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Different methods of
electricity generation Electricity generation is the process of generating electric power from sources of primary energy. For electric utility, utilities in the electric power industry, it is the stage prior to its Electricity delivery, delivery (Electric power transmi ...
can incur a variety of different costs, which can be divided into three general categories: 1) wholesale costs, or all costs paid by utilities associated with acquiring and distributing electricity to consumers, 2) retail costs paid by consumers, and 3) external costs, or
externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
, imposed on society. Wholesale costs include initial
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used f ...
, operations & maintenance (O&M), transmission, and costs of decommissioning. Depending on the local regulatory environment, some or all wholesale costs may be passed through to consumers. These are costs per unit of energy, typically represented as dollars/megawatt hour (wholesale). The calculations also assist governments in making decisions regarding
energy policy Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development including energy conversion, distribution and use as well as reduction of greenhouse gas emissions in order to contri ...
. On average the
levelized cost of electricity The levelized cost of electricity (LCOE), or levelized cost of energy, is a measure of the average net present cost of electricity generation for a generator over its lifetime. It is used for investment planning and to compare different methods ...
from utility scale solar power and onshore wind power is less than from
coal Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal is formed when dea ...
and gas-fired power stations, but this varies a lot depending on location.


Cost metrics


Levelized cost of electricity

The
levelized cost of electricity The levelized cost of electricity (LCOE), or levelized cost of energy, is a measure of the average net present cost of electricity generation for a generator over its lifetime. It is used for investment planning and to compare different methods ...
(LCOE) is a metric that attempts to compare costs of different methods of electricity generation on a consistent basis. Though LCOE is often presented as the minimum constant price at which electricity must be sold in order to
break even Break-even (or break even), often abbreviated as B/E in finance, (sometimes called point of equilibrium) is the point of balance making neither a profit nor a loss. Any number below the break-even point constitutes a loss while any number above it ...
over the lifetime of the project, such a cost analysis requires assumptions about the value of various non-financial costs (environmental impacts, local availability, others), and is therefore controversial. Roughly calculated, LCOE is the net present value of all costs over the lifetime of the asset divided by an appropriately discounted total of the energy output from the asset over that lifetime.


Levelized cost of storage

The levelized cost of storage (LCOS) is analogous to LCOE, but applied to energy storage technologies such as batteries. Regardless of technology, however, storage is but a secondary source of electricity dependent on a primary source of generation. Thus, a true cost accounting demands that the costs of both primary and secondary sources be included when the cost of storage is compared to the cost of generating electricity in real time to meet demand. A cost factor unique to storage are losses that occur due to inherent inefficiencies of storing electricity, as well as increased emissions if any component of the primary source is less than 100% carbon-free.In the U.S., a comprehensive 2015 study found that net system CO2 emissions resulting from storage operation are nontrivial when compared to the emissions from electricity generation
n real time to meet demand N, or n, is the fourteenth Letter (alphabet), letter in the Latin alphabet, used in the English alphabet, modern English alphabet, the alphabets of other western European languages and others worldwide. Its name in English is English alphabet# ...
ranging from 104 to 407 kg/MWh of delivered energy depending on location, storage operation mode, and assumptions regarding carbon intensity.


Levelized avoided cost of electricity

The metric levelized avoided cost of energy (LACE) addresses some of the shortcomings of LCOE by considering the economic value that the source provides to the grid. The economic value takes into account the dispatchability of a resource, as well as the existing
energy mix The energy mix is a group of different primary energy sources from which secondary energy for direct use - such as electricity - is produced. Energy mix refers to all direct uses of energy, such as transportation and housing, and should not be c ...
in a region. In 2014, the US
Energy Information Administration The U.S. Energy Information Administration (EIA) is a principal agency of the U.S. Federal Statistical System responsible for collecting, analyzing, and disseminating energy information to promote sound policymaking, efficient markets, and publ ...
recommended that levelized costs of non- dispatchable sources such as wind or solar be compared to the "levelized avoided cost of energy" (LACE) rather than to the LCOE of dispatchable sources such as fossil fuels or geothermal. LACE is the avoided costs from other sources divided by the annual yearly output of the non-dispatchable source. The EIA hypothesized that fluctuating power sources might not avoid capital and maintenance costs of backup dispatchable sources. The ratio of LACE to LCOE is referred to as the value-cost ratio. When LACE (value) is greater than LCOE (cost), then value-cost ratio is greater than 1, and the project is considered economically feasible.


Value-adjusted levelized cost of electricity

The value-adjusted levelized cost of electricity (VALCOE) is a metric devised by the
International Energy Agency The International Energy Agency (IEA) is a Paris-based autonomous intergovernmental organisation, established in 1974, that provides policy recommendations, analysis and data on the entire global energy sector, with a recent focus on curbing carb ...
which includes both the cost of the electricity and the value to the electricity system. For example, the same amount of electricity is more valuable at a time of peak demand. However VALCOE does not take into account future changes to the electricity system, for example the addition of much more solar power could reduce midday value but today's VALCOE does not take that into account.


Cost factors

While calculating costs, several internal cost factors have to be considered. Note the use of "costs," which is not the actual selling price, since this can be affected by a variety of factors such as subsidies and taxes: *
Capital costs Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a project to a ...
tend to be low for gas and oil
power station A power station, also referred to as a power plant and sometimes generating station or generating plant, is an industrial facility for the generation of electric power. Power stations are generally connected to an electrical grid. Many p ...
s; moderate for onshore wind turbines and solar PV (photovoltaics); higher for coal plants and higher still for
waste to energy Waste-to-energy (WtE) or energy-from-waste (EfW) is the process of generating energy in the form of electricity and/or heat from the primary treatment of waste types, waste, or the processing of waste into a fuel source. WtE is a form of energy ...
,
wave In physics, mathematics, and related fields, a wave is a propagating dynamic disturbance (change from equilibrium) of one or more quantities. Waves can be periodic, in which case those quantities oscillate repeatedly about an equilibrium (res ...
and
tidal Tidal is the adjectival form of tide. Tidal may also refer to: * ''Tidal'' (album), a 1996 album by Fiona Apple * Tidal (king), a king involved in the Battle of the Vale of Siddim * TidalCycles, a live coding environment for music * Tidal (servic ...
,
solar thermal Solar thermal energy (STE) is a form of energy and a technology for harnessing solar energy to generate thermal energy for use in industry, and in the residential and commercial sectors. Solar thermal collectors are classified by the United Sta ...
, offshore wind and
nuclear Nuclear may refer to: Physics Relating to the nucleus of the atom: * Nuclear engineering *Nuclear physics *Nuclear power *Nuclear reactor *Nuclear weapon *Nuclear medicine *Radiation therapy *Nuclear warfare Mathematics *Nuclear space *Nuclear ...
. *Fuel costs – high for fossil fuel and biomass sources, low for nuclear, and zero for many renewables. Fuel costs can vary somewhat unpredictably over the life of the generating equipment, due to political and other factors. To evaluate the total cost of production of electricity, the streams of costs are converted to a
net present value The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount ...
using the
time value of money The time value of money is the widely accepted conjecture that there is greater benefit to receiving a sum of money now rather than an identical sum later. It may be seen as an implication of the later-developed concept of time preference. The t ...
. These costs are all brought together using
discounted cash flow The discounted cash flow (DCF) analysis is a method in finance of valuing a security, project, company, or asset using the concepts of the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate devel ...
.


