The True Cost of Electric Power - India Environment Portal

THE TRUE COST OF ELECTRIC POWER
An Inventory of Methodologies to Support Future
Decisionmaking in Comparing the Cost and Competitiveness of
Electricity Generation Technologies
Dallas Burtraw, Alan Krupnick, and Gabriel Sampson,
with contributions from William Isaac, Jessica Chu, and Blair Beasley *
I. Introduction
A. Purpose of Project
To support the Renewable Energy Policy Network for the 21st Century (REN21), Resources for the
Future was asked to provide a critical review of methodologies for accounting for the true costs of
electric power across the available generation technologies. By true costs, economists mean the social
costs of electricity, accounting for private or market costs as well as the external costs. To the extent
that policies in a country are designed to force investment and operating decisions in the market to
account for true costs, as opposed to simply private or market costs, renewable energy sources are
likely to be advantaged.
This report is limited to a focus on the individual facility and asks, ultimately, what the social costs
would be for an electric generation facility powered by coal, oil, gas, nuclear, hydro, solar, wind, and
other fuels. To fully explore this topic, one would want to examine the entire energy system and
address issues such as those arising from network effects, such as how to think about true costs when
one needs to pair wind with other, less intermittent technologies. Also, note that this project is about
methodologies for developing true cost estimates, not about choosing estimates from the literature.
Nonetheless, the reader will gain some understanding of the estimates available and the relative
magnitude of various aspects of social costs stemming from different technologies in different
contexts.
B. Approach
Our approach was to review the available conceptual and empirical literature on social cost
estimation and to draw from that literatureand our experience as creators of some of this
literatureto identify the strengths and weaknesses of the various methods used to estimate such
* Burtraw is the Darius Gaskins Senior Fellow at Resources for the Future (RFF). Krupnick is a senior fellow and director of
Center for Energy Economics and Policy. Sampson is a graduate student at University of California, Davis, and previously worked at
RFF. Isaac, Chu, and Beasley are research assistants at RFF. The authors appreciate comments and guidance from Adrienne
Foerster, Christine Lins, Virginia Sonntag- The authors received funding and guidance from
Ren21; however, all errors and opinions are those of the authors and not attributable to others.
BURTRAW, KRUPNICK, AND SAMPSON
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