Electricity Costs and Economics: 2015 to 2025

  • ID: 3926498
  • Report
  • Region: Global
  • 126 Pages
  • Power Generation Research
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Finding The Optimum Balance Between Renewable And Conventional Power Generation In A Carbon-Constrained World
The power sector still remains an attractive area for investment but investors are now more cautious than previously. Global warming continues to be a dominant theme but alongside that there is a new pragmatism about fossil fuel combustion which will continue to dominate the power sector for another generation at least. Meanwhile renewable sources of generation continue to advance, led principally by wind power but with solar capacity growing rapidly too, though from a small base.

Electricity is the most important energy source in the modern age but also the most ephemeral, a source that must be consumed as fast as it is produced. This makes modeling the economics of electricity production more complex than carrying out the same exercise for other products. Accurate modeling is important because it forms the basis for future investment decisions. In the electricity sector two fundamental yardsticks are used for cost comparison, capital cost and the levelized cost of electricity. The latter is a lifecycle cost analysis of a power plant that uses assumptions about the future value of money to convert all future costs and revenues into current prices. This model is widely used in the power industry but has some significant failings, particularly in its ability to handle risk. Even so these two measures, together, are the first consulted when power sector investment and planning decisions are to be made.

Production of electricity has always involved an element of risk but this has been extended, and in some cases magnified by the introduction of liberalized electricity markets. One big source of risk is fuel price risk. If an investment is made today based on a predicted cost of natural gas that turns out to be wildly in error because prices soar, as has happened during the past decade, then that investment will be in danger of failing to be economical to operate. Therefore some measure of the risk of fuel price volatility should be included in any economic model. Other risks arise where large capital investment is required in untested technology. Meanwhile the liberalized market has introduced new types of risk more often associated with financial markets.

Key features of this report:

- Analysis of power generation costs concepts, drivers and components.
- Assessment of electricity costs for different technologies in terms of the two fundamental yardsticks used for cost comparison, capital cost and the levelized cost of electricity.
- Insight relating to the most innovative technologies and potential areas of opportunity for manufacturers.
- Examination of the key power generation technologies costs.
- Identification of the key trends shaping the market, as well as an evaluation of emerging trends that will drive innovation moving forward.

Key benefits from reading this report:

- Realize up to date competitive intelligence through a comprehensive power cost analysis in electricity power generation markets.
- Assess power generation costs and analysis - including capital costs, overnight costs, levelized costs and risk analysis.
- Identify which key trends will offer the greatest growth potential and learn which technology trends are likely to allow greater market impact.
- Quantify capital and levelized cost trends and how these vary regionally.

Key findings of this report:

1. Onshore wind power is potentially the cheapest of all the renewable technologies and it can be built for as little as $1,850/kW.
2. South Korean coal-fired power plants were estimated to cost $1,218/kW while in China the cost was even lower at $813/kW.
3. Adding CCS to a combined cycle power plant would raise the cost of electricity from the plant to $100.2/MWh.
4. A PC plant with CCS, meanwhile would provide electricity for £107/MWh.
5. In China the cost of wind power is notably higher than in the USA at $46/MWh, $60/MWh and $72/MWh at the three discount rates and in Germany it is much higher ($77/MWh - $108/MWh).
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Executive summary

Chapter 1 Electricity and fuel cost trends: the signature of the past and signs for the future
Summary
Introduction
Global power generation
Fuel costs
Fuel cost volatility and risk
The historical cost of electricity
Retail prices and distributed generation

Chapter 2 The capital cost of electricity generating technologies
Summary
Introduction
Capacity factor
Commodity prices and world markets
Lead times
Capital costs
Solar photovoltaic costs
Capital cost trends
Regional variations in capital costs

Chapter 3 The future cost of electricity: the levelized cost of power from conventional, nuclear and renewable technologies
Summary
Introduction
The levelized cost of energy
Levelized costs of electricity
Levelized cost trends
Regional variation in levelized cost
Subsidies and other distortions

Chapter 4 Global electricity generating capacity and the cost of power: technology growth trends and prospects
Summary
Introduction
Global capacity and production levels
A changing role for conventional generation
Renewable growth
The nuclear debate
Natural gas developments
Future generation costs
Global finance
Future outlook
List of abbreviations