Capital costs

For power generation capacity capital costs are often expressed as
overnight cost Overnight cost is the cost of a construction project if no interest was incurred during construction, as if the project was completed "overnight." This concept is used for providing a simplistic cost comparison between power plant projects or tech ...
per watt. Estimated costs are: Real life costs can diverge significantly from those estimates.
Olkiluoto The Olkiluoto Nuclear Power Plant ( fi, Olkiluodon ydinvoimalaitos, sv, Olkiluoto kärnkraftverk) is one of Finland's two nuclear power plants, the other being the two-unit VVER Loviisa Nuclear Power Plant. The plant is owned and operated by ...
block 3, which achieved first criticality in late 2021 had an overnight cost to the construction consortium (the utility paid a fixed price agreed to when the deal was signed of only 3.2 billion euros) of and a net electricity capacity of 1.6 gigawatt or per kilowatt of capacity. Meanwhile
Darlington Nuclear Generating Station Darlington Nuclear Generating Station is a Canadian nuclear power station located on the north shore of Lake Ontario in Clarington, Ontario. It is a large nuclear facility comprising four CANDU nuclear reactors with a total output of 3,512&nbs ...
in Canada had an overnight cost of for a net electric capacity of 3512 Megawatts or per Kilowatt of capacity. The oft cited figure of - which works out to per kilowatt of capacity - includes interest (a particularly high cost in this case as the utility had to borrow at market rates and had to absorb the cost of delays in construction) and is thus not an "overnight cost". Furthermore, there is the issue of comparability of different sources of power, as
capacity factor The net capacity factor is the unitless ratio of actual electrical energy output over a given period of time to the theoretical maximum electrical energy output over that period. The theoretical maximum energy output of a given installation is de ...
s can be as low as 10-20% for some wind and solar applications reaching into the 50% range for
offshore wind Offshore wind power or offshore wind energy is the generation of electricity through wind farms in bodies of water, usually at sea. There are higher wind speeds offshore than on land, so offshore farms generate more electricity per amount of c ...
and finally above 90% for the most reliable nuclear power plants. The average capacity factor of all commercial nuclear power plants in the world in 2020 was 80.3% (83.1% the prior year) but this includes outdated Generation II nuclear power plants and countries like
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
which run their nuclear power plants
load following A load-following power plant, regarded as producing mid-merit or mid-priced electricity, is a power plant that adjusts its power output as demand for electricity fluctuates throughout the day. Load-following plants are typically in between base l ...
which reduces the capacity factor.
Peaking power plant Peaking power plants, also known as peaker plants, and occasionally just "peakers", are power plants that generally run only when there is a high demand, known as peak demand, for electricity. Because they supply power only occasionally, the power ...
s have particularly low capacity factors but make up for it by selling electricity at the highest possible price when supply does not meet demand otherwise. The first German Offshore Wind Park
Alpha Ventus Offshore Wind Farm Alpha Ventus Offshore Wind Park (before renaming known as Borkum West Offshore Wind Park) is Germany's first offshore wind farm. It is situated in the North Sea north of the island of Borkum. History The application for construction of the wi ...
with a
nameplate capacity Nameplate capacity, also known as the rated capacity, nominal capacity, installed capacity, or maximum effect, is the intended full-load sustained output of a facility such as a power station,
of 60 MW cost (after an initial estimate of ). In 2012 it produced 268 Gigawatt-hours of electricity, achieving a capacity factor of just over 50%. If the overnight cost is calculated for the nameplate capacity, it works out to per Kilowatt whereas if one takes into account the capacity factor, the figure needs to be roughly doubled.
Geothermal power Geothermal power is electrical power generated from geothermal energy. Technologies in use include dry steam power stations, flash steam power stations and binary cycle power stations. Geothermal electricity generation is currently used in 2 ...
is unique among renewables in that it usually has a low above-ground impact and is capable of
baseload power The base load (also baseload) is the minimum level of demand on an electrical grid over a span of time, for example, one week. This demand can be met by unvarying power plants, dispatchable generation, or by a collection of smaller intermittent en ...
generation as well as
combined heat and power Cogeneration or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time. Cogeneration is a more efficient use of fuel or heat, because otherwise- wasted heat from elect ...
. However, depending on the plant and conditions underground
naturally occurring radioactive material Naturally occurring radioactive materials (NORM) and technologically enhanced naturally occurring radioactive materials (TENORM) consist of materials, usually industrial wastes or by-products enriched with radioactive elements found in the envir ...
s such as
radon Radon is a chemical element with the symbol Rn and atomic number 86. It is a radioactive, colourless, odourless, tasteless noble gas. It occurs naturally in minute quantities as an intermediate step in the normal radioactive decay chains through ...
may be released into the air. This partially offsets relatively high costs per capacity which were cited as for the 45 MW first phase of Þeistareykir Geothermal Power Station and a total of for the 90 MW combined two first phases. This gives a cost per kilowatt of capacity of if only the first phase is considered and if the cost estimates for both phases together hold. The source also calls this power plant uniquely cost effective for geothermal power and the unique
geology of Iceland The geology of Iceland is unique and of particular interest to geologists. Iceland lies on the divergent boundary between the Eurasian plate and the North American plate. It also lies above a hotspot, the Iceland plume. The plume is believed to h ...
makes the country one of the largest producers of geothermal power worldwide and by far the largest per capita or relative to all energy consumed. Block 5 of
Irsching Power Station Irsching Power Station near Vohburg at the Danube, Germany, is operated as a so-called peaking power plant. From the original three units only unit 3 with a capacity of 415 MW is operated, the older two units, with a capacity of 151 MW ...
in Southern Germany uses
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
as fuel in a
combined cycle A combined cycle power plant is an assembly of heat engines that work in tandem from the same source of heat, converting it into mechanical energy. On land, when used to make electricity the most common type is called a combined cycle gas turb ...
converting 1750 Megawatts of thermal energy to 847 net Megawatts of usable electricity. It cost to build. This works out to some per Kilowatt of capacity. However, due to the uneconomical prospect of operating it as a peaking power plant, the owners, soon after opening the plant in 2010, wanted to shut down the plant. The LCOE of floating wind power increases with the distance from shore. The Lieberose Photovoltaic Park - one of the largest in Germany - had a nameplate capacity at opening of 52.79 Megawatt and cost some to build or per kilowatt. With a yearly output of some 52 Gigawatt-hours (equivalent to just over 5.9 Megawatts) it has a capacity factor just over 11%. The figure was again cited when the solar park was sold in 2010. The world's largest solar farm to date (2022) in
Rajasthan Rajasthan (; lit. 'Land of Kings') is a state in northern India. It covers or 10.4 per cent of India's total geographical area. It is the largest Indian state by area and the seventh largest by population. It is on India's northwestern si ...
, India -
Bhadla Solar Park Bhadla Solar Park is the largest solar park in the world as of 2022 and is spread over a total area of in Bhadla, Phalodi tehsil, Jodhpur district, Rajasthan, India. The park has a total capacity of 2245  MW. The park had witnessed the lo ...
- has a total nameplate capacity of 2255 Megawatts and cost a total of 98.5 billion
Indian rupee The Indian rupee ( symbol: ₹; code: INR) is the official currency in the republic of India. The rupee is subdivided into 100 ''paise'' (singular: ''paisa''), though as of 2022, coins of denomination of 1 rupee are the lowest value in use wh ...
s to build. This works out to roughly 43681 rupees per kilowatt. As can be seen by these numbers, costs vary wildly even for the same source of electricity from place to place or time to time and depending on whether interest is included in total cost. Furthermore, capacity factors and the intermittency of certain power sources further complicate calculations. Another issue that is often omitted in discussions is the lifespan of various power plants - some of the oldest hydropower plants have existed for over a century, and nuclear power plants going on five or six decades of continuous operation are no rarity. However, many wind turbines of the first generation have already been torn down as they can no longer compete with more modern wind turbines and/or no longer fit into the current regulatory environment. Some of them were not even twenty-five years old. Solar panels exhibit a certain aging, which limits their useful lifetime, but real world data does not yet exist for the expected lifetime of the latest models.


