In the previous TCASE post, I considered how various low-carbon energy technologies meet the following criteria: commercial readiness, scalability, dispatchability, fuel constraints, load access, storage requirements, capacity factor and emissions intensity. Here I consider the next issue: cost of deployment, based on expert consensus.
The primary data again come from the work I had published in 2011 in the peer-reviewed journal Energy (with colleagues Martin Nicholson [lead author] and Tom Biegler). Cost was analysed on the basis of 15 comprehensive levelised cost of electricity studies published over the past decade. The data are as follows (see also figure above), with references given in the footnote:
(LCOE = levelised cost of electricity (in 2009 US$/MWh) — see footnotes for a more detailed explanation.)
Enthusiastic supporters of various renewable energy technologies have long made claims that all or most of the world’s electricity needs could be met with renewable energy. Our analysis point to the costs involved and hence to the reliance on future major advances on that front in order to be competitive with other, low-emission, alternatives. In our view such reliance is highly speculative and risky as part of any plan to secure future energy.
The hard reality is that there are reasons why diffuse and variable energy sources like solar and wind may never compete on costs. They require large installations covering extensive land areas, with costs mainly in the realm of civil engineering works and therefore not amenable to substantial reduction through advances in the energy conversion technologies themselves. Drawing analogies with ‘Moore’s Law’ (rapid decline in the cost, and increase in the performance, of computer chips), as is sometimes done with renewable technologies, is therefore not appropriate. These technologies are undeniably elegant and innovative; their limitations unfortunately arise from the inherently diffuse and intermittent nature of their energy sources.
One technical study we covered assessed wind with storage against IGCC with CCS. The wind/storage (compressed air) solution could only compete at a carbon price above $350 a tonne of carbon dioxide, well above anything being contemplated. Enhanced Geothermal Systems (hot dry rock fracturing) is a possible future baseload technology, but it is still too early to estimate performance and costs with the degree of reliability we required.
The levelised cost of electricity, shown in the figure and table above, is a good indicator of the average wholesale price the power station owner would need to break even. If an emissions price (e.g., carbon tax or emissions trading system) were introduced, the cheapest non-nuclear solution would first be combined cycle gas turbine (natural gas) with carbon capture and storage. To justify building either of the coal technologies (PF or IGCC) with carbon capture and storage for new plants would require a carbon price over $40 (or a relative rise in the gas price). Retrofitting existing coal plants with carbon capture and storage might have different costs.
If nuclear energy were adopted for the first time by a country (or if new nuclear builds were initiated after a long period of construction quiescence, like is the situation in the U.S.), its initial cost (termed ‘first-of-a-kind’) would be about $30 per MWh higher than what it would eventually reach as more plants were built (settled down costs).
The problem is, carbon capture and storage may only make sense if you take a short-term view of emission reductions. While it might deliver the probable reduction targets until 2030, if the technology proves feasible at large scales (still undetermined), the current methods used for CCS will not deliver the tougher emission targets recommended by the Intergovernmental Panel on Climate Change (IPCC) for 2050 and beyond. Coal plants often have a 40-year life, so new coal plants with CCS built over the next few decades may still be operating by 2050, holding us back from meeting those greenhouse gas mitigation targets, unless they can be modified later.
The only renewable technology that meets the fit-for-service criteria explained in TCASE 13 was solar thermal with heat storage and gas backup for cloudy days. According to the meta-analysis data, using solar thermal power to replace coal would require a carbon price greater than $150. The solar industry is ever hopeful that costs will fall, but current costs are about twice other low-carbon alternatives so they have a long way to go. Future cost reductions for any technology are inherently uncertain and should not be relied on.
The standout technology, from a cost perspective, is nuclear power. From the eight nuclear cost studies we reviewed (all published in the past decade, and adjusted to 2009 dollars. see footnotes), the median cost of electricity from current technology nuclear plants was just above new coal plants with no carbon price. Having the lowest carbon emissions of all the fit-for-service technologies, nuclear remains the cheapest solution at any carbon price. Most importantly, it is the only fit-for-service baseload technology that can deliver the IPCC’s 2050 emission reduction targets.
