Projected Costs of Generating Electricity 2010

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Projected Costs ofGenerating Electricity

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INTERNATIONAL ENERGY AGENCYNUCLEAR ENERGY AGENCY

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT


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InternatIonal energy agency

The International Energy Agency (IEA), an autonomous agency, was established in Novem-ber 1974. Its mandate is two-old: to promote energy security amongst its member countriesthrough collective response to physical disruptions in oil supply and to advise member countrieson sound energy policy.

The IEA carries out a comprehensive programme o energy co-operation among 28 advanced

economies, each o which is obliged to hold oil stocks equivalent to 90 days o its net imports.The Agency aims to: Secure member countries access to reliable and ample supplies o all orms o energy; in

particular, through maintaining eective emergency response capabilities in case o oilsupply disruptions.

Promote sustainable energy policies that spur economic growth and environmental pro-tection in a global context particularly in terms o reducing greenhouse-gas emissionsthat contribute to climate change.

Improve transparency o international markets through collection and analysis o energydata.

Support global collaboration on energy technology to secure uture energy supplies andmitigate their environmental impact, including through improved energy eciency and

development and deployment o low-carbon technologies. Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders.

IEA member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark,Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Korea (Republic o), Luxembourg,the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden,Switzerland, Turkey, the United Kingdom and the United States. The European Commission alsoparticipates in the work o the IEA.

nUclear energy agency

The OECD Nuclear Energy Agency (NEA) was established on 1st February 1958 under the nameo the OEEC European Nuclear Energy Agency. It received its present designation on 20th April1972, when Japan became its rst non-European ull member. NEA membership today consists o28 OECD member countries: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark,Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, theNetherlands, Norway, Portugal, Republic o Korea, the Slovak Republic, Spain, Sweden, Switzer-land, Turkey, the United Kingdom and the United States. The Commission o the European Com-munities also takes part in the work o the Agency.

The mission o the NEA is: to assist its member countries in maintaining and urther developing, through interna-

tional co-operation, the scientic, technological and legal bases required or a sae, envi-

ronmentally riendly and economical use o nuclear energy or peaceul purposes, as wellas

to provide authoritative assessments and to orge common understandings on key issues,as input to government decisions on nuclear energy policy and to broader OECD policyanalyses in areas such as energy and sustainable development.

Specic areas o competence o the NEA include saety and regulation o nuclear activities,radioactive waste management, radiological protection, nuclear science, economic and technicalanalyses o the nuclear uel cycle, nuclear law and liability, and public inormation.

The NEA Data Bank provides nuclear data and computer program services or participatingcountries. In these and related tasks, the NEA works in close collaboration with the InternationalAtomic Energy Agency in Vienna, with which it has a Co-operation Agreement, as well as with

other international organisations in the nuclear eld.


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organISatIon For econoMIc co-oPeratIon anD DeVeloPMent

The OECD is a unique orum where the governments o 30 democracies work together toaddress the economic, social and environmental challenges o globalisation. The OECD is alsoat the oreront o eorts to understand and to help governments respond to new developmentsand concerns, such as corporate governance, the inormation economy and the challenges o anageing population. The Organisation provides a setting where governments can compare policy

experiences, seek answers to common problems, identiy good practice and work to co-ordinatedomestic and international policies.

The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the SlovakRepublic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. TheCommission o the European Communities takes part in the work o the OECD.

OECD Publishing disseminates widely the results o the Organisations statistics gathering andresearch on economic, social and environmental issues, as well as the conventions, guidelinesand standards agreed by its members.

Copyright 2010

Organisation or Economic Co-operation and Development/International Energy Agency9 rue de la Fdration, 75739 Paris Cedex 15, France

and

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No reproduction, transmission or translation o this publication may be made

without prior written permission. Applications should be sent to: [email protected]

Also available in French under the title:

Cots prvisionnels de production de llectricitdition 2010

Corrigenda to OECD publications may be ound on line at: www.oecd.org/publishing/corrigenda.


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Foreword

This joint report by the International Energy Agency (IEA) and the OECD Nuclear EnergyAgency (NEA) is the seventh in a series o studies, started in 1983, on the projected costs oelectricity generation. Despite increased concerns about the condentiality o commerciallyrelevant cost data, the 2010 edition thanks to the co-operation o member countries, non-membercountries, industry and academia includes a larger number o technologies and countries thanever beore.

The study contains data on electricity generating costs or almost 200 power plants in 17 OECDmember countries and 4 non-OECD countries. It was conducted under the supervision o theAd hoc Expert Group on Electricity Generating Costs which was composed o representatives othe participating OECD member countries, experts rom the industry and academia as well asrom the European Commission and the International Atomic Energy Agency (IAEA). Experts romBrazil, India and Russia also participated.

In Part I, the study presents the projected costs o generating electricity calculated accordingto common methodological rules on the basis o the data provided by participating countries andorganisations. Data were received or a wide variety o uels and technologies, including coal, gas,nuclear, hydro, onshore and oshore wind, biomass, solar, wave and tidal. Cost estimates were

also provided or combined heat and power (CHP) plants, as well as or coal plants that includecarbon capture. As in previous studies o the same series, all costs and benets were discountedor capitalised to the date o commissioning in order to calculate the levelised costs o electricity(LCOE) per MWh, based on plant operating lietime data.

The LCOE provided in Part I depend heavily, o course, on the underlying assumptions. Whilereasonable and vetted by experts, these assumptions can never cover all cases. Part II thereoreprovides a number o sensitivity analyses that show the relative impact on LCOE o changes inkey underlying variables such as discount rates, uel, carbon or construction costs, or even loadactors and lietimes o plants. This provides the reader with a more complete picture.

In addition, Part II also contains a number o discussions on boundary issues that do not

necessarily enter into the calculation o LCOE but have an impact on decision making in theelectricity sector. They include the actors aecting the cost o capital, the outlook or carboncapture and storage, the working o electricity markets and the systemic eects o intermittentrenewable energies. A concluding chapter provides inormation on other studies o electricitygenerating costs. Two annexes contain inormation on the data rom non-OECD countries and alist o abbreviations. It is the hope o the authors that the nal product will constitute a valuabletool or policy makers, market players and researchers concerned with energy and climate changepolicies.

This study is published under the responsibility o the OECD Secretary-General and theIEA Executive Director. It refects the collective views o the participating experts, though notnecessarily those o their parent organisations or governments.


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Acknowledgements

The lead authors and coordinators o the study were Ms. Mara Sicilia Salvadores, SeniorElectricity Markets Expert, IEA, and Proessor Jan Horst Keppler, Principal Economist, NEA. Theywould like to acknowledge the essential contribution o the EGC Expert Group, which assisted inthe sourcing o data, provided advice on methodological issues and reviewed successive drats

o the study. The Group was expertly chaired by Proessor William Dhaeseleer rom Belgium.Dr. Koji Nagano (Japan), Dr. John Paenbarger (United States) and Proessor Alred Voss (Germany)assiduously served the Group as Vice-Chairmen and members o the Bureau. Mr. Ian Cronshaw(IEA), Dr. Thierry Dujardin (NEA) and Mr. Didier Houssin (IEA) provided managerial oversight.The study benetted greatly rom the work o Ms. Alena Pukhova, NEA Consultant.

Mr. Hugo Chandler, IEA (System Integration Aspects o Variable Renewable Power Generation),Mr. Franois Nguyen, IEA (Levelised Costs and the Working o Actual Power Markets) andDr. Uwe Remme, IEA (Carbon Capture and Storage) were the lead authors o specic chaptersin Part II o this study. The Synthesis Report on Other Studies o the Levelised Cost o Electricitywas contributed by Mr. Claudio Marcantonini and Proessor John E. Parsons, both rom theMassachusetts Institute o Technology (MIT). Mr. Alex Zhang, IEA intern, provided researchassistance or cost data in China. Ms. Mari Vie Maeland (IEA), Mr. Wouter van der Goot (IEA) andMs. Esther Ha (NEA) all assisted with the important task o managing large amounts o cost data.Ms. Hlne Dry (NEA) provided consistent and comprehensive administrative support.


