Projected Costs of Generating Electricity - OECD Nuclear Energy ...

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The technologies and plant types covered by the present study include units under construction or planned that could be commissioned in the respondent countries between 2010 and 2015, and for which they have developed cost estimates generally through paper studies or bids. However, some participating experts included plants recently connected to the grid that they considered representative of state-ofthe-art technologies in their respective countries. Also, for some newer technologies with relatively steep learning curves, state-of-the-art technology today may have improved by 2010-2015. The range of energy sources and technologies for which cost data were provided varies from country to country depending on their national energy resource and policy context. The answers received are indicative of the type of power plants that are commissioned or planned to be built in the respondent countries in the short and medium term, although cost estimates for a generation technology may exist irrespective of decisions or committed plans to build a new power plant relying on that technology. As compared with previous studies, significant evolutions may be noted on the technologies and plant types for which data were provided (see Chapter 2 for details on responses to the questionnaire). For the first time, at the request of participating experts, the scope of the study was extended to include hydro power plants. A larger number of countries provided cost information on combined heat and power (CHP) plants, using coal, gas and various renewable fuels, than in previous studies. Similarly, more cost information was given on a larger number of wind power plants, showing an increasing interest in this renewable source for electricity generation. On the other hand, only one country provided cost data for distributed generation plants, although they seem to attract investors’ interest in several countries. The generation cost estimates presented in the report result from calculations carried out with a methodology agreed upon by the group and an internally consistent framework including generic assumptions that the participating experts considered representative of reference conditions. This approach provides a robust, transparent and coherent set of cost estimates for the power plants considered. Such estimates may be used to assess alternative options at the stage of screening studies. They do not substitute for detailed economic evaluations required by investors and utilities at the stage of project decision and implementation that should be based on project specific assumptions, using a framework adapted to the local conditions and a methodology adapted to the particular context of the investors and other stakeholders. Evolution of decision making in the electricity sector 1 Electricity markets are opening to competition in many countries. The introduction of competition in the generation and supply of electricity is expected to improve the economic efficiency of the power sector, to reduce overcapacity of generation and eventually to reduce electricity prices for consumers. Two issues raised by electricity market liberalisation are of special relevance in the context of the present study: impact of deregulation on technology choices; and adaptation of investors to risks associated with market competition. In the absence of market risk, investors in the power sector could increase prices to recover additional costs and, moreover, could predict demand with a reasonable level of certainty owing to regional or national monopoly situations. The reform of electricity markets has changed the decision making in the power sector and led investors to take into account the financial risks associated with alternative options as well as their economic performance. In this context, the total capital investment cost may become a more compelling criterion than the average lifetime generation cost. In the view of the risks they are facing in competitive markets, investors tend to favour less capital intensive and more flexible technologies. 1. This section of the report is drawn from the report published by IEA on Power Generation Investment in Electricity Markets (IEA, 2003a). 16
Uncertainties in future demand and price levels tend to lead investors towards flexible technologies with short return on investment period; short construction times and ability to switch fuels undoubtedly are attractive characteristics in liberalised markets. While the long-term nature of electricity infrastructure remains a fundamental aspect in decision making, investors are adopting new economic assessment approaches to quantify risks and opportunities associated with electricity price volatility. In the light of the long lead times inherent to the electricity sector, the conventional discounted cash flow method has been used broadly in investment decisions for base-load generating capacity. However, investors are beginning to use discount rates varying from technology to technology reflecting their perception of financial risks associated with each alternative. The approach adopted in this report reflects this trend: the levelised lifetime generation cost method is used in the body of the report while Appendix 6 provides insights on the new approaches being developed to incorporate financial risks in economic assessments in the context of liberalised markets. Past studies in the series Six studies on costs of generating electricity have been published by the OECD in the series including the present edition. Eight countries – Canada, France, Italy, Japan, the Netherlands, Portugal, the United Kingdom and the United States – participated in all the studies. However, Portugal did not contribute data in the first study and the United Kingdom did not contribute data for the last two studies. Three international organisations – the European Commission, the International Atomic Energy Agency and the International Energy Agency – participated in all the studies and since the third edition the studies have been conducted jointly by the NEA and the IEA. The first study in the series, initiated in 1982 and published in 1983 (NEA, 1983), focused on establishing a reference methodology and framework and, as far as technologies were concerned, considered only nuclear and coal-fired power plants. A 5% discount rate was used to calculate levelised costs and the reference monetary unit adopted was the European currency unit (ECU). Twelve countries participated in the study which concluded that, within the framework adopted, nuclear generated electricity was cheaper than coal generated electricity in all participating countries, except some parts of the United States. The second study published in 1986 (NEA, 1986) also focused on methodological approach and considered only nuclear and coal-fired power plants. Seventeen countries participated. The reference monetary unit became the US dollar (USD) and a variant at 10% discount rate was included together with the reference 5% discount rate. Like the first report, the 1986 study stressed that international cost comparisons are affected by many factors such as exchange rate and local or regional economic differences. It concluded that nuclear is the cheapest option except in some parts of the United States. The third study published in 1989 (IEA and NEA, 1989) was conducted jointly by the IEA and the NEA for the first time. Eighteen OECD countries participated and seventeen provided data. Cost data from five non-OECD countries were provided by the IAEA and included in the report. While the study focused again on nuclear and coal power plants, generation costs for gas- and oil-fired units as well as some renewable sources were discussed in an appendix. The report concluded that while nuclear generated electricity had a significant cost advantage in many countries, the decrease of expected future coal prices led to an economic advantage of coal over nuclear in several countries. The 1992 update published in 1993 (IEA and NEA, 1993) included gas-fired and some renewable sources in the analysis and provided an analysis of projected cost trends based upon previous reports in the series. Twenty-two countries including six non-OECD countries participated in the study. The report concluded that there was no clear-cut winner between nuclear, coal and gas in all countries. Renewable sources analysed in the study were found to be uneconomic except for marginal supplies in remote 17