Table of tables:
Table 1: Global power generation 1985 - 2015 (TWh), 2016
Table 2: Global electricity production by source in 2013 (TWh), 2015
Table 3: Global electricity production by region in 2015 (TWh), 2016
Table 4: Cost of fossil fuels for power generation ($/GJ and US standard units) for 2014, 2016 .
Table 5: Average spot price for crude oil 1990 - 2015 ($/bbl), 2016 (Part 1)
Table 5: Average spot price for crude oil 1990 - 2015 ($/bbl), 2016 (Part 2)
Table 6: The average cost of natural gas 1990 - 2015 ($/GJ), 2016 (Part 1)
Table 6: The average cost of natural gas 1990 - 2015 ($/GJ), 2016 (Part 2)
Table 7: Average annual cost of natural gas to US utilities (2004 - 2015) ($/GJ), 2016
Table 8: Annual cost of steam coal 1992 - 2015 ($/tonne), 2016 (Part 1)
Table 8: Annual cost of steam coal 1992 - 2015 ($/tonne), 2016 (Part 2)
Table 9: Annual cost of coal to US utilities 2005 - 2016 ($/tonne), 2016
Table 10: US retail electricity costs 2005 - 2015 ($/MWh), 2016
Table 11: Average retail electricity prices within the European Union 2007 - 2015 ($/€), 2016
Table 12: Japanese retail electricity costs 2009 - 2014 (Yen/MWh), 2015
Table 13: Typical capacity factors for the main power generating technologies (%), 2015
Table 14: New power plants capital costs in the US in 2014 ($/kW), 2015
Table 15: Lazard capital cost estimates for generating technologies ($/kW), 2015
Table 16: UK capital costs for low-carbon generating technologies (£/kW), 2013
Table 17: European spot prices for crystalline solar cell modules 2010 - 2016 (€/W), 2016
Table 18: US generating technology capital cost trends 2001 - 2015 ($/kW), 2015
Table 19: Coal-fired power plant capital cost by country ($/kW), 2015
Table 20: Combined cycle gas turbine power plant capital cost by country ($/kW), 2015
Table 21: Onshore wind plant capital cost by country ($/kW), 2015
Table 22: Solar photovoltaic capital cost by country ($/kW), 2015
Table 23: US levelized cost of electricity for generating plants entering service in 2020 (2013$/MWh), 2015
Table 24: Lazard levelized cost of electricity in the USA in 2015 ($/MWh), 2015
Table 25: UK levelized costs for plants entering service in 2019 (£/MWh), 2013
Table 26: US EIA levelized cost of electricity trends 2009 - 2015 ($/MWh), 2015
Table 27: Levelized cost of electricity from coal fired power plants, by country ($/MWh), 2015
Table 28: Levelized cost of electricity from natural gas-fired combined cycle plants, by country($/MWh), 2015
Table 29: Levelized cost of electricity from onshore wind installations, by country ($/MWh), 2015
Table 30: Levelized cost of electricity from solar pV installations, by country ($/MWh), 2015
Table 31: Predicted global electricity generation by fuel (TWh)
Table 32: Total global renewable capacities 2015 (GW), 2016
Table 33: Predicted global renewable electricity generation by source 2012 - 2040 (TWh), 2016
Table 34: Renewable growth rates 2010 - 2015 (%), 2016
Table 35: Predicted US gas prices, 2014 - 2040 ($/GJ), 2016
Table 36: Predicted US coal prices 2012 - 2040 ($/tonne), 2015
Table 37: US levelized generation costs in 2020 ($/MWh), 2015
Table 38: Projected levelized costs in the UK for different generating technologies 2014 - 2030(£/MWh), 2013
Table 39: Predicted cost of key renewable technologies in 2025 ($/MWh), 2015
Table 40: Annual global investment in renewable technologies 2005 - 2015 ($bn), 2016
Table 41: Investment in renewable technologies by technology in 2015 ($bn), 2016