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List o participating memberso the Expert Group

Data or this study was provided through the Expert Group, except in the case o China orwhich the Secretariat collected publicly available data rom a variety o Chinese sources.The joint Secretariat is happy to reer any enquiries about data to the respective experts. Please

contact or this purpose Mara Sicilia Salvadores ([email protected]) or Jan Horst Keppler([email protected]).

Country representatives

Christian Schnbauer Energy-Control GmbH (Austria)

William Dhaeseleer University o Leuven Energy Institute,(Chairman) KU Leuven (Belgium)

Erik Delarue University o Leuven Energy Institute,KU Leuven (Belgium)

Lubor eula Nuclear Research InstituteRe (Czech Republic)

Nicolas Barber Direction Gnrale de l'nergie et du Climat (France)

Frdric Lege Commissariat lnergie Atomique (CEA) Saclay (France)

Alred Vo University Stuttgart, IER (Germany)(Vice-Chairman)

Johannes Kerner Bundesministerium r Wirtschat und Technologie(Germany)

Michael Pfugradt German Delegation to the OECD (Germany)

Marc Ringel German Delegation to the OECD (Germany)

Gyrgy Wol Paks Nuclear Power Plant (Hungary)

Fortunato Vettraino Agenzia nazionale per le nuove tecnologie, lenergia e losviluppo economico sostenibile (ENEA) (Italy)

Koji Nagano Central Research Institute o Electric Power Industry(Vice-Chairman) (CRIEPI) (Japan)


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Kee-Hwan Moon Korea Atomic Energy Research Institute (KAERI) (Korea)

Mankin Lee Korea Atomic Energy Research Institute (KAERI) (Korea)

Seung Hyuk Han Korea Hydro & Nuclear Power Co. (Korea)

Hun Baek Korea Hydro & Nuclear Power Co. (Korea)

Eun Hwan Kim Korea Power Exchange (Korea)

Bongsoo Kim Korean Delegation to the OECD

Gert van Uitert Ministry o Economic Aairs (Netherlands)

Ad Seebregts Energy Research Centre o the Netherland (ECN)(Netherlands)

Roger J. Lundmark Swissnuclear (Switzerland)

Nedim Arici Ministry o Energy and Natural Resources (Turkey)

Matthew P. Crozat Department o Energy (United States)

John Stamos Department o Energy (United States)

Henry Shennan Department o Energy and Climate Change(United Kingdom)

Gilberto Hollauer Ministry o Mines and Energy (Brazil)

Sandro N. Damsio Centrais Eltricas Brasileiras ELETROBRS (Brazil)

Sangeeta Verma Ministry o Power (India)

Fedor Veselov Energy Research Institute o the Russian Academyo Sciences (Russia)

Industry representatives

Elizabeth Majeau Canadian Electricity Association

John Paenbarger Constellation Energy(Vice-Chairman)

Thomas Krogh DONG Energy

Jean-Michel Trochet lectricit de France (EDF)

Revis W. James Electric Power Research Institute (EPRI)

Gopalachary Ramachandran Electric Power Research Institute (EPRI)

Franz Bauer Eurelectric/VGB Powertech


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Christian Stolzenberger Eurelectric/VGB Powertech

Jacqueline Boucher Gaz de France (GDF) Suez

Carlos Gasc Iberdrola Renovables

John E. Parsons Massachusetts Institute o Technology

Mats Nilsson Vattenall

Representatives o international organisations

Christian Kirchsteiger European Commission (EC)

Zsolt Pataki Euratom, European Commission (EC)

Nadira Barkatullah International Atomic Energy Agency (IAEA)

Ian Cronshaw International Energy Agency (IEA)

Mara Sicilia Salvadores International Energy Agency (IEA)

Maria Argiri International Energy Agency (IEA)

Hugo Chandler International Energy Agency (IEA)

Alex Zhang International Energy Agency (IEA)

Jan Horst Keppler OECD Nuclear Energy Agency (NEA)

Alena Pukhova OECD Nuclear Energy Agency (NEA)

Further contributors

Others have contributed to the study with data, advice or help on questions o methodology:

Stella Lam Atomic Energy o Canada Limited (Canada)

Lilian Tarnawsky Atomic Energy o Canada Limited (Canada)

Isaac Jimenez Lerma Comisin Federal de Electricidad (Mexico)

Alena Zakova Ministry o Economy (Slovak Republic)

Maria Husarova Ministry o Economy (Slovak Republic)

Magnus Reinsj Vattenall (Sweden)

Michel Delannay Kernkratwerk Gsgen-Dniken (Switzerland)

Jim Hewlett Department o Energy (United States)


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Paul Bailey Department o Energy and Climate Change(United Kingdom)

Altino Ventura Filho Ministry o Mines and Energy (Brazil)

Paulo Altaur Pereira Costa Ministry o Mines and Energy (Brazil)

Srabani Guha Ministry o Power (India)

Gina Downes Eskom Holdings (South Arica)

Luyanda Qwemesha Eskom Holdings (South Arica)

Steve Lennon Eskom Holdings (South Arica)

Clare Savage Energy Supply Association o Australia

Estathios Peteves EU Commission, Joint Research Centre,

Petten (Netherlands)

Peter Fraser Ontario Energy Board (Canada)

Claudio Marcantonini Massachusetts Institute o Technology(United States)

Uwe Remme International Energy Agency (IEA)

Franois Nguyen International Energy Agency (IEA)

Anne-Sophie Corbeau International Energy Agency (IEA)

Mari Vie Maeland International Energy Agency (IEA)

Brian Ricketts International Energy Agency (IEA)

Wouter van der Goot International Energy Agency (IEA)

Hlne Dry OECD Nuclear Energy Agency (NEA)

Esther Ha OECD Nuclear Energy Agency (NEA)


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Table o contents

Fwd .................................................................................................................................................................................... 5

akwdms ............................................................................................................................................................ 6

lis piipi mms exp gup ........................................................................................ 7

t s .................................................................................................................................................................. 11

lis s ............................................................................................................................................................................ 13

lis fus .......................................................................................................................................................................... 14

exuiv summ ............................................................................................................................................................ 17

Part I MethoDology anD Data on leVelISeD coStS For generatIng electrIcIty

cp 1 Idui d x .................................................................................................................... 29

cp 2 Md, vis d k ssumpis ................................................................ 33

2.1 The notion o levelised costs o electricity (LCOE)................................................. 33

2.2 The EGC spreadsheet model or calculating LCOE ............................................... 37

2.3 Methodological conventions and key assumptions or calculatingLCOE with the EGC spreadsheet model ...................................................................... 41

Conclusions ............................................................................................................................................. 45

cp 3 t vviw ............................................................................................................................. 47

3.1 Presentation o dierent power technologies ......................................................... 47

3.2 Technology-by-technology data on electricity generating costs ................. 59

cp 4 cu--u d ii i ss di is ........................................................................................................................... 65

4.1 Country-by-country data on electricity generating costs (bar graphs) ... 65

4.2 Country-by-country data on electricity generating costs(numerical tables) ..................................................................................................................... 89


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Part II SenSItIVIty analySeS anD boUnDary ISSUeS

cp 5 Mdi s ................................................................................................................................................ 101

cp 6 Ssiivi ss ................................................................................................................................ 105

6.1 Multi-dimensional sensitivity analysis ....................................................................... 1066.2 Summary results o the sensitivity analyses or dierent parameters .. 112

6.3 Qualitative discussion o dierent variables aecting the LCOE ................ 123

cp 7 Ssm ii sps vi w pw i .................... 141

7.1 Introduction ................................................................................................................................. 141

7.2 Variability ........................................................................................................................................ 142

7.3 Flexibility ........................................................................................................................................ 145

7.4 Costing variable renewable integration ....................................................................... 146

7.5 Power system adequacy ......................................................................................................... 149

cp 8 Fii issus ....................................................................................................................................... 151

8.1 Social resource cost and private investment cost: the dierenceis uncertainty .............................................................................................................................. 151

8.2 The role o corporate taxes and the coherence o scal andenergy policy ................................................................................................................................ 155

8.3 The impact o the nancial and economic crisis .................................................. 158

8.4 Options or improving investment conditions in the power sector .......... 160

cp 9 lvisd ss d wki u pw mks ........................................... 163

9.1 Use and limitations o LCOE .............................................................................................. 164

