The Cost of Power Generation

The Current and Future Competitiveness of Renewable and Traditional Technologies

Publication Date	May 2008
Publisher	Business Insights
Product Type	Report
Pages	122
ISBN Number	not applicable
Product Code	RBI00224

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Summary

The Cost of Power Generation

The current and future competitiveness of renewable and traditional technologies

Conditions within the power industry have changed significantly in recent years. The rising cost of natural gas has made this an expensive source of power, while concern about global warming and the introduction of limits on CO2 emissions will have a profound effect on the use of coal for power generation, at least in the developed world. In consequence nuclear power has its best chance of a revival for a generation and renewable energy is gaining ground as technology is refined and experience grows.

The Cost of Power Generation is a new report published by Business Insights that assesses the current and future case for investment in traditional versus renewable energy. This report analyzes all available data to directly compare the investment case and future prospects of different power generation technologies. It also examines the results of our proprietary executive survey to provide a unique benchmark of how decision makers within the energy industry forecast the future of power generation and the issues influencing those changes.

Identify the most competitive forms of power generation using this report's detailed analysis of the true costs of power generation.

This new report will enable you to...

Assess the relative cost benefits of renewable and traditional technologies throughout their lifecycles.
Identify the key factors that impact on the costings of new energy projects, including structural costs, operational costs, grid extension costs, subsidies and externalities.
Analyse the impact of increased renewable penetration on the structural costs and capacity of energy networks.
Predict the effect of changes in fuel prices on the competitiveness of renewable technologies.
Understand why cost of power estimates have changed over the past three years.
Benchmark industry executive opinion on the future roles of traditional and renewable energy and the significance of a proposed hydrogen economy.

Key questions answered by this report...

Which technologies will be the most competitive now and in the next ten years?
How does market structure affect the pricing and penalisation of green energy?
What is the cheapest renewable energy source?
How does geographical location affect cost estimates for power generation technologies?
What are the weaknesses of traditional fossil fuels in terms of the long-term cost implications?
When do industry executives forecast renewable energy to take a majority share of electricity production?
What impact does government policy have on the relative competitiveness of competing power generation technologies?

Evaluate the costs of traditional versus renewable power generation using this report's analysis of historical, structural and lifecycle costs...

Key findings from this report...

There have been major changes in estimates of capital costs of renewable technologies since 2003, for example, cost estimates for fuel cells were 244% higher in 2007 than in 2003.
The advance of renewables is likely to be slower than their competitiveness would suggest. Wind generation is becoming more competitive relative to fossil fuels but the global wind turbine manufacturing capacity is far too small to fill the gap today.
Levelized costs for power generation technologies differ by geography. In California, geothermal and wind power have the lowest costs while Vattenfall data suggests nuclear power is the cheapest source.
43% of Business Insights survey respondents consider the proposed hydrogen economy for future electricity generation significant compared to 52% in 2005.
Solar cells cost could fall below $1/W by 2020 and $0.5/W by 2030, assuming 20% annual solar cell production growth.