Operations and Maintenance (O&M) Costs

O&M costs include marginal costs of fuel, maintenance, operation, waste storage, and decommissioning for an electricity generation facility. Fuel costs tend to be highest for oil fired generation, followed in order by coal, gas, biomass and uranium. Due to the high
energy density In physics, energy density is the amount of energy stored in a given system or region of space per unit volume. It is sometimes confused with energy per unit mass which is properly called specific energy or . Often only the ''useful'' or extract ...
of uranium (or
MOX fuel Mixed oxide fuel, commonly referred to as MOX fuel, is nuclear fuel that contains more than one oxide of fissile material, usually consisting of plutonium blended with natural uranium, reprocessed uranium, or depleted uranium. MOX fuel is an alt ...
in plants that use this alternative to uranium) and the comparatively low price on the world
uranium market The uranium market, like all commodity markets, has a history of volatility, moving with the standard forces of supply and demand as well as geopolitical pressures. It has also evolved particularities of its own in response to the unique nature and ...
(especially when measured in units of currency per unit of energy content), fuel costs only make up a fraction of the operating costs of nuclear power plants. In general, the cost balance between capital and running costs tilts in favor of lower operating expenses for renewables and nuclear and in the other direction for fossil fuels. As
sovereign debt A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...
in high income countries is usually to be had at lower interest rates than private loans, nuclear and renewable power become significantly cheaper - also compared to fossil alternatives - the bigger the involvement of state investment or state guarantees. In the
Global South The concept of Global North and Global South (or North–South divide in a global context) is used to describe a grouping of countries along socio-economic and political characteristics. The Global South is a term often used to identify region ...
, where interest rates tend to be higher, the shorter construction period of small scale projects (particularly wind and solar) partially compensates for their increased capital cost. In terms of
import substitution Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.''A Comprehensive Dictionary of Economics'' p.88, ed. Nelson Brian 2009. It is based on the premise that ...
, solar can be particularly attractive in replacing
bunker oil Fuel oil is any of various fractions obtained from the distillation of petroleum (crude oil). Such oils include distillates (the lighter fractions) and residues (the heavier fractions). Fuel oils include heavy fuel oil, marine fuel oil (MFO), bun ...
or diesel generators for
rural electrification Rural electrification is the process of bringing electrical power to rural and remote areas. Rural communities are suffering from colossal market failures as the national grids fall short of their demand for electricity. As of 2017, over 1 billion ...
as it needs no imported hydrocarbons and as it allows hydrocarbon resources (where available) to be exported instead. Short term fluctuations in fuel prices can have significant effects on the cost of energy generation in natural gas and oil fired power plants and to a lesser extent for coal fired power plants. As renewable energies need no fuel, their costs are independent of world markets for fuels once built. Coal-fired power plants are often supplied with locally or at least domestically available coal - this is especially true for
lignite Lignite, often referred to as brown coal, is a soft, brown, combustible, sedimentary rock formed from naturally compressed peat. It has a carbon content around 25–35%, and is considered the lowest rank of coal due to its relatively low heat ...
whose low
grade Grade most commonly refers to: * Grade (education), a measurement of a student's performance * Grade, the number of the year a student has reached in a given educational stage * Grade (slope), the steepness of a slope Grade or grading may also ref ...
and high
moisture Moisture is the presence of a liquid, especially water, often in trace amounts. Small amounts of water may be found, for example, in the air (humidity), in foods, and in some commercial products. Moisture also refers to the amount of water vapo ...
content make transporting it over long distances uneconomical - and are thus less subject to the influence of world markets. If there is a
carbon tax A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more sev ...
or other forms of CO2-pricing, this can have a significant impact on the economic viability of fossil fueled power plants. Due to the ease of stockpiling uranium and the rarity of refueling (most
Pressurized Water Reactor A pressurized water reactor (PWR) is a type of light-water reactor, light-water nuclear reactor. PWRs constitute the large majority of the world's nuclear power plants (with notable exceptions being the UK, Japan and Canada). In a PWR, the primary ...
s will change about a quarter to a third of their fuel loading every one and a half to two years), short term fluctuations in world uranium prices are a risk absorbed by fuel suppliers, not power plant operators. However, long-term trends in uranium price can have an effect of a few tenths of a cent to a cent or two per Kilowatt-hour on the final price of nuclear energy. The biggest factor in the operating costs of both nuclear and renewable are local wages - in most cases those need to be paid regardless of whether the plant is operating at full capacity or putting out only a fraction of its
nameplate capacity Nameplate capacity, also known as the rated capacity, nominal capacity, installed capacity, or maximum effect, is the intended full-load sustained output of a facility such as a power station,
and thus those plants are usually run to as high a fraction of their capacity as the market (
negative price In economics, negative pricing can occur when demand for a product drops or supply increases to an extent that owners or suppliers are prepared to pay others to accept it, in effect setting the price to a negative number. This can happen because i ...
s) and weather (avoiding overheating rivers with
cooling water Cooling tower and water discharge of a nuclear power plant Water cooling is a method of heat removal from components and industrial equipment. Evaporative cooling using water is often more efficient than air cooling. Water is inexpensive and non ...
, availability of sun or wind...) allow. However, in France the nuclear power plants which provide some 70% of electricity demand are run
load following A load-following power plant, regarded as producing mid-merit or mid-priced electricity, is a power plant that adjusts its power output as demand for electricity fluctuates throughout the day. Load-following plants are typically in between base l ...
to stabilize the grid. As a lot of home heating in France is supplied via electric means (
heat pump A heat pump is a device that can heat a building (or part of a building) by transferring thermal energy from the outside using a refrigeration cycle. Many heat pumps can also operate in the opposite direction, cooling the building by removing h ...
s and
resistive heating Joule heating, also known as resistive, resistance, or Ohmic heating, is the process by which the passage of an electric current through a conductor (material), conductor produces heat. Joule's first law (also just Joule's law), also known in c ...
), there is a notable seasonality to nuclear energy generation in France with planned outages usually scheduled for the lower demand summer period, which also coincides with school holidays in France. In Germany some two decades old and older
wind turbine A wind turbine is a device that converts the kinetic energy of wind into electrical energy. Hundreds of thousands of large turbines, in installations known as wind farms, now generate over 650 gigawatts of power, with 60 GW added each year. ...
s were shut down after no longer receiving
renewable energy subsidies Energy subsidies are measures that keep prices for customers below market levels, or for suppliers above market levels, or reduce costs for customers and suppliers. Energy subsidies may be direct cash transfers to suppliers, customers, or rel ...
due to a reported market-rate electricity price of some per kWh not covering
marginal costs In economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it r ...
or only covering them as long as no major maintenance was needed. By contrast after being fully
depreciated In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the a ...
, Germany's (then remaining) nuclear power plants were described in media reports throughout the 2010s and into the early 2020s as highly profitable for their operators even without direct government subsidy.