9.2 Power market unctioning and electricity pricing incompetitive markets ............................................................................................................... 168

9.3 Qualitative assessment o major risks associated with generationtechnologies ................................................................................................................................. 172

9.4 Policy considerations .............................................................................................................. 174

cp 10 c pu d s .............................................................................................................. 177

10.1 Introduction .............................................................................................................................. 177

10.2 Role o CCS in CO2 mitigation ......................................................................................... 178

10.3 CO2 capture and storage in power generation ..................................................... 181

10.4 Demonstration and deployment o CCS..................................................................

187

cp 11 Ssis p sudis visd s ii....................... 189

11.1 Introduction .............................................................................................................................. 189

11.2 Common lessons .................................................................................................................... 196


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anneXeS

ax 1 Issus i d m -oecD uis d ssumpis ii i s uis ............................................................................. 201

Brazil ............................................................................................................................................................ 202

China ........................................................................................................................................................... 204Russia .......................................................................................................................................................... 208

South Arica ............................................................................................................................................ 210

ax 2 lis viis ............................................................................................................................... 213

lISt oF tableS

Table 1.1 Summary overview o responses ............................................................................................... 30

Table 2.1 National currency units (NCU) per USD (2008 average) ............................................... 38

Table 3.1a Overnight costs o electricity generating technologies (USD/kWe) Mainstream technologies ............................................................................................................... 48

Table 3.1b Overnight costs o electricity generating technologies (USD/kWe) Other technologies .............................................................................................................................. 49

Table 3.2 Nuclear power plants ........................................................................................................................ 50

Table 3.3a Coal-red power generation technologies ........................................................................... 53

Table 3.3b Coal-red power generation technologies with CC(S) .................................................. 54

Table 3.4 Gas-red power generation technologies ............................................................................. 55

Table 3.5 Renewable energy sources ............................................................................................................. 57

Table 3.6 Combined heat and power (CHP) plants ............................................................................... 58Table 3.7a Nuclear power plants: Levelised costs o electricity

in US dollars per MWh ..................................................................................................................... 59

Table 3.7b Coal-red power plants: Levelised costs o electricityin US dollars per MWh ..................................................................................................................... 60

Table 3.7c Gas-red power plants: Levelised costs o electricityin US dollars per MWh ..................................................................................................................... 61

Table 3.7d Renewable power plants: Levelised costs o electricityin US dollars per MWh ..................................................................................................................... 62

Table 3.7e CHP: Levelised costs o electricity in US dollars per MWh ......................................... 63

Table 3.7 Oil: Levelised costs o electricity in US dollars per MWh ............................................ 63

Table 3.7g Fuel cells: Levelised costs o electricity in US dollars per MWh ............................. 63

Table 4.1a Country-by-country data on electricity generating costs or mainstreamtechnologies (at 5% discount rate) ............................................................................................ 90

Table 4.1b Country-by-country data on electricity generating costs or mainstreamtechnologies (at 10% discount rate) .......................................................................................... 92

Table 4.2a Country-by-country data on electricity generating costs or othertechnologies (at 5% discount rate) ............................................................................................ 94

Table 4.2b Country-by-country data on electricity generating costs or othertechnologies (at 10% discount rate) .......................................................................................... 96

Table 5.1 Overview o the data points or each main generation technology ..................... 102

Table 5.2 Median case specications summary ..................................................................................... 103Table 6.1 Median case ............................................................................................................................................ 105


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Table 6.2 Total generation cost structure ................................................................................................... 112

Table 6.3 2009 WEO ossil uel price assumptions in the Reerence Scenario(2008 USD per unit) ............................................................................................................................. 114

Table 6.4 2009 WEO ossil uel price assumptions in the 450 Scenario(2008 USD per unit) ............................................................................................................................. 114

Table 7.1 Penetration o wind energy in electricity production ................................................... 142Table 9.1 Main risk actors or investors in power generation ...................................................... 166

Table 9.2 Qualitative assessment o generating technology risks .............................................. 172

Table 10.1 Electricity generation mix in 2050 or the BASE scenario and dierentvariants o the BLUE scenario ...................................................................................................... 180

Table 10.2 Technical and economic characteristics o power plants withcarbon capture ...................................................................................................................................... 186

Table 11.1a LCOE or nuclear, pulverised coal, IGCC, gas and biomass ........................................ 190

Table 11.1b LCOE or nuclear, pulverised coal, IGCC, gas and biomass ........................................ 191

Table 11.2 LCOE or wind, hydro, solar PV and solar thermal .......................................................... 192

Table 11.3 Financial assumptions in dierent studies ......................................................................... 195Table A.1 Emission limits or selected airborne pollutants ............................................................. 203

Table A.2 China power plant overnight construction cost ............................................................... 205

Table A.3 Qinhuangdao domestic coal prices .......................................................................................... 205

Table A.4 West-East pipeline gas (2008) ....................................................................................................... 206

lISt oF FIgUreS

Figure ES.1 Regional ranges o LCOE or nuclear, coal, gas andonshore wind power plants (at 5% discount rate) ........................................................... 18

Figure ES.2 Regional ranges o LCOE or nuclear, coal, gas andonshore wind power plants (at 10% discount rate) ........................................................ 19

Figure 4.1a Austria levelised costs o electricity (at 5% discount rate) ..................................... 66

Figure 4.1b Austria levelised costs o electricity (at 10% discount rate) ................................... 66

Figure 4.2a Belgium levelised costs o electricity (at 5% discount rate) ................................... 67

Figure 4.2b Belgium levelised costs o electricity (at 10% discount rate) ................................. 67

Figure 4.3a Canada levelised costs o electricity (at 5% discount rate) ..................................... 68

Figure 4.3b Canada levelised costs o electricity (at 10% discount rate) .................................. 68

Figure 4.4a Czech Republic levelised costs o electricity (at 5% discount rate) .................... 69

Figure 4.4b Czech Republic levelised costs o electricity (at 10% discount rate) ................. 69

Figure 4.5a France levelised costs o electricity (at 5% discount rate) ....................................... 70

Figure 4.5b France levelised costs o electricity (at 10% discount rate) .................................... 70

Figure 4.6a Germany levelised costs o electricity (at 5% discount rate) ................................. 71

Figure 4.6b Germany levelised costs o electricity (at 10% discount rate) ............................... 71

Figure 4.7a Hungary levelised costs o electricity (at 5% discount rate) .................................. 72

Figure 4.7b Hungary levelised costs o electricity (at 10% discount rate) ................................ 72

Figure 4.8a Italy levelised costs o electricity (at 5% discount rate) ............................................ 73

Figure 4.8b Italy levelised costs o electricity (at 10% discount rate) ......................................... 73

Figure 4.9a Japan levelised costs o electricity (at 5% discount rate) ......................................... 74Figure 4.9b Japan levelised costs o electricity (at 10% discount rate) ....................................... 74


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Figure 4.10a Korea levelised costs o electricity (at 5% discount rate) ......................................... 75

Figure 4.10b Korea levelised costs o electricity (at 10% discount rate) ...................................... 75

Figure 4.11a Mexico levelised costs o electricity (at 5% discount rate) ...................................... 76

Figure 4.11b Mexico levelised costs o electricity (at 10% discount rate) ................................... 76

Figure 4.12a Netherlands levelised costs o electricity (at 5% discount rate) .......................... 77

Figure 4.12b Netherlands levelised costs o electricity (at 10% discount rate) ....................... 77

Figure 4.13a Slovak Republic levelised costs o electricity (at 5% discount rate) .................. 78

Figure 4.13b Slovak Republic levelised costs o electricity (at 10% discount rate) ................ 78

Figure 4.14a Sweden levelised costs o electricity (at 5% discount rate) .................................... 79

Figure 4.14b Sweden levelised costs o electricity (at 10% discount rate) ................................. 79

Figure 4.15a Switzerland levelised costs o electricity (at 5% discount rate) ........................... 80

Figure 4.15b Switzerland levelised costs o electricity (at 10% discount rate) ........................ 80

Figure 4.16a United States levelised costs o electricity (at 5% discount rate) ....................... 81

Figure 4.16b United States levelised costs o electricity (at 10% discount rate) ..................... 81

Figure 4.17a Brazil levelised costs o electricity (at 5% discount rate) ......................................... 82Figure 4.17b Brazil levelised costs o electricity (at 10% discount rate) ...................................... 82

Figure 4.18a China levelised costs o electricity (at 5% discount rate) ........................................ 83

Figure 4.18b China levelised costs o electricity (at 10% discount rate) ...................................... 83

Figure 4.19a Russia levelised costs o electricity (at 5% discount rate) ....................................... 84

Figure 4.19b Russia levelised costs o electricity (at 10% discount rate) ..................................... 84

Figure 4.20a South Arica levelised costs o electricity (at 5% discount rate) .......................... 85

Figure 4.20b South Arica levelised costs o electricity (at 10% discount rate) ....................... 85

Figure 4.21a ESAA levelised costs o electricity (at 5% discount rate) ............................................. 86

Figure 4.21b ESAA levelised costs o electricity (at 10% discount rate)...........................................

