a brief on cost of eenergy issue
TRANSCRIPT
Ma
Cos
C
Co
Wh
Bu
Re
Ou
FA
Re
y 2011 By Gro
st of Energy (Co
Cost
ontents
hy focus on
uilding block
Costs of
educing cost
ur energy fut
AQ
eferences
oup Governmen
oE), Global
t of
cost of ener
ks of cost of e
f different po
t of energy
ture
nt Relations
f En
rgy
energy
ower source
nerg
es
gy
2
2
3
5
6
7
7
This issue b
information
the five Ves
of Energy.
brief provides
n on the topics
stas videos ad
more
s discussed in
ddressing Cos
n
st
Ma
Cos
W
Eve
lim
like
cos
bus
eco
pro
As
bec
to b
ene
get
fut
ma
B
Cos
ind
the
Di
CA
The
cos
the
get
“Thgenpersig
Dav
OP
The
and
dril
y 2011 By Gro
st of Energy (Co
Why f
eryone needs e
ited resources
e fossil fuels. Ev
st of energy ma
siness, for crea
onomic growth.
osperity.
a society, we ru
cause we don’t
be in the future
ergy choices co
t the most powe
ure. How do we
de? We focus o
Buildi
st of energy con
irect. When cho
e direct and the
rect costs
PEX
e capital expen
sts associated w
e cost of capital
t funding.
he influence of ineration cannorcentage point
gnificant effect
vid Milborrow, Wi
EX
e operating cos
d, for some ene
lling/mining an
oup Governmen
oE), Global
focus
energy, and gen
and in many ca
veryone and ev
atters for the co
ting and maint
. If energy is too
un risks in plan
know what the
e. We need to lim
ompared to the
er out of our inv
e ensure that th
on the cost of e
ng bl
nsists of many
oosing our pow
e indirect costs
s
nditure (CAPEX
with building a
l, that is, the int
interest rates oot be over-empht change in the p
on the end pric
indpower Month
sts (OPEX) cove
ergy forms, the c
nd transporting
nt Relations
s on c
nerating energy
ases limited na
verything requi
ompetitiveness
aining local job
o expensive, it
ning our future
e cost of energy
mit the risks as
current energy
vestment both
he best energy
energy.
locks
building block
wer sources, we
of energy into
X), or initial cost
power plant. It
terest rate you
on the cost of whasized. […] A sproject interestce of the electri
ly article in 2010
er operations a
cost of fuel (pu
g the fuel used a
cost o
y consumes
tural resources
res energy. The
s of local
bs, and for
limits growth a
e energy supply
y or fuel is going
ssociated with o
y mix. We need
today and in th
choices are
s of co
s, both direct a
should take bo
account.
t, covers all the
t also includes
have to pay to
wind power single t rate has a icity produced.”
0
and maintenanc
rchasing or
at the power
of ene
s
e
and
y
g
our
to
he
If
su
alt
en
W
It
pl
th
ost o
and
oth
”
ce,
pl
em
Th
co
en
Co
“Pmnuspin
“Tanchco
So20
ergy
we want to sec
upply in the futu
ternatives – we
nergy mix.
What is cost of e
is the total cos
ant, and includ
he power plant.
f ene
ant), purchasin
mits greenhous
he potential pri
ost to society, a
nergy costs for
osts are projec
Pinning a singlemeaningless exe
umber of operapeeds on wind p
nfluence of inter
The precise costnd wind] depenharacteristics oost of financing
ources: David Mil010 (respectively
ure a more stab
ure, we have to
e need to includ
energy?
t of generating
es the cost of b
ergy
ng carbon perm
se gases, and st
ce volatility of
s the risk of lar
all.
ct specific
e figure to the coercise given theating cost variabpower economirest rates on pr
st competitivenends more than aof each particulag as well as CO2
borrow, Windpowy)
ble and sustain
o look into bette
de wind energy
g 1 kWh of pow
building, fueling
mits for fossil fu
toring waste.
some fuel type
rge price fluctu
cost of wind powe range of insta
ables, the strongmics and the equ
roject financing
ness [of nuclear,anything on thelar market and t
2 and fossil fuel
wer Monthly artic
nable energy
er long term
y in our future
wer from a powe
g and operating
el energy that
es can also hav
ations increase
wer is a alled costs, the g influence of w
ually strong g.”
r, coal, gas, hydre local their associatel prices.”
cle in 2010, IEA
er
g
e a
es
wind
dro
ed
In
The
cos
Mo
the
Soc
Am
– th
the
a p
Env
Am
air
nat
in p
Clim
The
pla
effe
and
cos
wat
Est
The
or t
exi
cos
The
cyccosannconcoacom$1
due
the
of c
SouPro
direct cos
e indirect costs
sts are often div
ost of the indire
e owners of the
cial costs
mong the social
he cost of hosp
e emissions from
ower plant.