Content

Executive Summary
Introduction
- Levelized cost
- Risk
- Historical costs
- The cost of carbon
- Market distortions
- The cost of power
- The Business Insights 2008 Industry survey
Chapter 1 Introducing The Cost of Power
- Introduction
- The structure of the report
Chapter 2 Levelized Cost: The Traditional Approach to Estimating The Cost
- of power
- Introduction
- Capital costs
- Capacity factor
- Financing capital cost
- Levelized cost of electricity
- Interest, discount rate and present value
Chapter 3 Introducing Risk into Cost of Electricity Estimates
- Introduction
- Fuel prices and fuel price volatility
- Fuel price risk
- Portfolio planning theory
Chapter 4 Historical Costs of Electricity and The Technology Learning Effect
- Introduction
- Historical costs of electricity
- Retail cost and levelized cost
- Technology costs
Chapter 5 Co2 Lifecycle Emissions and The Cost of Carbon
- Introduction
- Lifecycle greenhouse gas emissions
- Placing a price on carbon
- Actual carbon costs: the European Trading Scheme
Chapter 6 Factors Distorting The Price of Electricity
- Introduction
- Structural costs
- Grid extension
- Operational costs
- Externalities
- Subsidies
- Fuel subsidies
- Tariff subsidies
- Quotas
- Taxes
Chapter 7 The Cost of Power
- Introduction
- Levelized cost trends
Chapter 8 Business Insights Executive
- Survey
- Introduction
- Competitiveness of power generation technologies
- Impact on the competitiveness of renewable energy
- Impact on the uptake of renewable energy
- Changes in the use of fossil fuels
List of Figures
- Figure 2.1: Comparison of capital cost estimates ($/kW), 2003 and 2007
- Figure 2.2: Typical capacity factors for power generating plants
- Figure 2.3: Levelized cost of generation by type ($/MWh), California 2007
- Figure 2.4: Levelized costs as estimated by Vattenfall (€/MWh)
- Figure 2.5: Mean levelized costs from published global figures (/MWh)
- Figure 3.6: Average world oil prices ($/barrel), 1989-2008
- Figure 4.7: Annual US photovoltaic module production costs (Cost ($/W), 1970-2005
- Figure 4.8: Global solar cell production (MWp), 1993-2010
- Figure 5.9: Energy payback ratios
- Figure 5.10: Lifetime greenhouse gas emissions for different power generation technologies
- (kgCO2/kWh)
- Figure 6.11: Balancing costs for 20% wind penetration and energy storage (€/MWh)
- Figure 6.12: External costs for various power generation technologies within the EU (€/MWh)
- Figure 6.13: Fuel subsidies as a percentage of GDP (% of GDP)
- Figure 7.14: Levelized cost comparison, 2003 vs 2007 ($/MWH)
- Figure 7.15: Comparative levelized costs of full range of generating technologies ($/MWh)
- Figure 8.16: The relative competitiveness of power generation technologies in 2008 and 2018
- Figure 8.17: How important are the following for the competitiveness of renewable energy?
- Figure 8.18: How important are the following for the uptake of renewable energy?
- Figure 8.19: How important are the following to changes in the future use of fossil fuel for power
- generation?
- Figure 8.20: in how many years would you expect renewable energy to contribute half of global
- electricity generation?
- Figure 8.21: How significant do you consider the proposed hydrogen economy for future electricity
- generation?
List of Tables
- Table 2.1: Capital costs of power generating technologies in the US ($/kW)
- Table 2.2: Comparison of capital cost estimates ($/kW), 2003 and 2007
- Table 2.3: Typical capacity factors for power generating plants (%)
- Table 2.4: Present value of $1m as a function of discount rate
- Table 2.5: Levelized cost of generation by type ($/MWh), California 2007
- Table 2.6: Levelized costs as estimated by Vattenfall (€/MWh)
- Table 2.7: Mean levelized costs from published global figures (/MWh)
- Table 3.8: Average world oil prices ($/barrel), 1989-2008
- Table 3.9: The comparative cost of natural gas for electricity generation ($/107kcals)
- Table 3.10: The comparative cost of steam coal for power generation ($/tonne)
- Table 4.11: The comparative cost of electricity for industry ($/MWh), 1998-2006
- Table 4.12: The comparative cost of electricity for domestic use ($/MWh), 1998-2006
- Table 4.13: Annual US photovoltaic module production costs (Cost ($/W), 1970-2005
- Table 4.14: Global solar cell production (MWp), 1993-2010
- Table 5.15: Energy payback ratios
- Table 5.16: Lifetime greenhouse gas emissions for different power generation technologies
- (kgCO2/kWh)
- Table 6.17: Grid extension costs as a function of wind penetration (€/MWh)
- Table 6.18: Transmission and distribution costs in 2020 associated with increasing UK renewable
- contribution above 10% after 2010 (m/y)
- Table 6.19: Balancing costs for 20% wind penetration and energy storage (€/MWh)
- Table 6.20: External costs for various power generation technologies within the EU (€/MWh)
- Table 6.21: Fuel subsidies as a percentage of GDP (% of GDP)
- Table 7.22: Levelized cost comparison, 2003 vs 2007 ($/MWH)
- Table 7.23: Comparative levelized costs of full range of generating technologies ($/MWh)
- Table 8.24: The relative competitiveness of power generation technologies in 2005, 2008 and 2018
- Table 8.25: The relative competitiveness of power generation technologies in 2018 and 2013
- Table 8.26: How important are the following for the competitiveness of renewable energy?
- Table 8.27: How important are the following for the uptake of renewable energy?
- Table 8.28: How important are the following to changes in the future use of fossil fuel for power
- generation?
- Table 8.29: What is the best way to implement carbon emission controls?
- Table 8.30: What percentage of global electricity production will be supplied by renewable energy
- in ten years?
- Table 8.31: in how many years would you expect renewable energy to contribute half of global
- electricity generation?
- Table 8.32: How significant do you consider the proposed hydrogen economy for future electricity
- generation?