Market Matching Costs

Many scholars, such as
Paul Joskow Paul may refer to: *Paul (given name), a given name (includes a list of people with that name) * Paul (surname), a list of people People Christianity *Paul the Apostle (AD c.5–c.64/65), also known as Saul of Tarsus or Saint Paul, early Chri ...
, have described limits to the "levelized cost of electricity" metric for comparing new generating sources. In particular, LCOE ignores time effects associated with matching production to demand. This happens at two levels: * Dispatchability, the ability of a generating system to come online, go offline, or ramp up or down, quickly as demand swings. * The extent to which the availability profile matches or conflicts with the market demand profile. Ramp rates (how fast the power can be increased or decreased) may be quicker for more modern nuclear and the economics of nuclear power plants differ. Nevertheless, capital intensive technologies such as wind, solar, and nuclear are economically disadvantaged unless generating at maximum availability since the LCOE is nearly all sunk-cost capital investment. Grids with very large amounts of
intermittent Intermittency is a behavior of dynamical systems: regular alternation of phases of apparently periodic and chaotic dynamics. Intermittent or intermittency may also refer to: *Intermittent river or stream, the one that ceases to flow every year or ...
power sources, such as wind and solar, may incur extra costs associated with needing to have storage or backup generation available. At the same time, intermittent sources can be even more competitive if they are available to produce when demand and prices are highest, such as solar during summertime mid-day peaks seen in hot countries where
air conditioning Air conditioning, often abbreviated as A/C or AC, is the process of removing heat from an enclosed space to achieve a more comfortable interior environment (sometimes referred to as 'comfort cooling') and in some cases also strictly controlling ...
is a major consumer.Open access
/ref> Another limitation of the LCOE metric is the influence of
energy efficiency Energy efficiency may refer to: * Energy efficiency (physics), the ratio between the useful output and input of an energy conversion process ** Electrical efficiency, useful power output per electrical power consumed ** Mechanical efficiency, a ra ...
and
conservation Conservation is the preservation or efficient use of resources, or the conservation of various quantities under physical laws. Conservation may also refer to: Environment and natural resources * Nature conservation, the protection and managem ...
(EEC). In the 2010s EEC caused the electricity demand of many countries, such as the US, to remain flat or decline. For solar systems installed at the point of end use, it may be more economical to invest in EEC first, then solar, or both at the same time. This results in a smaller required solar system than what would be needed without the EEC measures. However, designing a solar system on the basis of LCOE would cause the smaller system LCOE to increase, as the energy generation drops faster than the system cost. The whole of system life cycle cost should be considered, not just the LCOE of the energy source. LCOE is not as relevant to end-users than other financial considerations such as income, cashflow, mortgage, leases, rent, and electricity bills. Comparing solar investments in relation to these can make it easier for end-users to make a decision, or using cost-benefit calculations "and/or an asset's capacity value or contribution to peak on a system or circuit level".