vironmental co
mong the enviro
pollution and w
ture areas, and
power plants, im
mate change
e costs of clima
nt emissions a
ects of climate
d the environm
sts of rebuilding
ter and food sh
timating indire
ere are many un
the avoided cos
sting research
sts of energy, so
e U.S. National
cle effects of costing the U.S. punually. […] Acconservatively doal per kWh genempetitive.” The
78.4/MWh, wh
e to difficulty in
ey go on and sta
coal are thus fa
urce: Hidden Costduction and Use
sts
s are many and
vided into socia
ct costs of ene
power plants b
costs we can n
pitals, doctor vis
m a power plan
osts
onmental costs
waste – pollutin
also the cost o
mpacting both t
ate change as a
ffect both soci
change range
ent to global ch
g, of lost econo
hortages, of hig
ect costs
ncertainties in
sts of fossil-fue
suggests thes
ometimes man
Academy of Sc
oal and the waspublic a third to counting for theoubles to triples
nerated, makingir estimated va
hich does not re
n monetizing al
ate that “the truar greater than t
ts of Energy: Unpe, 2010
often hard to q
al and environm
rgy are current
but by citizens a
name the poten
sits and medici
nt, or as a result
we can also na
ng drinking wat
of using fresh w
the environme
a result of fossi
ety and the env
from local chan
hanges and the
omic activity, of
gher insurance p
estimates of th
el power genera
e costs can sur
ny times over.
ciences conclud
ste stream geneover one-half o
e [cumulative] ds the price of el
g wind […] econalue of coal exte
epresent the fu
l the impacts, a
rue ecological athe numbers su
priced Conseque
quantify. Indirec
mental costs.
tly not carried b
and society.
ntial health cost
ine as a result o
t of an accident
ame the costs o
ter, destroying
water for cooling
nt and people.
l fueled power
vironment. The
nges to weathe
e associated
f crop failures a
premiums.
he indirect cost
ation, however,
rpass the direct
des that“the lifeerated are of a trillion dolladamages lectricity from
nomically ernalities is
ll burden of coa
and therefore
and health costsuggest.”
nces of Energy
ct
by
ts
of
t at
of
g
e
er
and
ts
,
t
fe
lars
al
ts
C
W
W
co
wi
(h
re
st
no
wi
so
ex
Th
fa
th
hi
gr
to
So
Costs of di
Wind energy
Wind power, like
ompared to ope
ind energy is m
ow often the po
source among
able and predic
o carbon cost a
ind energy is al
ources in some
xpected.
he pie charts sh
rm. Costs for of
his is offset by h
gher offshore c
rid costs; the tu
otal cost.
ource for both pie
T
Average
Average op
fferent po
most renewab
erating costs, b
most impacted b
ower plant runs
others). While
ctable over lon
nd virtually no
ready competi
cases, and furt
how typical cos
ffshore wind ar
higher energy p
costs are due p
rbines account
e charts EWEA 20
urbine
e cost profile f
Land rent
Insurance
Misc
erating cost p
ower sour
bles, has a high
but the latter ar
by variations in
s, which reflect
the power outp
nger periods. Th
environmenta
itive with conve
ther cost impro
st profiles for an
re higher than f
production in m
primarily to high
t for a smaller p
009, data from 2
for onshore w
Service and spare parts
Administr
Pcellaneous
profile for onsh
ces
initial investm
e low. The cost
n the load facto
s the energy
put is variable i
here is no fuel c
l cost. Onshore
entional power
vements are
n onshore wind
for onshore, bu
most cases. The
her foundation
percentage of t
2006
Grid Connection
Foundatioand Turbin
Set Up
Land Rent
Financial Costs
Project Developmen
ind farm
ration
Power from the grid
hore wind farm
3
ent
t of
r
t is
cost,
d
t
and
the
n ne
t
nt
m
Cos
The
com
tim
con
ava
tra
Com
Due
ma
The
dire
bas
com
ass
cos
cal
and
The
pow
and
in c
ene
Sou
2
3
4
5
6
Co
st $
/MW
h
st of energy va
e cost of energy
mprises a range
me. These value
nditions, by ma
ailable and by t
nsmission syst
mparing power
e to the challen
ny comparison
e benefit of com
ect and indirect
sis for making l
mparison shoul
sumptions for a
sts. When you i
culations, wind
d already is in s
e graph below s
wer sources in 2
d BRICS countr
costs and is bas
ergy are not inc
urce IEA 2010
1
101
201
301
401
501
601
Cost rang
aries…
y is not a fixed
e of values dep
s are affected b
cro-economic f
the structure of
tems.
r sources
nge of monetizi
ns include only t
mparing power
t components i
ong term energ
ld be on a comm
all technologies
nclude all of th
d energy can be
some cases.
shows levelized
2009, based o
ies. The graph
sed only on dire
cluded.