86Figure 4.22a Eurelectric/VGB levelised costs o electricity (at 5% discount rate) ...................... 87

Figure 4.22b Eurelectric/VGB levelised costs o electricity (at 10% discount rate) .................... 87

Figure 4.23a US EPRI levelised costs o electricity (at 5% discount rate) ........................................ 88

Figure 4.23b US EPRI levelised costs o electricity (at 10% discount rate) ...................................... 88

Figure 6.1 Tornado graph 1 nuclear ................................................................................................................. 106

Figure 6.2 Tornado graph 2 gas ........................................................................................................................... 107

Figure 6.3 Tornado graph 3 coal ......................................................................................................................... 108

Figure 6.4 Tornado graph 4 coal with CC(S) ................................................................................................ 109

Figure 6.5 Tornado graph 5 onshore wind ................................................................................................... 110

Figure 6.6 Tornado graph 6 solar PV ................................................................................................................ 110Figure 6.7 LCOE as a unction o the discount rate ................................................................................ 112

Figure 6.8 The ratio o investment cost to total costs as a unction o the discount rate ...... 113

Figure 6.9 LCOE as a unction o uel cost variation (at 5 % discount rate) ............................. 115

Figure 6.10 LCOE as a unction o uel cost variation (at 10% discount rate) ............................ 115

Figure 6.11 Share o uel cost over total LCOE calculated (at 5 % discount rate) .................... 115

Figure 6.12 Share o uel cost over total LCOE calculated (at 10% discount rate) ................... 115

Figure 6.13 LCOE as a unction o carbon cost variation (at 5 % discount rate) ...................... 117

Figure 6.14 LCOE as a unction o carbon cost variation (at 10% discount rate) ..................... 117

Figure 6.15 Share o CO2 cost over total LCOE calculated (at 5% discount rate) ..................... 118Figure 6.16 Share o CO2 cost over total LCOE calculated (at 10% discount rate) ................... 118


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Figure 6.17 LCOE as a unction o a 30% construction cost increase (at 5%discount rate) ......................................................................................................................................... 119

Figure 6.18 LCOE as a unction o a 30% construction cost increase (at 10%discount rate) ......................................................................................................................................... 119

Figure 6.19 LCOE as a unction o a variation in the construction period (at 5%

discount rate).........................................................................................................................................

120Figure 6.20 LCOE as a unction o a variation in the construction period (at 10%discount rate) ......................................................................................................................................... 120

Figure 6.21 LCOE as a unction o a variation in the load actor (at 5% discount rate) ....... 121

Figure 6.22 LCOE as a unction o a variation in the load actor (at 10% discount rate) .... 121

Figure 6.23 LCOE as a unction o lietime variation (at 5% discount rate) ................................ 122

Figure 6.24 LCOE as a unction o lietime variation (at 10% discount rate) ............................. 122

Figure 6.25 Incremental power generation in the OECD area ............................................................ 125

Figure 6.26 Monthly gas prices in key OECD regional gas markets ................................................ 127

Figure 6.27 Steam coal quarterly import costs and monthly spot prices ................................... 128

Figure 6.28 Average prices in the EU or natural uranium delivered under spot andmultiannual contracts, 1980-2008 (in EUR/kgU and USD/lb U3O8) ......................... 130

Figure 6.29 Monthly natural uranium spot prices in USD/lb U3O8 .................................................. 131

Figure 6.30 Changes in installed capacity in the OECD area (GW) .................................................. 133

Figure 6.31 Changes in installed capacity in the OECD North America region (GW) .......... 134

Figure 6.32 Changes in installed capacity in the OECD Asia-Pacic region (GW) .................. 134

Figure 6.33 Changes in installed capacity in the OECD Europe region (GW) ............................ 135

Figure 6.34 IHS CERA Power Capital Cost Index (PCCI) ........................................................................... 137

Figure 6.35 Electric Power Generation Producer Price Index .............................................................. 138

Figure 7.1 Smoothing eect o geo-spread on wind power outputin Germany (2-12 February 2005) ............................................................................................... 143

Figure 7.2 Monthly capacity actors or wind and PV, Germany, 2005 ........................................ 144

Figure 7.3 Western Denmarks electricity trading with Norway and Sweden: windpower or hydropower ...................................................................................................................... 146

Figure 7.4 Estimates o increase in balancing costs .............................................................................. 147

Figure 8.1 Impact o corporate taxes at 5% discount rate and 50% equity nance ............ 157

Figure 8.2 Impact o corporate taxes at 10% basic discount rate and50% equity nance .............................................................................................................................. 158

Figure 9.1 Illustrative electricity market clearing based on marginal costs ........................... 170

Figure 10.1 Reduction in CO2 emissions rom the baseline scenario in the powersector in the ACT Map and BLUE Map scenarios in 2050,

by technology area..............................................................................................................................

179Figure 10.2 CO2 capture processes ...................................................................................................................... 181

Figure 10.3 Cost components o the capture costs or a coal and naturalgas power plant .................................................................................................................................... 185

Figure 10.4 CO2 avoidance costs or dierent coal and gas power plants between2010 and 2030 ......................................................................................................................................... 187

Figure 11.1 LCOE or nuclear .................................................................................................................................. 196

Figure 11.2 LCOE or pulverised coal ................................................................................................................. 197

Figure 11.3 LCOE or IGCC ........................................................................................................................................ 197

Figure 11.4 LCOE or gas ............................................................................................................................................ 198


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Executive summary

Projected Costs o Generating Electricity 2010 Edition presents the main results o the work carriedout in 2009 or calculating the costs o generating baseload electricity rom nuclear and ossil uelthermal power stations as well as the costs o generating electricity rom a wide range o renew-able technologies, some o them with variable or intermittent production. All o the includedtechnologies are expected to be commissioned by 2015. The core o the study consists o indi-vidual country data on electricity generating costs. However, the study also includes or the rsttime extensive sensitivity analyses or key cost parameters, since one o the objectives is to pro-vide reliable inormation on key actors aecting the economics o electricity generation using arange o technologies. This new report in the series continues the now traditional representationo baseload generating costs made in order to compare the various types o generating plantswithin each o the countries represented and also to provide a basis or comparing generatingcosts between dierent countries or similar types o plant. The report can serve as a resourceor policy makers, researchers and industry proessionals seeking to better understand the powergeneration costs o dierent technologies.

The study ocuses on the expected plant-level costs o baseload electricity generation bypower plants that could be commissioned by 2015. It also includes the generating costs o a widerange o renewable energy sources, some o which have variable output. In addition, the report

covers projected costs related to advanced power plants o innovative designs, namely commer-cial plants equipped with carbon capture, which might reach the level o commercial availabilityand be commissioned by 2020.

The study was carried out with the guidance and support o an ad hoc Expert Group o o-cially appointed national experts, industry experts and academics. Cost data provided by theexperts were compiled and used by the joint IEA/NEA Secretariat to calculate the levelised costso electricity (LCOE) or baseload power generation.