Page 1: NUCLEAR ENERGY AGENCY INTERNATIONAL
Page 4: ORGANISATION FOR ECONOMIC CO-OPERAT
Page 9 and 10: Table of Contents Table of Contents
Page 11: Figures Figure 3.1 Specific overnig
Page 14 and 15: The introduction of liberalisation
Page 16 and 17: 150 USD/MWh at a 5% discount rate a
Page 20 and 21: locations and/or very favourable co
Page 22 and 23: conclusions of the study were used
Page 25 and 26: Chapter 2 Input Data and Cost Calcu
Page 27 and 28: equipped with emission control devi
Page 29 and 30: Table 2.2 - Exchange rates (as of 1
Page 31 and 32: Table 2.4 - Coal plant specificatio
Page 33 and 34: Table 2.7 - Wind and solar power pl
Page 35: Table 2.10 - Other plant specificat
Page 38 and 39: Figure 3.1 - Specific overnight con
Page 40 and 41: exchange rates, the coal prices var
Page 42 and 43: Construction time Gas-fired power p
Page 44 and 45: USD/MWh 70 60 Figure 3.5 - Levelise
Page 46 and 47: O&M costs The specific annual O&M c
Page 48 and 49: Cost ranges for coal, gas and nucle
Page 50 and 51: Ratio 1.9 Figure 3.12 - Cost ratios
Page 52 and 53: Table 3.11 - Overnight construction
Page 54 and 55: Table 3.14 - Projected generation c
Page 56 and 57: Except for the offshore plant in th
Page 58 and 59: At 10% discount rate, the levelised
Page 60 and 61: At 5% discount rate, hydroelectrici
Page 62 and 63: Table 4.4 - Overnight construction
Page 64 and 65: Table 4.6 - Projected generation co
Page 66 and 67: A CHP plant typically supplies heat
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Table 5.1 - Overnight construction
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Figure 5.2 - Levelised costs of ele
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lower unit capital and operating co
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Table 6.5 - Overnight construction
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cost calculation for some 130 power
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It should be stressed that the plan
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Concluding remarks The lowest level
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Portugal Mr. António B. Gomes EDP
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Table A2.1 - Nuclear plant investme
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Overnight Capital Costs: Constructi
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Table A2.7 - Gas-fired (including C
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Table A2.10 - Wind plant investment
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Cost structure of supported green e
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The highest investment cost arises
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The expected development of the per
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● ● Autoproducers. These firms
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Canada The electricity market situa
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Natural gas - combined cycle gas tu
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Denmark Basic data Denmark has abou
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In the future, both an increase in
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nuclear operator Teollisuuden Voima
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these power generation methods. Two
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Figure 5 - Competitiveness of vario
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2004. It envisages the gradual incr
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Table 4 - Gross electricity supply
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● ● ● ● ● ● ● ● ●
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Electricity generation costs The to
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photovoltaic device. Finally the su
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Table 1 - Installed electric power
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Japan Consumers in Japan are suppli
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BPE will be established not as a bi
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Coal Coal fired power plants have b
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A new sewage treatment plant with a
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The interconnections between Portug
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In order to respond to these basic
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efficient energies and is reducing
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Liberalisation Basic restructuring
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External costs for electricity prod
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At the beginning of plant operation
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and high ash, moisture and sulphur
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The White Paper did not contain pro
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Table 7 shows the projected load fa
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other investment options available
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The impurities contained in coal ar
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“ultra-supercritical” condition
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unmineable coal seams. All three pr
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Light water reactors require enrich
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concerns. Consequently, the natural
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generators and power electronics el
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conventional fossil-fired plants. B
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● ● very effective and is used
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Appendix 5 Cost Estimation Methodol
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into account in the real price of g
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● ● ● ● Factors under the c
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and small power plants. Although th
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The general approach remains useful
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Two US economic analyses of nuclear
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assume future prices follow a rando
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The effects of price risk on techno
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The option to delay is embedded in
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Appendix 7 Allocating the Costs and
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Further Fourier’s law for heat tr
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Figure A7.4 - The energy conversion
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This yields: β = 0.153 α. If α e
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It is emphasised that depending on
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1 st oil shock 2 nd oil shock Saudi
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Table A8.2 - Expected lower and upp
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Reliability in electricity systems
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is also highly dependent on the typ
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In the ILEX study 5 and in another
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an increasing share of wind is the
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able to work out the optimal operat
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Appendix 10 Impact of Carbon Emissi
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costs of generation. The introducti
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price at 3.5 €/GJ are the next fa
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Figure A10.5 - Steam coal price var
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The longer term impact on investmen
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Appendix 11 List of Main Abbreviati
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