Calculated and hidden costs of energy production

1. THE COSTS OF ENERGY TECHNOLOGY
Data collection
and
presentation by
Carl Denef,
Januari, 2014

2. The calculated costs of energy technology
 Costs of any power generation facility is expressed as a number known as the Levelized
Energy Cost (LEC [5]), being the price/MWh at which the usable energy must be
generated from a specific source to break even over the lifetime of the energy generator.
The costs include:
• Capital costs (including waste disposal) - tend to be
– low for fossil fuel power stations
– high for nuclear energy, solar thermal, solar PV, wave and tidal and waste biomass
• The annual effective discount rate: is the annual interest divided by the capital including
that interest, which is the interest rate divided by 100% plus the interest rate.
• Fuel costs
– high for fossil fuel and biomass,
– low for nuclear,
– zero for many renewables.
• Costs of continuous operation, maintenance and connecting the energy generating
source to the energy transmission system (for example the electrical grid).
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3. Costs of electricity generation by conventional and renewable
energy types
0
50
100
150
200
250
300
USdollar/MWh
U.S. Department of energy study
2012
0
50
100
150
200
250
Pound/MWh
UK 2010 study
Low
High
0
50
100
150
200
250
300
350
400
450
Euro/MWh
Germany study 2010
Low
High
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As shown in this Figure, power development
by several renewable energy systems is
competitive with conventional energy
systems but solar systems are more
expensive.
Source

4. • However, if Carbon Capture and Sequestration (CCS) facilities necessary to meet
international CO2 emission aggreements are included in the cost, conventional power plants
become more expensive than renewable energy facilities, i.e. 12-62 € per ton of captured
CO2, resulting, according to the U.S. Department of Energy, in a near doubling of energy
production costs.
• It is expected that large cost reductions of renewable energy systems can come from
technical advances, manufacturing improvements and large-scale production. Evidence for
this expectation comes from the so called learning factor. The learning factor (or progress
ratio) gives a measure of the proportional decrease in cost in relation to the cumulative
output of the installed technology. A learning factor of 0.9 means that costs are expected to
fall by 10% every time the cumulative output from the technology doubles. Empirical data
show that the learning factor is between 0.75 for less mature systems to 0.95 and higher for
well-established technologies. For example, the learning factor for solar PV modules has
been constant at 0.8 over 30 years whilst that for wind energy varies from 0.75 in the UK to
0.94 in the more advanced German market. Swanson's law states that solar cell prices fall
20% for every doubling of industry capacity.[56]
• Many countries now have ‘feed-in tariffs’ (FIT) for renewable energy installations to promote
its deployment. FIT typically includes guaranteed grid access, long-term contracts for the
electricity produced and purchase prices based on the cost of generation. Payment levels are
performance-based, which puts the incentive on producers to maximize the overall output
and efficiency of their project.
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5. The hidden costs of energy technology
In most studies various important costs of power generation are NOT included, resulting in
underestimation of traditional energy costs:
• R&D (research & development)
• Impacts of pollution on public health (particulate matter, nitrogen oxides, from coal or
chromium VI, river water alkalinity, mercury poisoning and arsenic) and environmental
damage, particularly for coal power plants. An EU funded research study known as ExternE
(Externalities of Energy), found that the cost of producing electricity from coal or oil would
double over its present value, and the cost of electricity production from gas would
increase by 30%, if costs of damage to the environment and health, produced by these
sources, were taken into account.
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6. • Cost for the greenhouse gas emissions (such as under carbon tax or emissions trading
scenarios)
• With the ongoing process of sea level rise, due to fossil fuel use-induced climate
change,[51] it is expected that evacuation of millions of homes in low lying areas, and an
annual cost of hundreds of billions of dollars worth of property damage by
2100.[44][45][46][47][48][49][50]. Already now massive international climate litigation lawsuits
against fossil fuel users are currently beginning in the International Court of Justice.[52][53]
• Sea level rises due to global warming
• Costs of decommissioning for nuclear energy (in US included, though)
• Nuclear power plants built recently, or in the process of being built, have incurred many
cost overruns. Those being built now are expected to incur further cost overruns due to
design changes after the Fukushima Daiichi nuclear disaster.
• Insurances do not fully cover damage costs in case of a nuclear disaster such as in
Fukushima or in case of hydroelectric dam catastrophies such as the Banqiao Dam
• Read more
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7. Comparison of hidden costs by energy type
Coal Gas Nuclear Wind Solar Biomass
Planning and Cost Risks
Subsidies & Tax
Climate change impact
Air pollution impact
Water impact CSP
Land impacts
Noice and visual impacts
large
moderate
small
The following table shows appoximations of the hidden costs of traditional and renewable
energy development. It is clear that hidden costs are much lower in wind and solar
power generation than in traditional power generation systems. Among renewables
biomass scores worse than wind and solar systems. Data are for the United States. Read
more
CSP = Concentrating Solar Power
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8. View other slide shows on energy costs