The calculations are based on the simple levelised average (unit) lietime cost approachadopted in previous studies, using the discounted cash fow (DCF) method. The calculations usegeneric assumptions or the main technical and economic parameters as agreed upon by the ad

hoc Expert Group. The most important assumptions concern the real discount rates, 5% and 10%,also keeping with tradition, uel prices and, or the rst time, a carbon price o USD 30 per tonneo CO2.1

1. See Chapter 2 on Methodology, conventions and key assumptions or urther details on questions o methodology

and Chapter 7 on Financing issues or a discussion o discount rates. It needs to be kept in mind that the LCOEmethodology deals with nancial costs only and does not include any social or external costs o electricity production.


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4The study reaches two important conclusions (see Figures ES.1 and ES.2 below). First, in the

low discount rate case, more capital-intensive, low-carbon technologies such as nuclear energyare the most competitive solution compared with coal-red plants without carbon capture andnatural gas-red combined cycle plants or baseload generation. Based on the data available orthis study, where coal is low cost (such as in Australia or certain regions o the United States), bothcoal plants with and without carbon capture [but not transport or storage, reerred to as CC(S)] are

also globally competitive in the low discount rate case. It should be emphasized that these resultsincorporate a carbon price o USD 30 per tonne o CO2, and that there are great uncertainties con-cerning the cost o carbon capture, which has not yet been deployed on an industrial scale.

Figure ES.1: Regional ranges o LCOE or nuclear, coal, gas and onshore wind power plants

(at 5% discount rate)

Second, in the high discount rate case, coal without carbon capture equipment, ollowed by

coal with carbon capture equipment, and gas-red combined cycle turbines (CCGTs), are thecheapest sources o electricity. In the high discount rate case, coal without CC(S) is always cheaperthan coal with CC(S), even in low-cost coal regions, at a carbon price o USD 30 per tonne. Theresults highlight the paramount importance o discount rates and, to a lesser extent, carbon anduel prices when comparing dierent technologies. The study thus includes extensive sensitivityanalyses to test the relative impact o variations in key cost parameters (such as discount rates,construction costs, uel and carbon prices, load actors, lietimes and lead times or construction)on the economics o dierent generating technologies individually considered.

0 50 100 150 200 250

Onshorewind

Gas

Coal

Nuclear

Onshorewind

Gas

Coal

Nuclear

Onshorewind

Gas

Coal

Nuclear

N

.America

Europe

AsiaPacific

Onshore windGas

Nuclear Coal (USD/MWh)

CA

N,

MEX

,USA

,

EPRI

ESAA

,JPN,K

OR

AUT

,BEL

,CHE

,CZE

,

DEU

,EDF,Eurelec-

tric/VGB

,HUN

,ITA

,

NLD

,SVK

,SWE

Median line


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4Figure ES.2: Regional ranges o LCOE or nuclear, coal, gas and onshore wind power plants

(at 10% discount rate)

Features o the method o calculation

The study includes 21 countries and gathered cost data or 190 power plants. Data was providedor 111 plants by the participants in the Expert Group representing 16 OECD member countries(Austria, Belgium, Canada, Czech Republic, France, Germany, Hungary, Italy, Japan, Korea, Mexico,Netherlands, Slovak Republic, Sweden, Switzerland and United States), or 20 plants by 3 non-member countries (Brazil, Russia and South Arica) and or 39 plants by industry participants[ESAA (Australia), EDF (France), Eurelectric (European Union) and EPRI (United States)]. In addi-tion, the Secretariat also collected data or 20 plants under construction in China using both pub-licly available and ocial Chinese data sources.

The total sample comprises 34 coal-red power plants without carbon capture, 14 coal-red

power plants with carbon capture [reerred to in the study as coal with CC(S)], 27 gas-red plants,20 nuclear plants, 18 onshore wind power plants, 8 oshore wind plants, 14 hydropower plants,17 solar photovoltaic plants, 20 combined heat and power (CHP) plants using various uels and18 plants based on other uels or technologies. The data provided or the study highlight theincreasing interest o participating countries in low-carbon technologies or electricity gener-ation, including nuclear, wind and solar power, CHP plants as well as rst commercial plantsequipped with carbon capture, all key technologies or decarbonising the power sector.

Onshore windGas

Nuclear Coal (USD/MWh)

0 50 100 150 200 250

Onshorewind

Gas

Coal

Nuclear

Onshorewind

Gas

Coal

Nuclear

Onshorewind

Gas

Coal

Nuclear

N.

Am

erica

Europe

AsiaPacific

Median line

CAN

,ME

X,

USA

,

EP

RI

ESAA

,JPN

,KOR

AUT

,BEL

,CHE

,CZE

,

DEU

,EDF,Eurelec-

tric/VGB

,HUN

,ITA

,

NLD

,SVK

,SWE


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4The electricity generation costs calculated are plant-level (busbar) costs, at the station, and

do not include transmission and distribution costs. Neither does the study include other sys-temic eects such as the costs incurred or providing back-up or variable or intermittent (non-dispatchable) renewable energies. For the calculation o the costs o coal-red power generationwith carbon capture, only the costs o capture net o transmission and storage have been takeninto account. Finally, the cost estimates do not include any external costs associated either with

residual emissions other than CO2 emissions or impacts on the security o supply.

A number o key observations can be highlighted rom the sample o plants considered in thisstudy. A rst issue is the wide dispersion o data. The results vary widely rom country to country;even within the same region there are signicant variations in the cost or the same technolo-gies. While some o this spread o data refects the timing o estimates (costs rose rapidly overthe last our years, beore alling late in 2008 and 2009), a key conclusion is that country-speciccircumstances determine the LCOE. It is clearly impossible to make any generalisation on costsabove the regional level; but also within regions (OECD Europe, OECD Asia), and even within largecountries (Australia, United States, China or Russia), there are large cost dierences dependingon local cost conditions (e.g. access to ossil uels, availability o renewable resources, dierentmarket regulations, etc.). These dierences highlight the need to look at the country or even

sub-country level.2

A second issue relates to the quality o data itsel. High-quality data is needed to producereliable gures. However, the widespread privatisation o utilities and the liberalisation o powermarkets in most OECD countries have reduced access to oten commercially sensitive data onproduction costs. Data used in this study is based on a mix o current experience, publishedstudies or industry surveys. The nal cost gures are subject to uncertainty due to the ollowingelements:

Future uel and CO 2 prices: it is important to note that or the rst time a price o car-bon or all OECD countries is internalised and included in LCOE calculations. Policies toreduce greenhouse gas emissions have reached a level o maturity such that memberso the Expert Group decided that a carbon price o 30 USD per tonne o CO2 was now

the most realistic assumption or plants being commissioned in 2015. Nevertheless, thegroup underlines the uncertainties connected to this assumption.

Present and uture nancing costs.

Construction costs.

Costs or decommissioning and storage, which particularly aect nuclear energy, stillremain uncertain due to the relatively small experience base, noting that the DCF meth-odology employed in the study means that decommissioning costs become negligible ornuclear at any realistic discount rate.

In an indirect manner, the results o the study also depend on uture electricity pricessince the LCOE methodology presupposes stable electricity prices that ully cover costs

over the lie o a power plant. A dierent electricity price assumption would yield dier-ent results.

The current edition oProjected Costs o Generating Electricity has been produced in a period ounprecedented uncertainty given the current economic and policy context, characterised on theone hand by the growing momentum o climate change policies as well as uncertainty about thetiming o the impact o policy measures and, on the other hand, by the dramatic changes in eco-nomic conditions aecting both energy demand and supply.

2. In particular, the cost or renewable energy technologies shows important variations rom country to country and,

within each country, rom location to location. In addition, some o the largest current markets or renewable energy are notrepresented in the study.


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4In addition to the uncertainties described above, there are also other actors which cannot

be adequately incorporated into a cross-country analysis but need to be acknowledged, and arethereore dealt with in the study in a qualitative manner in dedicated boundary chapters:

integrating variable and intermittent renewable energies in most existing electricity sys-tems;

current cost o capital or energy projects and dierences in tax treatment;

issues in connection with the behaviour o energy markets (demand and price risk);

cost o CC(S), a technology that can be key or the decarbonisation o the power sector, yetis still in the development stage.

