Joint IEA-NEA report details plunge in costs of renewable electricity; nuclear competitive with other baseload power sources
|2010 and 2015 LCOE ranges for solar and wind technologies. Source: IEA/NEA. Click to enlarge.|
The cost of producing electricity from renewable sources such as wind and solar has been falling for several years. A new report, a joint project by the International Energy Agency and the Nuclear Energy Agency, provides in detail the contrasting costs for different power generation technologies around the world and shows that renewable sources can produce electricity at close to or even below the cost of new fossil fuel-based power stations, depending upon conditions such as resources and appropriate market and regulatory frameworks.
The report, Projected Costs of Generating Electricity: 2015 Edition, also shows that new nuclear power plants generate electricity more cheaply than other established “baseload” sources—mainly coal- and gas-fired power plants—over the full lifetime of facilities when financing costs are relatively low.
|Top: LCOE ranges for baseload technologies at three different discount rates. |
Bottom: LCOE ranges for solar PV and wind technologies at three discount rates. Source: IEA/NEA. Click to enlarge.
The report calculates the cost of producing electricity from different types of new power plants. Compared with the previous edition published five years ago, Projected Costs of Generating Electricity: 2015 Edition details a significant drop in the price of solar and wind generation costs, especially for solar photovoltaic (PV) installations, as a result of sustained technological progress.
That drop, as well as a plateauing in the price of new nuclear energy plants, helped arrest cost inflation in electricity generation over the past five years.
No single technology proves the cheapest form of electricity generation under all circumstances: many factors determine the final cost of any investment, principally local influences such as market structure, policy environment and resource endowments.
Projected Costs of Generating Electricity: 2015 Edition looks at generation costs at more than 180 plants—from large nuclear and fossil-fuel facilities to wind farms to residential-sized solar PV installations—in 22 countries, including Brazil, China and South Africa.
This total includes 17 natural gas-fired generators (13 combined-cycle gas turbines [CCGTs] and 4 open-cycle gas turbines [OCGTs]); 14 coal plants; 11 nuclear power plants; 38 solar photovoltaic (PV) plants (12 residential scale, 14 commercial scale, and 12 large, ground- mounted) and 4 solar thermal (CSP) plants; 21 onshore wind plants; 12 offshore wind plants; 28 hydro plants; 6 geothermal; 11 biomass and biogas plants; and 19 combined heat and power (CHP) plants of varying types.
This data set contains a marked shift in favor of renewables compared to the prior reports, indicating an increased interest in low-carbon technologies on the part of the participating governments. The data suggest that any cost inflation in baseload technologies has been arrested.This is particularly notable in the case of nuclear technologies, which have costs that are roughly on a par with those reported in the prior study, thus undermining the growing narrative that nuclear costs continue to increase globally, according to the IEA.
The data were used to project, country by country and for the different technologies, what it would cost to generate electricity over the lifetime of a plant built to enter service in 2020. The report’s standardized form of analysis, levelized cost of electricity (LCOE), displays the cost range of generation in each country for each technology.
The LCOE calculations are based on a levelized average lifetime cost approach, using the discounted cash flow (DCF) method. The calculations use a combination of generic, country-specific and technology-specific assumptions for the various technical and economic parameters, as agreed by the Expert Group on Projected Costs of Generating Electricity (EGC Expert Group). For the first time, the analysis was performed using three discount rates (3%, 7% and 10%).
While the costs of renewable technologies in some higher priced markets can be well above that of coal- or gas-fired plants, the report details how utility-scale solar PV and especially onshore wind power are comparable and often lower in countries featuring plentiful resources and appropriate market and regulatory frameworks.
Further, while more significant regional variations remain than for baseload technologies, variable renewable technology costs continue to converge towards international benchmarks at the lower end of their cost range.
Projected Costs of Generating Electricity: 2015 Edition also examines the potential cost of emerging technologies such as ocean energy and fuel cells. The report also discusses the value and cost of generation from the perspective of the power system as a whole, examining other relevant cost metrics that may be more appropriate for a world where the concept of baseload power is of declining relevance.
Some of the specific finds about baseload power generation were:
Overnight costs for natural gas-fired CCGTs in OECD countries range from US$845/kWe (Korea) to US$1,289/kWe (New Zealand). In LCOE terms, costs at a 3% discount rate range from a low of US$61/ MWh in the United States to US$133/MWh in Japan. The United States has the lowest cost CCGT in LCOE terms, despite having a relatively high capital cost, which demonstrates the significant impact that variations in fuel price can have on the final cost. At a 7% discount rate, LCOEs range from US$66/MWh (United States) to US$138/MWh (Japan), and at a 10% discount rate they range from US$71/MWh (United States) to US$143/MWh (Japan).
