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

lower unit capital and operating costs. The liberalised market also allows distributed generators to contract
with other producers for backup electricity. The ability to source backup power competitively should
reduce costs of this source of supply.
On the other hand, small distributed generation units are likely to have higher generation costs than
large grid-connected units owing to higher specific investment costs per kWe installed, higher fuel
delivery costs and lower efficiency, except in combined heat and power plants. Furthermore, the selection
of fuels and technologies available for distributed generation is more limited than for grid-connected
generation.
Also, charges for connection of distributed generation to the network may turn out to be higher than
for large central generation – particularly if distributed generators are required to pay for all associated
network upgrades (a requirement not normally imposed on large central plants). In addition to higher
connection costs per kilowatt, distributed generators may face regulatory requirements of meeting air
quality standards that result in higher costs per kilowatt. Emission control equipment generally has higher
unit costs in smaller sizes. If identical NO x emission standards are applied to fossil distributed generation
and large fossil central generators the cost of controlling emissions of NO x per kilowatt will be higher for
distributed generation.
The three distributed generation plants of the United States are all fuel cells, fuelled with natural gas.
Their sizes vary from 1 MWe to 10 MWe and their specific overnight construction costs (see Table 6.1)
vary from less than 1 000 USD/kWe to more than 2 000 USD/kWe. Strangely, the larger the size, the
higher the specific overnight construction cost.
Table 6.1 – Overnight construction costs of distributed generation plants (fuel cells)
Plant Fuel/technology/ Net capacity Overnight construction costs
emission control equipment incl. in costs
included in costs (MWe) MNCU MUSD M€ USD/kWe
USA-DG1 Gas/fuel cell/none 10 21 21 19 2 127
USA-DG2 Gas/fuel cell/FF, SCR 2 1.6 1.6 1.4 802
USA-DG3 Gas/fuel cell/FF, SCR 1 1.0 1.0 0.8 962
The construction time for those units is three years or shorter. The economic lifetime of the plants is
40 years. The fuel price assumptions are similar to those included in Table 3.6 on gas prices. The levelised
costs of generating electricity at 5% and 10% discount rates are summarised in Table 6.2. As stated above,
the number of plants in this category is not large enough to draw generic conclusions. While quite high
as compared with traditional grid-connected generation technologies, the levelised generation costs of
fuel cells included in the study are comparable with those obtained for some power plants using renewable
technologies included in Chapter 4.
Table 6.2 – Levelised generation costs of distributed generation plants (USD/MWh)
Plant 5% discount rate 10% discount rate
Investment O&M Fuel Total Investment O&M Fuel Total
USA-DG1 17.0 22.0 34.0 73.0 30.4 22.0 33.7 86.2
23% 30% 47% 100% 35% 26% 39% 100%
USA-DG2 6.4 8.2 43.8 58.4 11.5 8.2 43.4 63.1
11% 14% 75% 100% 18% 13% 69% 100%
USA-DG3 32.2 14.3 48.1 94.6 56.7 14.3 47.7 118.7
34% 15% 51% 100% 48% 12% 40% 100%
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