External costs of energy sources

Typically pricing of electricity from various energy sources may not include all
external costs In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
– that is, the costs indirectly borne by society as a whole as a consequence of using that energy source. These may include enabling costs, environmental impacts, energy storage, recycling costs, or beyond-insurance accident effects. This is expected to result in the evacuation of millions of homes in low-lying areas, and an annual cost of hundreds of billions of dollars' worth of property damage. Solar panel performance is usually guaranteed for 25 years and sometimes 30. According to a 2021
Harvard Business Review ''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, Massach ...
study costs of recycling solar panels will reach $20–30 per panel in 2035, which would increase the LCOE fourfold for PV solar power but only if panels are replaced after 15 years rather than the expected 30 years. If panels are replaced early this presents a significant policy challenge because if the recycling is made legal duty of the manufacturers (as it already is in the EU) it will dramatically reduce profit margins on this already competitive market. A 2021 IEA study of repairing old panels to reuse rather than recycle them concluded that the financial viability depends on country specific factors such as grid tariffs, but that reuse is only likely for utility solar, as rooftop owners will want to make best use of space with more efficient new panels. An EU funded research study known as ExternE, or
Externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
of Energy, undertaken over the period of 1995 to 2005 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 external costs such as damage to the environment and to human health, from the
particulate matter Particulates – also known as atmospheric aerosol particles, atmospheric particulate matter, particulate matter (PM) or suspended particulate matter (SPM) – are microscopic particles of solid or liquid matter suspended in the air. The ter ...
,
nitrogen oxides Nitrogen oxide may refer to a binary compound of oxygen and nitrogen, or a mixture of such compounds: Charge-neutral *Nitric oxide (NO), nitrogen(II) oxide, or nitrogen monoxide *Nitrogen dioxide (), nitrogen(IV) oxide *Nitrogen trioxide (), or ni ...
,
chromium VI Hexavalent chromium (chromium(VI), Cr(VI), chromium 6) is chromium in any chemical compound that contains the element in the +6 oxidation state (thus hexavalent). Virtually all chromium ore is processed via hexavalent chromium, specifically the ...
, river water
alkalinity Alkalinity (from ar, القلوي, al-qaly, lit=ashes of the saltwort) is the capacity of water to resist acidification. It should not be confused with basicity, which is an absolute measurement on the pH scale. Alkalinity is the strength of ...
,
mercury poisoning Mercury poisoning is a type of metal poisoning due to exposure to mercury. Symptoms depend upon the type, dose, method, and duration of exposure. They may include muscle weakness, poor coordination, numbness in the hands and feet, skin rashe ...
and
arsenic Arsenic is a chemical element with the symbol As and atomic number 33. Arsenic occurs in many minerals, usually in combination with sulfur and metals, but also as a pure elemental crystal. Arsenic is a metalloid. It has various allotropes, but ...
emissions produced by these sources, were taken into account. It was estimated in the study that these external, downstream, fossil fuel costs amount up to 1%–2% of the EU's entire Gross Domestic Product (GDP), and this was before the external cost of global warming from these sources was even included. Coal has the highest external cost in the EU, and global warming is the largest part of that cost.Subsidies and costs of EU energy. Project number: DESNL14583
Pages: 52. ''EcoFys'', 10 October 2014. Accessed: 20 October 2014. Size: 70 pages in 2MB.
Sustainable energy Energy is sustainable if it "meets the needs of the present without compromising the ability of future generations to meet their own needs". Most definitions of sustainable energy include considerations of environmental aspects such as greenh ...
avoids or greatly reduces future costs to society, such as respiratory illnesses. In 2022 the EU created a green taxonomy to indicate which energy investments reduce such external costs. A means to address a part of the external costs of fossil fuel generation is
carbon pricing Carbon pricing (or pricing), also known as cap and trade (CAT) or emissions trading scheme (ETS), is a method for nations to reduce global warming. The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the co ...
— the method most favored by economists for reducing global-warming emissions. Carbon pricing charges those who emit carbon dioxide for their emissions. That charge, called a "carbon price", is the amount that must be paid for the right to emit one tonne of carbon dioxide into the atmosphere. Carbon pricing usually takes the form of a
carbon tax A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more sev ...
or a requirement to purchase permits to emit (also called "allowances"). Depending on the assumptions of possible accidents and their probabilities external costs for nuclear power vary significantly and can reach between 0.2 and 200 ct/kWh. Furthermore, nuclear power is working under an insurance framework that limits or structures accident liabilities in accordance with the Paris convention on nuclear third-party liability, the Brussels supplementary convention, and the
Vienna convention on civil liability for nuclear damage The Vienna Convention on Civil Liability for Nuclear Damage is a 1963 treaty that governs issues of liability in cases of nuclear accident. It was concluded at Vienna on 21 May 1963 and entered into force on 12 November 1977. The convention has ...
and in the U.S. the Price-Anderson Act. It is often argued that this potential shortfall in liability represents an external cost not included in the cost of nuclear electricity; but the cost is small, amounting to about 0.1% of the levelized cost of electricity, according to a 2008 study. These beyond-insurance costs for worst-case scenarios are not unique to nuclear power, as
hydroelectric power Hydroelectricity, or hydroelectric power, is electricity generated from hydropower (water power). Hydropower supplies one sixth of the world's electricity, almost 4500 TWh in 2020, which is more than all other renewable sources combined and ...
plants are similarly not fully insured against catastrophic events like a large
dam failure A dam failure or dam burst is a catastrophic type of structural failure characterized by the sudden, rapid, and uncontrolled release of impounded water or the likelihood of such an uncontrolled release. Between the years 2000 and 2009 more than ...
. As private insurers base dam insurance premiums on limited scenarios, major disaster insurance in this sector is likewise provided by the state. Because externalities are diffuse in their effect, external costs cannot be measured directly, but must be estimated.


International trade

Different countries charge generating companies differently for the negative externalities (such as pollution) that they create. To avoid unfair competition from imports of dirty electricity a tariff may be applied. For example, the UK and the EU may include electricity in their
Carbon Border Adjustment Mechanism The Carbon Border Adjustment Mechanism (CBAM) is a carbon tariff on carbon intensive products, such as cement and some electricity, imported by the European Union. Currently being legislated as part of the European Green Deal it will to take effe ...
s. Alternatively the
emissions trading Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission t ...
systems (ETS) of the importing and exporting countries may be linked, or the generators in one country may be subject to the ETS of another country (for example Northern İreland generators are in the
EU ETS The European Union Emissions Trading System (EU ETS) is a "cap and trade" scheme where a limit is placed on the right to emit specified pollutants over an area and companies can trade emission rights within that area. It covers around 45% of th ...
).