Overnight costs for coal plants in OECD countries range from a low of US$1 218/kWe in Korea to a high of US$3 067/kWe in Portugal. In OECD countries, LCOEs at a 3% discount rate range from a low of US$66/MWh in Germany to a high of US$95/MWh in Japan. At a 7% discount rate, LCOEs range from US$76/MWh (Germany) to US$107/MWh (Japan), and at a 10% discount rate they range from US$83/MWh (Germany) to US$119/MWh (Japan).
The range of overnight costs for nuclear technologies in OECD countries is large, from a low of US$1,087/kWe in Korea to a high of US$6 215/kWe in Hungary. LCOEs at a 3% discount rate range from US$29/MWh in Korea to US$64/MWh in the United Kingdom, US$40/MWh (Korea) to US$101/MWh (United Kingdom) at a 7% discount rate and US$51/MWh (Korea) to US$136/MWh (United Kingdom) at 10%.
For solar and wind, the findings were:
Solar PV technologies are divided into three categories: residential, commercial, and large, ground- mounted. Overnight costs for residential PV range from US$1,867/kWe in Portugal to US$3,366/ kWe in France. LCOEs at a 3% discount rate range from US$96/MWh in Portugal to US$218/MWh in Japan. At a 7% discount rate, LCOEs range from US$132/MWh in Portugal to US$293/MWh in France. At a 10% discount rate, they range from US$162/MWh to US$374/MWh, in Portugal for both cases.
For commercial PV, overnight costs range from US$1,029/kWe in Austria to US$1,977/kWe in Denmark. LCOEs range from US$69/MWh in Austria to US$142/MWh in Belgium at a 3% discount rate, US$98/MWh (Austria) to US$190/MWh (Belgium) at a 7% discount rate and US$121/MWh (Portugal) to US$230/MWh (Belgium) at a 10% discount rate.
Overnight costs for large, ground-mounted PV range from US$1,200/kWe in Germany to US$2,563/kWe in Japan. LCOEs at a 3% discount rate range from US$54/MWh in the United States to US$181/MWh in Japan, US$80/MWh (United States) to US$239/MWh (Japan) at a 7% discount rate and US$103/MWh (United States) to US$290/MWh (Japan) at a 10% discount rate.
Onshore wind plant overnight costs range from US$1 571/kWe in the United States to US$2,999/ kWe in Japan. At a 3% discount rate, LCOEs range from US$33/MWh in the United States to US$135/ MWh in Japan, US$43/MWh (United States) to US$182/MWh (Japan) at a 7% discount rate and US$52/MWh (United States) to US$223/MWh at a 10% rate (Japan).
Overnight costs for offshore wind plants range from US$3,703/kWe in the United Kingdom to US$5,933/kWe in Germany. LCOEs at a 3% discount rate range from US$98/MWh in Denmark to US$214/MWh in Korea; at a 7% discount rate, they range from US$136/MWh (Denmark) to US$275/ MWh (Korea); and at a 10% discount rate, they range from US$167/MWh (United States) to US$327/ MWh (Korea).
The review of three non-OECD countries—Brazil (hydro only), the People’s Republic of China and South Africa—found:
Baseload. The estimated overnight cost for a CCGT in China (the only non-OECD data point in the sample) is US$627/kWe, while the LCOE is US$90/MWh, US$93/MWh and US$95/MWh at 3%, 7%, and 10% discount rates respectively. For coal, cost estimates are included for China, with an overnight cost of US$813/kWe, and South Africa, with an overnight cost of US$2,222/kWe. The LCOEs for China are US$74/MWh at a 3% discount rate, US$78/kW at a 7% discount rate and US$82/MWh at a 10% discount rate. For South Africa, the range is larger: US$65/MWh at 3%, US$82/MWh at 7% and US$100/MWh at 10%. The report includes two nuclear data points for China, with overnight costs of US$1 807/MWh and US$2,615/kWe; LCOES are US$26/MWh and US$31/MWh at a 3% discount rate, US$37/MWh and US$48/MWh at 7% and US$49/MWh and US$64/MWh at 10%.
Renewables. For solar PV, China has the lowest cost commercial PV plant in the database, with an overnight cost of US$728/kWe; LCOEs are US$59/MWh, US$78/MWh and US$96/MWh at 3%, 7% and 10% discount rates respectively. The overnight cost for the large, ground-mounted PV plant is US$937/kWe; the LCOEs are US$55/MWh, US$73/MWh and US$88/MWh at 3%, 7% and 10% discount rates. Finally, for onshore wind, overnight costs for the two estimates from China are US$1,200/kWe and US$1,400/kWe. While in South Africa, the single onshore wind plant in the database is US$2 756/kWe; LCOEs are US$77/MWh, US$102/MWh and US$123/MWh at 3%, 7% and 10% respectively.
The report also analyzes issues in projecting costs of electricity generation:
How to price in the impact of renewable variability—i.e., changes in generation when the sun does not shine or the wind does not blow;
The effects of liberalization of prices on LCOE and investment return; and
Various technologies’ sensitivities to a carbon price.