The Full Costs of Electricity Provision

Electricity provision touches upon every facet of life in OECD and non-OECD countries alike, and choosing how this electricity is generated – whether from fossil fuels, nuclear energy or renewables – affects not only economic outcomes but individual and social well-being in the broader sense. Research on the overall costs of electricity is an ongoing effort, as only certain costs of electricity provision are perceived directly by producers and consumers. Other costs, such as the health impacts of air pollution, damage from climate change or the effects on the electricity system of small-scale variable production are not reflected in market prices and thus diminish well-being in unaccounted for ways. Accounting for these social costs in order to establish the full costs of electricity provision is difficult, yet such costs are too important to be disregarded in the context of the energy transitions currently under way in OECD and NEA countries. This report draws on evidence from a large number of studies concerning the social costs of electricity and identifies proven instruments for internalising them so as to improve overall welfare. The results outlined in the report should lead to new and more comprehensive research on the full costs of electricity, which in turn would allow policy makers and the public to make better informed decisions along the path towards fully sustainable electricity systems.