3FOOD

Third Industrial Revolution Consulting Group
How all of the changes in demand and supply add up over time, together with their associated
costs to deliver the necessary energy services are summarized in Table 5, which shows three
key variables for two different scenarios. First, it highlights key cost variables for what is labeled
as REFERENCE 2050, or the main Reference Case assumptions out to the year 2050. The four
primary indicator variables are: (1) the life cycle cost of heat energy (LCOE) in €ct per kWh; (2)
the LCOE for electricity (also in €ct per kWh); (3) the LCOE for transport fuels (again in €ct per
kWh); and finally (4) the total energy costs in the year 2050 expressed in € Million per year. All
costs reflect constant € 2015 values. The same results are then shown for the TIR Innovation
Scenario, also for the year 2050.
Table 5. Unit and Annual Cost Assumptions for TIR Innovation Scenario
Resource Cost Unit REFERENCE 2050 TIR 2050
LCOE heat €ct 2015 /kWh] 6.55 6.99
LCOE electricity €ct 2015 /kWh] 6.97 7.10
LCOE Transport Fuels €ct 2015 /kWh] 11.99 13.31
Total Annual Costs € 2015 Mio/year] 2,190 1,369
Source: Adapted from Fraunhofer Institute ISE (2016).
Three things stand out from the information provided in Table 5. First, the unit energy costs for
heat, electricity and transportation fuels are somewhat more expensive in the TIR 2050
Innovation Scenario compared to the 2050 Reference Case Scenario. Second, from the
standpoint of the larger demand for energy services, however, this is still a positive result. The
reason is that total energy costs in TIR 2050 are significantly lower compared to the Reference
Case projections. The positive result is made possible by the savings from the other investments
in generating a more energy-efficient economy. The Reference Case 2050 total energy costs are
listed as €2,190 million in Table 5, so that even with the higher unit supply costs (that is, the
higher €ct per kWh), the total energy costs of the TIR Innovation Scenario are significantly less
at €1,369 million. 390 Finally, and although not shown in Table 5, the optimal TIR Innovation
Scenario, in which 70 percent of renewable resources are produced within Luxembourg,
provide unit energy costs that are about 20 percent less expensive than if 100 percent of the
renewables are generated within the region. The Table 5 results then show the reduced total
cost from less expensive energy efficiency improvements as well as an optimal level of in-region
production of renewable energy generation.
390 A minor note: The Reference Case 2050 results for the total energy costs, listed here at €2,190 million, differ
from Fraunhofer’s original cost of €2,007 million (all in 2015 real Euros). The reason is a small price increase that
increases slowly over time compared to the prior assumption of a steady price from 2015 through 2050. However,
neither assumption changes the overall outcome of this analysis.
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