Additional cost factors

Calculations often do not include wider system costs associated with each type of plant, such as long-distance transmission connections to grids, or balancing and reserve costs. Calculations do not necessarily include externalities such as health damage by coal plants, nor the effect of greenhouse emissions on the
climate change In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to E ...
,
ocean acidification Ocean acidification is the reduction in the pH value of the Earth’s ocean. Between 1751 and 2021, the average pH value of the ocean surface has decreased from approximately 8.25 to 8.14. The root cause of ocean acidification is carbon dioxid ...
and
eutrophication Eutrophication is the process by which an entire body of water, or parts of it, becomes progressively enriched with minerals and nutrients, particularly nitrogen and phosphorus. It has also been defined as "nutrient-induced increase in phytopla ...
,
ocean current An ocean current is a continuous, directed movement of sea water generated by a number of forces acting upon the water, including wind, the Coriolis effect, breaking waves, cabbeling, and temperature and salinity differences. Depth contours, s ...
shifts. Decommissioning costs of power plants are usually not included (nuclear power plants in the United States is an exception, because the cost of decommissioning is included in the price of electricity per the
Nuclear Waste Policy Act The Nuclear Waste Policy Act of 1982 is a United States federal law which established a comprehensive national program for the safe, permanent disposal of highly radioactive wastes. * The US Congress amended the act in 1987 to designate Yucca Mou ...
), is therefore not
full cost accounting Environmental full-cost accounting (EFCA) is a method of cost accounting that traces direct costs and allocates indirect costs by collecting and presenting information about the possible environmental, social and economical Cost-benefit analysis, c ...
. These types of items can be explicitly added as necessary depending on the purpose of the calculation. Other non-financial factors may include: * Comparisons of life-cycle greenhouse gas emissions show coal, for instance, to be radically higher in terms of GHGs than any alternative. *
Surface power density In physics and engineering, surface power density is power per unit area. Applications * The intensity of electromagnetic radiation can be expressed in W/m2. An example of such a quantity is the solar constant. * Wind turbines are often compared ...
which determines amount of land surface required per unit of energy generated using given technology, and can order by two orders of magnitude between high- and low-density sources. Surface power density is a significant limiting factor countries with high
population density Population density (in agriculture: standing stock or plant density) is a measurement of population per unit land area. It is mostly applied to humans, but sometimes to other living organisms too. It is a key geographical term.Matt RosenberPopul ...
. *Impacts on wildlife include an estimated 888,000 bats killed annually by collision with U.S. wind turbines. Millions of birds are estimated to be killed or electrocuted each year by collision with high voltage power lines and pylons, and millions more by fossil fuel power plants. *Other
environmental concerns with electricity generation Electric power systems consist of generation plants of different energy sources, transmission networks, and distribution lines. Each of these components can have environmental impacts at multiple stages of their development and use including in ...
include
acid rain Acid rain is rain or any other form of precipitation that is unusually acidic, meaning that it has elevated levels of hydrogen ions (low pH). Most water, including drinking water, has a neutral pH that exists between 6.5 and 8.5, but acid ...
,
ocean acidification Ocean acidification is the reduction in the pH value of the Earth’s ocean. Between 1751 and 2021, the average pH value of the ocean surface has decreased from approximately 8.25 to 8.14. The root cause of ocean acidification is carbon dioxid ...
and effect of coal extraction on watersheds. *Various human health concerns with electricity generation, including
asthma Asthma is a long-term inflammatory disease of the airways of the lungs. It is characterized by variable and recurring symptoms, reversible airflow obstruction, and easily triggered bronchospasms. Symptoms include episodes of wheezing, cou ...
and
smog Smog, or smoke fog, is a type of intense air pollution. The word "smog" was coined in the early 20th century, and is a portmanteau of the words ''smoke'' and '' fog'' to refer to smoky fog due to its opacity, and odor. The word was then inte ...
, now dominate decisions in developed nations that incur health care costs publicly. A 2021 study estimated the health costs of coal power at hundreds of billions of dollars for the rest of the decade.


Global studies


BNEF (2021)

In March 2021, Bloomberg New Energy Finance found that "renewables are the cheapest power option for 71% of global GDP and 85% of global power generation. It is now cheaper to build a new solar or wind farm to meet rising electricity demand or replace a retiring generator, than it is to build a new fossil fuel-fired power plant. ... On a cost basis, wind and solar is the best economic choice in markets where firm generation resources exist and demand is growing." They further reported "the levelized cost of energy from lithium-ion battery storage systems is competitive with many peak-demand generators." BNEF does not disclose the detailed methodology and LCOE calculation assumptions, however, apart from declaring it is "derived from selected public sources". Costs of gas peakers are substantial, and include both the cost of fuel and external costs of its combustion. Costs of its combustion include emission of greenhouse gases carbon monoxide and dioxide, as well as nitrogen oxides (), which damage the human respiratory system and contribute to acid rain.


IEA & OECD NEA (2020)

In December 2020 IEA and
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
NEA published a joint ''Projected Costs of Generating Electricity'' study which looks at a very broad range of electricity generating technologies based on 243 power plants in 24 countries. The primary finding was that "low-carbon generation is overall becoming increasingly cost competitive" and "new nuclear power will remain the dispatchable low-carbon technology with the lowest expected costs in 2025". The report calculated LCOE with assumed 7% discount rate and adjusted for systemic costs of generation. The report also contains a modeling utility that produces LCOE estimates based on user-selected parameters such as discount rate, carbon price, heat price, coal price and gas price. The report's main conclusions: * LCOE of specific energy sources significantly differs between countries due to their geographic, political and regulatory situation; * low-carbon energy sources cannot be considered in separation, as they operate in "complex interactions" with each other to ensure reliable supply at all times; IEA analysis captures these interactions in value-adjusted LCOE or VALCOE; * cost of renewable energy sources significantly decreased and are competitive (in LCOE terms) with dispatchable fossil fuel generation; * cost of extension of operations of existing nuclear power plants (LTO, long-term operations) has the lowest LCOE of low-carbon energy sources;


Lazard (2020)

In October 2020, the
investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
Lazard Lazard Ltd (formerly known as Lazard Frères & Co.) is a financial advisory and asset management firm that engages in investment banking, asset management and other financial services, primarily with institutional clients. It is the world's lar ...
compared renewable and conventional sources of energy, including comparison between existing and new generation (see table). Lazard study assumes "60% debt at 8% interest rate and 40% equity at 12% cost" for its LCOE calculation but did not disclose their methodology or project portfolio used to calculate prices.


