20050228-IEA-Projected_Costs_of_Generating_Electricity_2005_233页_3mb

Summary of Projected Costs of Generating Electricity (2005 Update)

Core Content

This report, published by the OECD and the IEA/NEA, provides an analysis of projected electricity generation costs for various technologies, including coal, gas, nuclear, hydro, wind, solar, and combined heat and power (CHP) plants. It is the sixth in a series of studies on electricity generation costs, with previous editions from 1983, 1986, and joint IEA/NEA publications in 1989, 1993, and 1998.

The study is based on data from 19 OECD member countries and two international organizations (IAEA and EC), including input from three non-OECD countries. The methodology used is the levelised lifetime cost (LLC) approach, which considers the total cost of a plant over its economic lifetime, discounted at 5% and 10% rates. The LLC includes construction, operation and maintenance (O&M), fuel, and other costs, but excludes transmission and distribution, as well as residual emissions.

Main Technologies and Their Costs

Coal-Fired Power Plants

• Overnight Construction Costs: Range between 1000 and 1500 USD/kWe.
• Construction Time: Typically 4 years.
• Fuel Prices: Vary widely by country, with coal prices in 2010 differing by a factor of 20 when expressed in the same currency.
• Levelised Costs:
  • At 5% discount rate: 25–50 USD/MWh.
  • At 10% discount rate: 35–60 USD/MWh.
• Cost Shares:
  • Investment: ~33–50%.
  • O&M: ~15–20%.
  • Fuel: ~45–35%.

Gas-Fired Power Plants

• Overnight Construction Costs: Range between 400 and 800 USD/kWe.
• Construction Time: Typically 2–3 years.
• Fuel Prices: Assumed to range between 3.5 and 4.5 USD/GJ in 2010.
• Levelised Costs:
  • At 5% discount rate: 37–60 USD/MWh.
  • At 10% discount rate: 40–63 USD/MWh.
• Cost Shares:
  • Investment: ~15–20%.
  • O&M: ~7–10%.
  • Fuel: ~73–80%.

Nuclear Power Plants

• Overnight Construction Costs: Range between 1000 and 2000 USD/kWe.
• Construction Time: Varies from 5 to 10 years.
• Levelised Costs:
  • At 5% discount rate: 21–31 USD/MWh.
  • At 10% discount rate: 30–50 USD/MWh.
• Cost Shares:
  • Investment: ~50%.
  • O&M: ~30%.
  • Fuel cycle: ~20–10%.

Wind Power Plants

• Overnight Construction Costs: Range between 1000 and 2000 USD/kWe (one offshore plant is an exception).
• Construction Time: 1–2 years.
• Availability Factors: 17–38% for onshore, 40–45% for offshore.
• Levelised Costs:
  • At 5% discount rate: 35–95 USD/MWh.
  • At 10% discount rate: 45–140 USD/MWh.
• Notes: The LLC methodology does not account for the need for backup power due to the intermittent nature of wind energy.

Hydro Power Plants

• Overnight Construction Costs: Vary, but the study focuses on small and very small units.
• Levelised Costs:
  • At 5% discount rate: 40–80 USD/MWh.
  • At 10% discount rate: 65–100 USD/MWh.
• Notes: Investment costs are the main contributor to the cost difference between the two discount rates.

Solar Power Plants

• Availability Factors: 9–24%.
• Levelised Costs:
  • At 5% discount rate: Up to 150 USD/MWh.
  • At 10% discount rate: Over 200 USD/MWh.
• Notes: Lower availability factors lead to significantly higher costs.

Combined Heat and Power (CHP) Plants

• Levelised Costs:
  • At 5% discount rate: 25–65 USD/MWh.
  • At 10% discount rate: 30–70 USD/MWh.
• Notes: CHP costs are highly dependent on the value and use of co-product heat, making them very site-specific.

Key Findings

• The lowest levelised costs for traditional technologies are generally in the range of 25–45 USD/MWh.
• Discount rates and fuel price projections significantly influence the ranking of technologies.
• The liberalisation of electricity markets has altered investment risk perceptions, leading to a preference for less capital-intensive and more flexible technologies.
• Gas-fired technologies are often favored in reformed markets due to their lower costs and flexibility.
• The methodology used in this study is generic, and therefore not suitable for precise project-specific evaluations.
• Renewable energy sources, particularly wind, are gaining increasing attention from participating countries.

Limitations and Methodological Notes

• The study uses generic assumptions and input data from experts, which may not reflect project-specific conditions.
• It does not account for business risks in competitive markets, which may lead to higher required returns for private investors.
• The LLC methodology ignores the need for backup power in the case of intermittent sources like wind.
• Residual emissions and greenhouse gases are not included in the cost estimates.
• The results are context-specific, and cannot be applied universally due to the limited number of responses for some technologies.

Conclusion

The report highlights that no single technology is the cheapest in all scenarios, and the choice of technology depends on project-specific conditions, including fuel prices, discount rates, and local regulations. It also underscores the importance of environmental policies and market reforms in shaping future electricity generation costs. The study serves as a resource for policymakers and industry professionals to understand the relative economics of different generation technologies.