technologies. In Texas, solar PV is part of the cost-optimal system, even in the absence of CO2 pricing and despite low natural gas prices.