Table of figures:
Figure 1: Global power generation 1985 - 2015 (TWh), 2016
Figure 2: Global electricity production by source in 2013 (TWh), 2015
Figure 3: Global electricity production by region in 2015 (TWh), 2016
Figure 4: Cost of fossil fuels for power generation ($/GJ and US standard units) for 2014, 2016
Figure 5: Average spot price for crude oil 1990 - 2015 ($/bbl), 2016
Figure 6: The average cost of natural gas 1990 - 2015 ($/GJ), 2016
Figure 7: Average annual cost of natural gas to US utilities (2004 - 2015) ($/GJ), 2016
Figure 8: Annual cost of steam coal 1992 - 2015 ($/tonne), 2016
Figure 9: Annual cost of coal to US utilities 2005 - 2016 ($/tonne), 2016
Figure 10: US retail electricity costs 2005 - 2015 ($/MWh), 2016
Figure 11: Average retail electricity prices within the European Union 2007 - 2015 ($/€), 2016 .
Figure 12: Japanese retail electricity costs 2009 - 2014 (Yen/MWh), 2015
Figure 13: Typical capacity factors for the main power generating technologies (%), 2015
Figure 14: New power plants capital costs in the US in 2014 ($/kW), 2015
Figure 15: Lazard capital cost estimates for generating technologies ($/kW), 2015
Figure 16: UK capital costs for low-carbon generating technologies (£/kW), 2013
Figure 17: European spot prices for crystalline solar cell modules 2010 - 2016 (€/W), 2016
Figure 18: US generating technology capital cost trends 2001 - 2015 ($/kW), 2015
Figure 19: Coal-fired power plant capital cost by country ($/kW), 2015
Figure 20: Combined cycle gas turbine power plant capital cost by country ($/kW), 2015
Figure 21: Onshore wind plant capital cost by country ($/kW), 2015
Figure 22: Solar photovoltaic capital cost by country ($/kW), 2015
Figure 23: US levelized cost of electricity for generating plants entering service in 2020 (2013$/MWh), 2015
Figure 24: Lazard levelized cost of electricity in the USA in 2015 ($/MWh), 2015
Figure 25: UK levelized costs for plants entering service in 2019 (£/MWh), 2013
Figure 26: US EIA levelized cost of electricity trends 2009 - 2015 ($/MWh), 2015
Figure 27: Levelized cost of electricity from coal fired power plants, by country ($/MWh), 2015 .
Figure 28: Levelized cost of electricity from natural gas-fired combined cycle plants, by country($/MWh), 2015
Figure 29: Levelized cost of electricity from onshore wind installations, by country ($/MWh), 2015
Figure 30: Levelized cost of electricity from solar pV installations, by country ($/MWh), 2015
Figure 31: Predicted global electricity generation by fuel (TWh)
Figure 32: Total global renewable capacities 2015 (GW), 2016
Figure 33: Predicted global renewable electricity generation by source 2012 - 2040 (TWh), 2016
Figure 34: Renewable growth rates 2010 - 2015 (%), 2016
Figure 35: Predicted US gas prices, 2014 - 2040 ($/GJ), 2016
Figure 36: Predicted US coal prices 2012 - 2040 ($/tonne), 2015
Figure 37: US levelized generation costs in 2020 ($/MWh), 2015
Figure 38: Projected levelized costs in the UK for different generating technologies 2014 - 2030 (£/MWh), 2013
Figure 39: Predicted cost of key renewable technologies in 2025 ($/MWh), 2015
Figure 40: Annual global investment in renewable technologies 2005 - 2015 ($bn), 2016
Figure 41: Investment in renewable technologies by technology in 2015 ($bn), 2016
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Key Market Issues:

Environmental requirements: The volume of fossil fuels burnt for power and heat generation have continually grown in line with economic, infrastructure and population growth. The resulting growth of carbon dioxide emissions globally has been linked to global warming and thereon climate change. Political, environmentalist and consumer pressures to lower carbon emissions is creating a path for lower carbon emitting power generation technologies.

The cost of power: The levelized cost of power remains an imperfect tool for comparing generating technologies but it is probably the best available provided its limitations are taken into account. Current levelized costs and levelized cost trends show overall prices rises over the past decade but some changes in relative cost too. Meanwhile the liberalized energy markets of the world have shown increasing signs of the type of cyclical behavior notable in financial markets. This and other factors have led to questioning of the fitness of the open market model to the provision of low cost stable electricity supplies.

Carbon dioxide emission management costs: Carbon emissions are becoming part of the economic equation, and the cost of emitting a tonne of CO2 will be an important factor in determining future power plant economics. The introduction of carbon capture and storage to conventional technologies such as coal effect the cost of power generated by these plants, where renewable technologies such as wind and solar have no fuel costs, but require additional structure and balancing costs.

Key questions answered by this report:

1. What are the drivers shaping and influencing power plant development in the electricity industry?
2. What is power generation going to cost?
3. Which power generation technology types will be the winners and which the losers in terms power generated, cost and viability?
4. Which power generation types are likely to find favour with manufacturers moving forward?
5. Which emerging technologies are gaining in popularity and why?
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