The relatively low cost for nuclear electricity may surprise some. Nuclear plants are often attacked for being very expensive to build (high capital costs and significant finance burden). But electricity costs are a function of construction costs, running costs (operations, maintenance and fuel) and the total energy generated over the plant’s lifetime. Nuclear fuel costs are relatively low compared to coal or gas (very little fuel is used in a nuclear plant) and these plants typically have a long life and high availability. These factors lead to a low electricity cost over the nuclear plant’s lifetime. They also offer some protection against the uncertainty of rising fuel prices for coal and gas.
The results of this survey represent the scientific/engineering/economic consensus of the world-wide, authoritative, peer-reviewed energy literature. Given the importance of reducing electricity generator emission, and the economic imperative to keep electricity costs at a minimum, it seems essential that the governments look closely at their nuclear power strategy, as some parts of the world (e.g., China, India, South Korea, Russia) are already doing.
The above assessment focuses on costs of replacement for coal and gas generation in fit-for-service baseload electricity plants. For an assessment of the cost of other technologies, including those which do NOT meet the FFS criteria explained in TCASE 13, see the following 2016 projection done by the US Energy Information Administration:
Footnote – explanation and references for LCOE table and figure:
Note on LCOE: This is a widely adopted metric for comparing the costs of different power generation technologies. Typically the levelised cost methodology discounts the time series of expenditures to their present values in a specified base year by applying a discount rate and then divides the total discounted expenditures by the total energy production adjusted for its economic time value. LCOE reflects the constant real wholesale price of electricity that recoups for the investors the overnight capital costs of constructing the plant plus operating, maintenance and fuel costs, taxes, interest and other borrowing expenses. The cost is for the net power supplied to the station busbar where electricity is fed to the grid and does not include transmission costs or utility profit margins.
Discount rates, overnight construction costs, lifetime of the plant, energy generated and fuel costs vary across the literature depending on region of origin and pricing year. These variations account for some of the differences in LCOE values for ostensibly the same technology. For example, technologies that have relatively high construction cost, long lead time and long expected lifetime, such as nuclear power, are particularly sensitive to discount rates.
Literature assessed in the energy costs meta-analysis
ANSTO. Introducing nuclear power to Australia, http://www.ansto.gov.au/__data/assets/pdf_file/0016/12445/nuclear_options_paper_Gittus_complete.pdf; 2006.
IPCC. Carbon capture and storage, http://www.ipcc.ch/pdf/special-reports/srccs/srccs_wholereport.pdf; 2006.
MIT. The future of nuclear power, http://web.mit.edu/nuclearpower/pdf/nuclearpower-full.pdf; 2003.
MIT. The future of coal e options for a carbon constrained world, http://www.ipcc.ch/pdf/special-reports/srccs/srccs_wholereport.pdf; 2007.
MIT. Update of the MIT 2003 future of nuclear power, http://web.mit.edu/nuclearpower/pdf/nuclearpower-update2009.pdf; 2009.
NEEDS. Final report on technical data, costs, and life cycle inventories of solar thermal power plants, http://www.needs-project.org/docs/results/RS1a/RS1a%20D12.2%20Final%20report%20concentrating%20solar%20thermal%20power%20plants.pdf; 2008.
NREL. Assessment of parabolic trough and power tower solar technology cost and performance forecasts, http://www.nrel.gov/docs/fy04osti/34440.pdf; 2003.
NREL. Biomass power and conventional fossil systems with and without CO2 sequestration, http://www.nrel.gov/docs/fy04osti/32575.pdf; 2004.
OECD. Projected costs of generating electricity. 2010. https://www.iea.org/publications/free_new_Desc.asp?PUBS_ID=2207.
Royal Academy of Engineers. The cost of generating electricity, http://www.raeng.org.uk/news/publications/list/reports/Cost_Generation_Commentary.pdf; 2004.
San Diego Regional Renewable Energy Group. Potential for renewable energy in the San Diego region. Appendix E; 2005.
Succar Samir, Greenblatt Jeffery B, Williams Robert H. Comparing coal IGCC with CCS and wind-CAES baseload power options, http://www.princeton.edu/~ssuccar/recent/Succar_NETLPaper_May06.pdf; 2006.
Tarjanne R, Luostarinen K. Competitiveness comparison of the electricity production alternatives. Lappeenranta University of Technology; 2003.
University of Chicago. The economic future of nuclear power, http://www.ne.doe.gov/np2010/reports/NuclIndustryStudy-Summary.pdf; 2004.
US Energy Information Administration. Annual energy outlook, http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html; 2010.