The Economic Benefits of Renewable Energy: A Cost-Benefit Analysis of Transitioning to Renewable Energy Sources

Abstract

In this research, the researcher systematically evaluated the cost-effectiveness of the shift from non-renewable (fossil fuel) to renewable (solar, wind, hydro) sources of energy in Pakistan from 2014 to 2024, focusing on the socio-economic benefits of the shift across the country, with special emphasis on the 2014-2024 period. Using a mixed method approach, the researcher utilized secondary data from various governmental institutions such as the Alternative Energy Directorate, National Electric Power Regulatory Authority, and the Pakistan Bureau of Statistics, while the primary data consisted of questionnaires from 250 employees in the energy sector, and 15 semi-structured interviews with key players in the sector from several of Pakistan’s largest cities. Initially, the research examined the economic differences from a conventional fossil fuel based (primary energy source) system to a renewable energy system (solar, wind, and hydro) and then proceeded to analyzed the economic factors levelized cost of energy, direct capital (investment) cost, operational (recurring) cost, potential creation of new jobs, and the external socio-eco factors emigrating from the system using the Net Present Value and Internal Rate of Return analytics. Based on the socio-economic factors it became evident that the country as a whole had long term financial benefits from the renewable sources; it would take a set period to realize the benefits from the shift (investment) in RV energy, whereas the non-renewable, fossil system would have immediate financial benefits but would have devastating long term external ecological socio impacts (cost to the country as a whole). Taking into account these financial factors, the author concluded that the socio-economic benefits created by RV energy for the country Pakistan would more than justify the socio and financial costs on the country. The author, therefore, made the greatest impact on the energy sector stakeholders and the public policy makers of the country by shedding light these benefits.