Increased uncertainty drives up costs through higher required returns on investment/discountrates, and this applies to all electricity generating technologies. However, higher discount ratespenalise more heavily capital-intensive, low-carbon technologies such as nuclear, renewables orcoal with CC(S) due to their high upront investment costs, and comparatively avour ossil-ueltechnologies with higher operating costs but relatively lower investment costs, especially gasCCGT. For renewable technologies, site-specic load actors can also be decisive. Overall, however,

access to nancing and the stability o the environmental policy rameworks to be developed inthe coming years will be crucial in determining the outcome o the successul decarbonisation othe power sector.

Main results

With all the caveats inherent to the EGC methodology, Projected Costs o Generating Electricity nev-ertheless enables the identication o a number o tendencies that will shape the electricity sec-tor in the years to come. The most important among them is the act that nuclear, coal, gas and,where local conditions are avourable, hydro and wind, are now airly competitive generationtechnologies or baseload power generation.3 Their precise cost competitiveness depends more

than anything on the local characteristics o each particular market and their associated cost onancing, as well as CO2 and ossil uel prices.4 As mentioned earlier, the lower the cost o nanc-ing, the better the perormance o capital-intensive, low-carbon technologies such as nuclear,wind or CC(S); at higher rates, coal without CC(S) and gas will be more competitive. There is notechnology that has a clear overall advantage globally or even regionally. Each one o these tech-nologies has potentially decisive strengths and weaknesses that are not always refected in theLCOE gures provided in the study.

Nuclears strength is its capability to deliver signicant amounts o very low carbon baseloadelectricity at costs stable over time; it has to manage, however, high amounts o capital at risk andits long lead times or construction. Permanent disposal o radioactive waste, maintaining overallsaety, and evolving questions concerning nuclear security and prolieration remain issues thatneed to be solved or nuclear energy.

3. The variable nature o wind power, in contrast to conventional, dispatchable technologies, requires fexible reserves

to be on hand or when the resource is not available. Thus, the wind cost is higher at the level o the system than at the

level o the plant, although our analysis o integration studies (see Chapter 7) suggests that this additional cost is not

prohibitive. System costs are likely to be lower in larger markets, with a geographical spread o plants, and when wind is

part o a complementary portolio o other generation technologies.

4. Other renewable energies are or the time being outside this range, although signicant cost reductions are expectedwith larger deployment, in particular or solar PV as intermediate load.


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4Coals strength is its economic competitiveness in the absence o carbon pricing and neglect-

ing other environmental costs. This applies in particular where coal is cheap and can be used orgenerating electricity close to the mine, such as in the western United States, Australia, SouthArica, India and China. However, this advantage is markedly reduced where signicant transportor transaction costs apply, or where carbon costs are included. The high probability o more gen-eralised carbon pricing and more stringent local environmental norms thus drastically reduce the

initial cost advantage.

Carbon capture [CC(S)] has not yet been demonstrated on a commercial scale or ossil-uelledplant. The costs provided in the study reer to carbon capture at plant level [CC(S)]; an unprovenrule o thumb says that transport and storage might add another USD 10-15 per MWh. Until arealistic number o demonstration plants have been operated or worthwhile time rames, totalCC(S) costs will remain uncertain.

The great advantage ogas-red power generation is its fexibility, its ability to set the price incompetitive electricity markets, hedging nancial risk or its operators and its lower CO2 prole;on the other hand, when used or baseload power production it has comparatively high costs

given the gas price assumptions (except at high discount rates) and is subject to security o sup-ply concerns in some regions. Progress in the extraction o lower-cost shale gas has eased thesupply and demand balance and thereore improved the competitive outlook or natural gas inNorth America, where prices are around hal those based on oil-indexation in Continental Europeor the OECD Asia-Pacic region.

For the rst time, onshore wind is included among the potentially competitive electricity gener-ation sources in this edition oProjected Costs o Generating Electricity. On the basis o the dynamicsgenerated by strong government support, onshore wind is currently closing its still existing butdiminishing competitiveness gap. Its weakness is its variability and unpredictability, which canmake system costs higher than plant costs, although these can be addressed through geographicdiversity and an appropriate mix with other technologies. According to the data available or this

study, oshore wind is currently not competitive with conventional thermal or nuclear baseloadgeneration. Many renewable technologies, however, are immature, although their capital costscan be expected to decline over the next decade. Renewables, like nuclear, also benet rom stablevariable costs, once built.

IProjected Costs o Generating Electricity is any indication, the uture is likely to see healthycompetition between these dierent technologies, competition that will be decided accordingto national preerences and local comparative advantages. At the same time, the margins are sosmall that no country will be able to insulate its choices rom the competitive pressures emanat-ing rom alternative technology options. The choices available and the pressure on operators andtechnology providers to oer attractive solutions have never been greater. In the medium term,investing in power markets will be raught with uncertainty.

Coal-fred generating technologies

Most coal-red power plants in OECD countries have overnight investment costs ranging between900 and 2 800 USD/kWe or plants without carbon capture.5 Plants with carbon capture have over-night investment costs ranging rom 3 223 to 6 268 USD/kWe. Coal plants with carbon capture arehenceorth reerred to as coal plants with CC(S) in order to indicate that their cost estimates donot include the costs or storage and transportation.

5. Overnight construction costs include owners cost, EPC (engineering, procurement and construction) and contingency,

but exclude interests during construction (IDC). Total investment costs include IDC, but exclude reurbishment ordecommissioning.


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4Construction times are approximately our years or most plants. From the data provided

by respondents, the prices o both black coal and brown coal vary signicantly rom country tocountry. Expressed in the same currency using ocial exchange rates, coal prices can vary bya actor o ten. The study assumed a black coal price o USD 90 per tonne except or large coal-producing countries that are partly shielded rom world markets such as Australia, Mexico andthe United States, where domestic prices were applied. For brown coal, domestic prices were

applied in all cases.

With a carbon price o 30 USD/tonne, the most important cost driver or coal plants withoutCC(S) is the CO2 cost in the low discount rate case. In the case o coal plants equipped with CC(S),the construction cost is the most important cost driver in the low discount rate case. In the highdiscount rate case, where total investment cost is more important, variations in the discount rate,closely ollowed by construction costs, are key determinants o total costs or both coal plantswith and without CC(S).

At a 5% discount rate, levelised generation costs in OECD countries range between 54 USD/MWh (Australia) and 120 USD/MWh (Slovak Republic) or coal-red power plants both with andwithout carbon capture. Generally, investment costs and uel costs each represent around 28%,

while operations and maintenance (O&M) costs account or some 9% and carbon costs aroundone-third o the total.

At a 10% discount rate, the levelised generation costs o coal-red power plants in OECD coun-tries range between 67 USD/MWh (Australia) and 142 USD/MWh (Slovak Republic) also or plantsboth with and without carbon capture. Investment costs represent around 42% o the total, uelcosts some 23%, O&M costs approximately 8% and carbon costs 27% o the total LCOE.

Gas-fred generating technologies

For the gas-red power plants without carbon capture in the OECD countries considered in thestudy, the overnight construction costs in most cases range between 520 and 1 800 USD/kWe. In all

countries considered, the investment costs o gas-red plants are lower than those o coal-redand nuclear power plants. Gas-red power plants are built rapidly and, in most cases, expendi-tures are spread over two to three years. The O&M costs o gas-red power plants are signicantlylower than those o coal-red or nuclear power plants in all countries which provided data or thetwo or three types o plants considered. The study assumed prices o USD 10.3/MMBtu in OECDEurope and USD 11.7/MMBtu in OECD Asia. National assumptions were assumed or large gas-producing countries such as Australia, Mexico and the United States.

At a 5% discount rate, the levelised costs o generating electricity rom gas-red power plantsin OECD countries vary between 67 USD/MWh (Australia) and 105 USD/MWh (Italy). On average,investment cost represents only 12% o total levelised costs, while O&M costs account or 6% andcarbon costs or 12%. Fuel costs instead represent 70% o the total levelised cost. Consequently,

the assumptions on gas prices used in the study are the driving actors in the estimated levelisedcosts o gas-generated electricity.