IPCC (2014)

IPCC Fifth Assessment Report The Fifth Assessment Report (AR5) of the United Nations Intergovernmental Panel on Climate Change (IPCC) is the fifth in a series of such reports and was completed in 2014.IPCC (2014The IPCC’s Fifth Assessment Report (AR5) leaflet/ref> As h ...
contains LCOE calculations for broad range of energy sources in the following four scenarios: * 10% WACC, high full load hours (FLH), no carbon tax * 5% WACC, high FLH, no carbon tax — scenario presented in the above table * 10% WACC, low FLH, no carbon tax * 10% WACC, high FLH, $100/tCO2eq
carbon tax A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more sev ...


Regional studies


Australia

BNEF estimated the following costs for electricity generation in Australia:


Europe

It can be seen from the following table that the cost of renewable energy, particularly photovoltaics, is falling very rapidly. As of 2017, the cost of electricity generation from photovoltaics, for example, has fallen by almost 75% within 7 years. In the United Kingdom, a feed-in tariff of £92.50/MWh at 2012 prices (currently the equivalent of €131/MWh) plus inflation compensation was set in 2013 for the new nuclear power plant to be built at Hinkley Point C, with a term of 35 years. At that time, this was below the feed-in tariff for large photovoltaic and offshore wind plants and above onshore wind plants. In Germany, the bidding processes that have been carried out since 2017 have led to significant cost reductions. In one bid for offshore wind farms, at least one bidder dispensed entirely with public subsidies and was prepared to finance the project through the market alone. The highest subsidy price that was still awarded was 6.00 ct/kWh. In a bid for onshore wind farm projects, an average payment of 5.71 ct/kWh was achieved, and 4.29 ct/kWh in a second bidding round. In 2019, there were bids for new offshore wind farms in the United Kingdom, with costs as low as 3.96 pence per kWh (4.47 ct). In the same year, there were bids in Portugal for photovoltaic plants, where the price for the cheapest project is 1.476 ct/kWh.


Britain

gas is the largest source of
electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described ...
at 40%: its
cost In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...
varies and being high carbon it causes
climate change In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to E ...
. So to reduce the share of gas the government annually auctions contracts for difference to build low carbon generation capacity, mainly offshore wind. Before 2022 these generators had always received payments from electricity suppliers, but that year they started making payments. In other words
renewables Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
became subsidy free, partly due to the fall in cost of offshore wind. Instead of gas still dark weeks can be supplied by Norwegian hydropower or by nuclear. As many of Britain's existing nuclear reactors are due to retire soon the government hopes that cost effective
small modular reactor Small modular reactors (SMRs) are a proposed class of nuclear fission reactors, smaller than conventional nuclear reactors, which can be built in one location (such as a factory), then shipped, commissioned, and operated at a separate site. The ...
s can be developed.


France

The
International Energy Agency The International Energy Agency (IEA) is a Paris-based autonomous intergovernmental organisation, established in 1974, that provides policy recommendations, analysis and data on the entire global energy sector, with a recent focus on curbing carb ...
and
EDF EDF may refer to: Organisations * Eclaireurs de France, a French Scouting association * Education for Development Foundation, a Thai charity * Électricité de France, a French energy company ** EDF Energy, their British subsidiary ** EDF Luminus, ...
have estimated the following costs. For nuclear power, they include the costs due to new safety investments to upgrade the French nuclear plant after the
Fukushima Daiichi nuclear disaster The was a nuclear accident in 2011 at the Fukushima Daiichi Nuclear Power Plant in Ōkuma, Fukushima, Japan. The proximate cause of the disaster was the 2011 Tōhoku earthquake and tsunami, which occurred on the afternoon of 11 March 2011 and ...
; the cost for those investments is estimated at €4/MWh. Concerning solar power, the estimate of €293/MWh is for a large plant capable of producing in the range of 50–100 GWh/year located in a favorable location (such as in Southern Europe). For a small household plant that can produce around 3 MWh/year, the cost is between 400 and €700/MWh, depending on location. Solar power was by far the most expensive renewable source of electricity among the technologies studied, although increasing efficiency and longer lifespan of photovoltaic panels together with reduced production costs have made this source of energy more competitive since 2011. By 2017, the cost of photovoltaic solar power had decreased to less than €50/MWh.


Germany

The
Fraunhofer Institute for Solar Energy Systems The Fraunhofer Institute for Solar Energy Systems ISE (or Fraunhofer ISE) is an institute of the Fraunhofer-Gesellschaft. Located in Freiburg, Germany, The Institute performs applied scientific and engineering research and development for all a ...
publishes studies comparing the cost of different styles of energy production. The values for PV installations are based on the average cost between Northern and Southern Germany. The reports differentiate between the two and gives more details. The LCOE for PV battery systems refers to the total amount of energy produced by the PV system minus storage losses. The storage losses are calculated based on the capacity of the battery storage, the assumed number of cycles and the efficiency of the battery. The results include differences in PV costs, battery costs (500 to 1200 EUR/kWh), and varying solar irradiation. For larger rooftop PV systems with battery storage, the battery costs between 600 and 1000 EUR/kWh. For ground-mounted PV with battery storage systems, investment costs for battery storage of 500 to 700 EUR/kWh were assumed. The prices for smaller systems are in part lower, as these are standardized products, whereas larger battery systems tend to be individualized projects that additionally incur costs for project development, project management, and infrastructure. The range of investment costs is smaller for the larger sizes, as there is more competitive pressure.


Middle East

The capital investment costs, fixed and variable costs, and the average capacity factor of utility-scale wind and photovoltaic electricity supplies from 2000 to 2018 have been obtained using overall variable renewable electricity production of the countries in the Middle East and 81 examined projects.