At a 10% discount rate, levelised costs o gas-red plants in OECD countries range between76 USD/MWh (Australia) and 120 USD/MWh (Italy). The dierence between costs at a 5% and a10% discount rate is very limited due to their low overnight investment costs and short construc-tion periods. Fuel cost remains the major contributor representing 67% o total levelised genera-tion cost. Investment costs amount to 16%, while O&M and carbon costs contribute around 5%and 11% respectively to total LCOE.

Nuclear generating technologies

Cost gures or nuclear power plants vary widely refecting the importance o national conditionsand the lack o recent construction experience in many OECD countries. For the nuclear power


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4plants in the study, the overnight construction costs vary between 1 600 and 5 900 USD/kWe witha median value o 4 100 USD/kWe. The study considered dierent Generation III technologiesincluding the EPR, other advanced pressurised water reactor designs as well as advanced boilingwater reactor designs.

At a 5% discount rate, the levelised costs o nuclear electricity generation in OECD countriesrange between 29 USD/MWh (Korea) and 82 USD/MWh (Hungary). Investment costs represent byar the largest share o total levelised costs, around 60% on average, while O&M costs representaround 24% and uel cycle costs around 16%. These gures include costs or reurbishment, wastetreatment and decommissioning ater a 60-year lietime.

At a 10% discount rate, the levelised costs o nuclear electricity generation in OECD countriesare in the range o 42 USD/MWh (Korea) and 137 USD/MWh (Switzerland). The share o invest-ment in total levelised generation cost is around 75% while the other cost elements, O&M costsand uel cycle costs, represent 15% and 9% respectively. Again, these gures include costs orreurbishment, waste treatment and decommissioning ater a 60-year lietime.

Renewable generating technologies

For onshore wind power plants, the specic overnight construction costs are in the range o 1 900to 3 700 USD/kWe. The expense schedules reported indicate a construction period between oneto two years in the majority o cases. As with all other technologies, the costs calculated and pre-sented in this report or wind power plants are plant-level costs. They thereore do not includespecic costs associated with the integration o wind or other intermittent renewable energysources into most existing electric systems and, in particular, the need or backup power capaci-ties to compensate or the variability and limited predictability o their production.

The levelised costs o electricity produced with onshore wind and solar PV technologiesexhibit a very high sensitivity to the load actor variation, and to a lesser extent to the construc-tion cost, at any discount rate. In contrast with nuclear and thermal plants with a generic loadactor o 85%, plant-specic load actors were used or renewable energy sources. For variablerenewable sources such as wind, the availability o the plant is in act an important driving ac-tor or the levelised cost o generating electricity. The reported load actors o wind power plantsrange between 21% and 41% or onshore plants, and between 34% and 43% or oshore plantsexcept in one case.

At a 5% discount rate, levelised generation costs or onshore wind power plants in OECD coun-tries considered in the study range between 48 USD/MWh (United States) and 163 USD/MWh(Switzerland), and rom 101 USD/MWh (United States) to 188 USD/MWh (Belgium) or oshore

wind. The share o investment costs is 77% or onshore wind turbines and 73% or oshore windturbines.

At a 10% discount rate, the levelised costs o wind-generated electricity in OECD countriesrange between 70 USD/MWh (United States) and more than 234 USD/MWh (Switzerland). Foroshore wind turbines the costs range rom 146 USD/MWh (United States) to 261 USD/MWh (Bel-gium). The share o investment costs is 87% or onshore wind turbines and 80% or oshore windturbines. For the latter, the dicult conditions o the marine environment imply a higher share othe costs or operations and maintenance.

For solar photovoltaic plants, the load actors reported vary rom 10% to 25%. At the higherload actor, the levelised costs o solar-generated electricity are reaching around 215 USD/MWh

at a 5% discount rate and 333 USD/MWh at a 10% discount rate. With the lower load actors, thelevelised costs o solar-generated electricity are around 600 USD/MWh.


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4The two reported solar thermal plants have a load actor o 32% (Eurelectric) and 24%

(US Department o Energy). The levelised costs range rom 136 USD/MWh to 243 USD/MWh, or5% and 10% discount rates respectively.

The current study also contains limited data on the cost o hydroelectric power generation.Depending on the plant size and specic site, hydro is competitive in some countries; however,

costs vary so widely that no general conclusions can be drawn.

Conclusions

The levelised costs and the relative competitiveness o dierent power generation technologiesin each country are highly sensitive to the discount rate and slightly less, but still signicantlysensitive, to the projected prices or CO2, natural gas and coal. For renewable energy technologies,country- and site-specic load actors also play an important role.

With the liberalisation o electricity markets, certain risks have become more transparent, sothat project proponents must now bear and closely manage these risks (to the extent that they

can no longer be transerred to consumers or taxpayers). This has implications or determiningthe required rate o return on generating investments. Access to nancing and national supportpolicies or individual technologies designed to reduce nancing risks (such as eed-in taris,loan or price guarantees) are thus likely to play an important role in determining nal powergeneration choices.

Environmental policy will also play an increasingly important role that is likely to signicantlyinfuence ossil uel costs in the uture and the relative competitiveness o various generationtechnologies. In addition, the markets or natural gas are undergoing substantial changes onmany levels which make current projections or prices even more uncertain than usual. Also,coal markets are being infuenced by new actors. Security o energy supply remains a concernor most OECD countries and may be refected in government policies aecting generating invest-

ment in the uture.

This study provides insights into the relative costs o generating technologies in the partici-pating countries and refects the limitations o the methodology and the generic assumptionsemployed. The limitations inherent in this approach are stressed in the report. In particular, thecost estimates presented do not represent the precise costs which would be calculated by poten-tial investors or any specic project. Together with national energy policies avouring or discour-aging specic technologies, the investors concern about risk is one o the reasons explaining thedierence between the studys ndings and the market preerence or gas-red technologies.Dierent uel price expectations may also aect investors decisions in some markets.

Within this ramework and various limitations, the study suggests that no single electricitygenerating technology can be expected to be the cheapest in all situations. The preerred gen-erating technology will depend on a number o key parameters and the specic circumstanceso each project. This edition oProjected Costs o Generating Electricity indicates that the investorschoice o a specic portolio o power generation technologies will most likely depend on nanc-ing costs, uel and carbon prices, as well as the specic energy policy context (security o supply,CO2 emissions reductions, market ramework).


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Methodology and data on levelised

costs for generating electricity


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Chapter 1

29

Introduction and context

The joint IEA/NEA publication on Projected Costs o Generating Electricity is a regular exercise pub-lished about every ve years. A large and active Expert Group accompanied the project throughall its stages rom data generation, over methodological treatment, to ormat and content o thenal publication.

The result is a complete study on the levelised cost o electricity (LCOE) with an expandedcoverage o both technologies and countries (see Table 1.1). For most OECD and non-OECD coun-tries, the data has been received either through member countries governments directly or byocially nominated experts to the ad hoc Expert Group.1 Other contributions have been made byindustrial companies or industry associations and are listed separately. The study tries to renderits methodology transparent on each aspect o the lie-cycle o a power plant, as well as to put theresults into perspective through extensive sensitivity studies and a comparison with other stud-ies. This study includes comprehensive data on generating costs in our large non-OECD coun-tries (Brazil, China, Russia and South Arica), thus refecting both the new realities o a changingworld economy and the success o the intensive outreach activities o IEA and NEA. The 2010 edi-tion oProjected Costs o Generating Electricity is designed to be an important tool or energy policymakers and the interested public in discussing power generation choices in the current energy

and economic policy context.

And yet, no previous edition has aced the current degree o uncertainty. One indication orthe uncertainties surrounding the estimates provided here are the large ranges even among OECDcountries in the same region. There are at least ve reasons or why this range o uncertaintytoday is larger than in previous times.

First, the widespread privatisation o utilities and the liberalisation o power markets in mostOECD countries has reduced access to data on production costs. Private actors cite condentialityand competitiveness concerns as reasons or not disclosing data on production costs.