Turkey

for projects starting generating electricity in Turkey from
renewable energy in Turkey Renewable energy in Turkey is mostly hydroelectricity, geothermal energy and solar energy. Although sun and wind could supply plenty of energy in Turkey, hydropower is the only renewable energy which is fully exploited, averaging about a fi ...
in July feed-in-tariffs in
lira Lira is the name of several currency units. It is the current currency of Turkey and also the local name of the currencies of Lebanon and of Syria. It is also the name of several former currencies, including those of Italy, Malta and Israe ...
per kWh are: wind and solar 0.32, hydro 0.4, geothermal 0.54, and various rates for different types of biomass: for all these there is also a bonus of 0.08 per kWh if local components are used. Tariffs will apply for 10 years and the local bonus for 5 years. Rates are determined by the presidency, and the scheme replaces the previous USD-denominated feed-in-tariffs for renewable energy.


Japan

A 2010 study by the Japanese government (pre-Fukushima disaster), called the Energy White Paper, concluded the cost for kilowatt hour was ¥49 for solar, ¥10 to ¥14 for wind, and ¥5 or ¥6 for nuclear power.
Masayoshi Son Masayoshi Son ( ja, 孫 正義, translit=Son Masayoshi, ko, 손정의, translit=Son Jeong-ui) (born 11 August 1957) is a Korean-Japanese billionaire technology entrepreneur, investor, financier and philanthropist. A 3rd generation "Zainichi Kore ...
, an advocate for
renewable energy Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
, however, has pointed out that the government estimates for nuclear power did not include the costs for reprocessing the fuel or disaster insurance liability. Son estimated that if these costs were included, the cost of nuclear power was about the same as wind power. More recently, the cost of solar in Japan has decreased to between ¥13.1/kWh to ¥21.3/kWh (on average, ¥15.3/kWh, or $0.142/kWh). The cost of a solar PV module make up the largest part of the total investment costs. As per the recent analysis of Solar Power Generation Costs in Japan 2021, module unit prices fell sharply. In 2018, the average price was close to 60,000 yen / kW, but by 2021 it is estimated at 30,000 yen / kW, so cost is reduced by almost half.


United States


Energy Information Administration (2020)

Since 2010, the US Energy Information Administration (EIA) has published the
Annual Energy Outlook The U.S. Energy Information Administration (EIA) is a principal agency of the U.S. Federal Statistical System responsible for collecting, analyzing, and disseminating energy information to promote sound policymaking, efficient markets, and publ ...
(AEO), with yearly LCOE projections for future utility-scale facilities to be commissioned in about five years' time. The following data are from the Energy Information Administration's (EIA) Annual Energy Outlook released in 2020 (AEO2020). They are in dollars per megawatt-hour (2019 USD/MWh). These figures are estimates for plants going into service in 2025, exclusive of tax credits, subsidies, or other incentives. The LCOE below is calculated based on a 30-year recovery period using a real after tax weighted average cost of capital (WACC) of 6.1%. For carbon intensive technologies 3 percentage points are added to the WACC. (This is approximately equivalent to a fee of $15 per metric ton of carbon dioxide .) Federal tax credits and various state and local incentive programs would be expected to reduce some of these LCOE values. For example, EIA expects the federal investment tax credit program to reduce the capacity weighted average LCOE of solar PV built in 2025 by an additional $2.41, to $30.39. The electricity sources which had the most decrease in estimated costs over the period 2010 to 2019 were solar photovoltaic (down 88%), onshore wind (down 71%) and advanced natural gas combined cycle (down 49%). For utility-scale generation put into service in 2040, the EIA estimated in 2015 that there would be further reductions in the constant-dollar cost of concentrated solar power (CSP) (down 18%), solar photovoltaic (down 15%), offshore wind (down 11%), and advanced nuclear (down 7%). The cost of onshore wind was expected to rise slightly (up 2%) by 2040, while natural gas combined cycle electricity was expected to increase 9% to 10% over the period.US Energy Information Administration
Levelized cost and levelized avoided cost of new generation resources in the Annual Energy Outlook 2015
14 April 2015
''Note'': Projected LCOE are adjusted for inflation and calculated on
constant dollars Inflation accounting comprises a range of accounting models designed to correct problems arising from historical cost accounting in the presence of high inflation and hyperinflation. For example, in countries experiencing hyperinflation the Intern ...
based on two years prior to the release year of the estimate.
Estimates given without any subsidies. Transmission cost for non-dispatchable sources are on average much higher. NB = "Not built" (No capacity additions are expected.)


See also

*
Electricity pricing Electricity pricing (also referred to as electricity tariffs or the price of electricity) can vary widely by country or by locality within a country. Electricity prices are dependent on many factors, such as the price of power generation, gover ...
* Life-cycle greenhouse gas emissions of energy sources *
Distributed generation Distributed generation, also distributed energy, on-site generation (OSG), or district/decentralized energy, is electrical generation and storage performed by a variety of small, grid-connected or distribution system-connected devices referred to ...
* Economics of nuclear power plants *
Demand response Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until the 21st century decrease in the cost of pumped storage and batteries electric energy could not be ...
*
Variable renewable energy Variable renewable energy (VRE) or intermittent renewable energy sources (IRES) are renewable energy sources that are not dispatchable due to their fluctuating nature, such as wind power and solar power, as opposed to controllable renewable ener ...
* Levelized cost of water *
National Grid Reserve Service To balance the supply and demand of electricity on short timescales, the UK National Grid has contracts in place with generators and large energy users to provide temporary extra power, or reduction in demand. These reserve services are needed if ...
*
Nuclear power in France Since the mid 1980s, the largest source of electricity in France is Nuclear power, with a generation of 379.5 TWh in 2019 and a total electricity production of . In 2018, the nuclear share was 71.67%, the highest percentage in the world. Since ...
* List of thermal power station failures * Calculating the cost of the UK Transmission network: Estimating cost per kWh of transmission *
List of countries by renewable electricity production This article is a list of countries and territories by electricity generation from renewable sources every year. Note that most countries import and/or export electricity, so the percentage figure do not reflect the percentage of consumption that ...
* List of U.S. states by electricity production from renewable sources *
Environmental impact of electricity generation Electric power systems consist of generation plants of different energy sources, transmission networks, and distribution lines. Each of these components can have environmental impacts at multiple stages of their development and use including in ...
*
Grid parity Grid parity (or socket parity) occurs when an alternative energy source can generate power at a levelized cost of electricity (LCOE) that is less than or equal to the price of power from the electricity grid. The term is most commonly used whe ...


Further reading

*
Lazard's Levelized Cost of Energy Analysis – Version 14.0
(Oct. 2020)


Notes


References

{{DEFAULTSORT:Cost Of Electricity By Source Late modern economic history Electricity economics Economics comparisons