Second, rarely have policy actors created more uncertainty or the cost o dierent power

generation technologies than today. The imperative to reduce greenhouse gas emissions has ledto new policy objectives which have an impact in power generation choices through explicit orimplicit carbon pricing. Projected Costs o Generating Electricity has paid heed to this act by assum-ing a carbon price o USD 30 per tonne o CO2. This is a judgement call. So ar, only the EuropeanUnion has established a ormal system or carbon pricing through the European Emission Trad-ing System (EU ETS). However, in several other countries, such pricing schemes are being activelydebated, and are implicitly aecting generation choices.

1. One o the exceptions is China, where data has been collected rom a variety o public sources. See Annex I or urtherdetails.


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1

It is also clear that a price o 30 USD per tonne o CO2 is probably well below that needed toachieve the ambitious objectives some OECD countries have set or themselves in terms o car-bon reduction. Issues like these highlight the importance o sensitivity analyses (see Part II) thatwill allow interested readers to compare the results o Part I with estimates based on their ownassumptions.

Uncertainty has also increased because o liberalisation. The opening o energy markets tocompetition required much more detailed re-regulation and careul market design. Where previ-ously a set o commissioners would simply decide on retail prices and let a vertically integratedmonopolist get on with it, today a complex interplay o legal, institutional and technologicaldevelopments determines market outcomes in a requently unoreseeable manner.

On top o that, security o supply concerns or gas, the technological and regulatory uncer-tainties surrounding carbon capture and storage, eed-in taris o limited duration or renewa-bles, and a still evolving situation or nuclear energy all increase uncertainty, aect technologychoices and make or a ar larger set o contingencies than in the past that energy decision mak-ers need to deal with. All o these actors aect the cost o technologies, sometimes decisively so,ar beyond the possibilities o a single publication to capture them.

The third actor increasing the uncertainty surrounding the presented cost gures pertainsto the evolution o the generating technologies. Ater two decades o relative stability, the powersector abounds with a signicant number o new technological developments. A new genera-tion o nuclear power plants with increased economic and saety perormance is beginning tobe deployed, higher eciency coal plant is now more available, promising up to 50% more powerrom the same coal input compared to plant that it might be replacing, renewable energies (espe-cially wind) are attracting large investments in many countries. A potentially large change, how-ever, is not likely to happen in generation but in network operation, basically at the distributionlevel. Smart metering and real-time pricing have the potential to increase demand elasticitiesand will fatten load curves. Smart grids will be able to connect increasingly disconnected con-sumption and production sites. During the lietime o most plants commissioned in 2015 (thosethat are considered or this study), the owners o electric cars may orm a sizeable share o their

customers. As o today, it is largely unknown how these actors will aect the system costs o di-erent technologies.

Table 1.1: Summary overview o responses

Country Nuclear CoalCoal

w/CC(S)Gas

Windonshore

Windoshore

HydroSolarPV

CHP Other TOTAL

Austria 1 1 2Belgium 1 2 4 2 1 10Canada 1 1 4 6

Czech Republic 1 4 4 2 1 2 1 3 1 19

France 1 1 1 1 4Germany 1 2 2 2 1 1 2 2 13

Hungary 1 1

Italy 1 1 1 1 4Japan 1 1 1 1 4

Korea 2 2 2 6

Mexico 1 1 1 3Netherlands 1 1 1 1 1 2 2 2 11

Slovak Republic 1 1 1 3

Sweden 1 1 2Switzerland 2 1 1 1 2 7

United States 1 2 1 3 1 1 1 1 5 16

NON-OECD MEMBERS

Brazil 1 1 1 3 1 7

China 3 3 2 4 3 4 1 20

Russia 1 2 1 1 1 5 11South Arica 1 1 2

INDUSTRY CONTRIBUTIONEDF 1 1

EPRI 1 1 1 1 1 1 6

ESAA 8 5 3 1 3 20Eurelectric-VGB 1 2 1 1 1 2 2 1 1 12

TOTAL 20 34 14 27 18 8 14 17 20 18 190


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1

A ourth source o uncertainty stems rom the lack o recent OECD experience with construc-tion o both existing and new technologies, since new construction o power generating plantshas been limited, and not technically diverse. In the last decade, the majority o new generatingplant constructed in OECD countries has been either gas (especially combined cycle gas turbines)or new renewables, especially onshore wind. Hence, within the OECD, there has been very littlenew build experience in new nuclear plant outside Asian region, notably Korea, and relatively

little new coal build outside the United States and a small group o European countries. Thiscreates uncertainty as to what actual construction and operating costs will be, especially or newgenerations o technologies. There is considerable condence that costs will all as more unitsare built and operating experience accumulates; technological progress in areas such as solarand oshore wind is also likely to be considerable. But none o these moves can be predictedwith certainty.

A high level o uncertainty surrounds also carbon capture and storage (CCS). For the rst time,this edition includes the cost o carbon capture technologies applied to coal-red power plant(the costs o transporting and storing carbon have not been included). There is no commercialoperating experience or this technology, since this technology is yet to be demonstrated at acommercial scale in power plant applications. Only a ew demonstration plants are likely to be

operating in the next ew years. Nonetheless, estimates o the costs o carbon capture are pro-vided, as a reerence, since this will be an essential decarbonising technology, but the uncertaintyo these estimates must be underlined.

A th source o uncertainty concerns the rapid changes in all power plant costs that havebeen observed in the last ve years or so. The period rom 2004 to 2008 saw an unprecedentedlevel o infation o power plant costs, covering all construction materials, but especially mainmechanical components, electrical assembly and wiring, and other mechanical equipment. Inthis period, cost rises o at least 50% were observed in many locations. Infation had an impact ondierent technologies to dierent degrees, but all have been aected. Since mid 2008, the globalcrisis has lessened these infation pressures, although prices or many components have beenslow to drop. Depending on when precisely cost estimates have been perormed, the outcomes

may vary quite widely even or the same technology in the same location.

Projected Costs o Generating Electricity estimates the levelised lietime costs o continuousbaseload power production rom an individual plant. It does not take account o costs o transmis-sion, distribution and impacts on the electricity system as a whole. And yet, dierent technologieshave very dierent impacts on these costs. It is well known, or instance, that non-dispatchable(intermittent) renewables such as wind and solar require back-up capacity, whose level dependson the type o grid and its fexibility. This issue is discussed more ully in the boundary chap-ter System Eects o Renewable Power Generation in Part II. Another question is how classicbaseload technologies such as nuclear and coal plants will cope with the ever-growing daily andseasonal peaks in power demand that will require more fexible electricity systems. Will they bepenalised or their inability to react quickly to changing supply and demand conditions or willthey benet rom smoothed load curves? The answer will probably depend on relative shares andlocal conditions or demand and supply variations. Again, providing a single estimate, even withthe possibility to perorm sensitivity analysis, has limited relevance.

Nonetheless, despite the uncertainties, the LCOE methodology provides a very useul basicreerence. I this sounds deensive, the authors would like to vigorously arm that this is not aweakness o the methodology (or which there is simply no alternative) or a shortcoming o thestudy but the sign o an ever more complex electricity world. Policy makers, academics and jour-nalists need benchmarks or discussion. At the same time, they need to be aware o the limita-tions o the data, and avoid misinterpretations.


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Chapter 2

33

Methodology, conventions andkey assumptions

This chapter presents the EGC Spreadsheet model used to calculate levelised average lietimecosts and the methodological conventions and key assumptions adopted to ensure consistency

between cost estimates o dierent countries.

The philosophy and methodology behind the calculation o levelised average lietime costsare discussed below, in particular addressing the issue o discounting. It is obvious that only alimited number o parameters can be included in any general model and that a number o actorsthat have not been taken into account may and do have an infuence on costs. A number o addi-tional specic methodological points, which bear on issues outside the actual calculations o thespreadsheet model used or the calculations o LCOE in Projected Costs o Generating Electricity (suchas the treatment o corporate taxes or risk) are discussed in Chapter 8 on Financing Issues.

2.1 The notion o levelised costs o electricity (LCOE)

The notion o levelised costs o electricity (LCOE) is a handy tool or comparing the unit costso dierent technologies over their economic lie. It would correspond to the cost o an investorassuming the certainty o production costs and the stability o electricity prices. In other words,the discount rate used in LCOE calculations refects the return on capital or an investor in theabsence o specic market or technology risks. Given that such specic market and t

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Projected Costs of Generating Electricity 2010