ges for selecte
value for each
pendent on sou
by local politica
factors, by fina
f power market
ing the indirect
the direct cost
sources based
is that it will pro
gy decisions. H
mon basis with
s, based on the
e actual costs
e a competitive
d cost of electr
on data collecte
highlights that
ect costs- the in
ed energy tech
power source b
rce, location an
al and regulato
ncing options
s and
t costs of energ
components.
d on both the
ovide the best
owever, the
the same
full lifetime
into the
power source –
icity from vario
ed from OECD
t large variabilit
ndirect costs of
hnologies
but
nd
ory
gy,
–
ous
ty
f
Th
co
la
th
fo
nu
So
20
EP
ba
da
III
Re
Va
di
co
Fo
ha
in
in
or
lik
Fo
ha
an
he graph below
osts for fossil fu
rge variability h
hat the indirect
ossil fuels and c
uclear energy.
ources: Direct cos
010. Indirect cos
PA 2011, World B
ased on supercrit
ata based on ons
technology.
elative impact
ariations in the
fferent energy
ost structures.
or fossil fuel-ba
ave the largest
crease in the fu
crease by more
r nuclear power
kely rising - fue
ossil fuel-based
ave a price on t
nd that price is
Fossil fuels
A
w shows averag
uels, wind energ
hidden in the d
cost componen
can play a poten
sts compiled from
ts compiled and/
Bank 2011, and
tical coal and CCG
hore wind plants
of different co
direct cost com
technologies in
ased technolog
effect on the le
uel price can ca
e than a third de
r-based power p
l cost, and the f
d power plants
heir emissions
also zero for wi
s Wind
Average directfor selecte
e direct and es
gy and nuclear
ata, however th
nts play a signi
ntially large rol
m EER 2009 and
/or calculated ba
Stern Review 20
GT gas technolog
s. Nuclear data ba
ost components
mponents of en
n unique ways
gies variations i
evelized cost of
ause the cost of
epending on th
plants have a la
fuel cost for wi
will - or potent
of carbon and
ind energy.
d energy
t and indirected energy typ
timated indirec
power. There i
here is little do
ficant role for
le in the case of
d 2010 and IEA
ased on data from
006. Fossil fuel d
gies. Wind energy
ased on generati
s
nergy impact
as a result of th
in the fuel price
f energy. A 50%
f electricity to
he fuel. Fossil fu
asting - and mo
nd is zero.
tially already do
other pollutant
Nuclear
t costs es
Decommission
Social cost
Environmental
OPEX
CAPEX
4
ct
s a
ubt
f
m
data
y
on
heir
e
%
uels
ost
o –
ts,
ning
l cost
R
The
som
ene
Wh
Ves
ene
Thi
typ
are
sta
gua
risk
bla
to t
How
Gov
ene
dev
Ves
A ra
Reduc
e cost of energy
me trends can b
ergy is still falli
hat Vestas is do
stas works in a
ergy through te
is means that w
pe of wind spee
ea is to make th
ble, predictabl
arantees for av
ks further. In th
de and every tu
the installed am
w government
vernments play
ergy by reducin
velopers and ow
stas product p
ange of turbine
Wind speed (m/6
cing c
y for various so
be seen for diff
ng.
oing
focused way to
echnological ad
we make turbin
d and each typ
he power produ
e and efficient
vailability and lo
at way we get t
urbine, lowerin
mount of MW.
ts can help
y an important
ng risks and ind
wners.
ortfolio
es suited to spe
IEC III/s)
6.5
V90 2MW
V100 1.8MW
cost o
ources fluctuat
erent sources.
o continue lowe
dvances in turb
es that are fine
pe of site. Anoth
ction from our t
as possible. Ve
ost production
the most energ
g the cost of en
part in lowerin
direct costs for w
ecific wind spee
7
W
V90
W
V112 3MW
of en
es over time an
The cost of win
ering the cost o
ine technology
ely tuned to eac
her key focus
turbines as
estas gives
thereby reduci
gy out of every
nergy compared
g the cost of
wind project
eds and conditi
7.5
1.8MW
V
W Onshore
nergy
nd
nd
of
y.
ch
ing
d
M
ris
ge
po
re
hi
hi
m
di
ru
co
th
re
wh
In
st
wi
pr
in
bo
ions, customiza
IEC II
8
V60 850 kW
y
any potential r
sk has a cost. R
etting funding,
olitical and regu
gulatory uncer
gher the risk pr
gher the intere
akes it more ex
rect cost of ene
les are for plan
ompensation, fo
hat impact ener
turn on investm
hich lowers the
addition, gove
able support sc
ind energy. Sup
roject more pre
vestment more
orrowing money
able for various
8.5
V52 85
V90 3
isks can impac
isks have an im
and they can b
ulatory uncerta
tainties there a
remium that an
st rate that a b
xpensive to fun
ergy. The cleare
nning and deve
or grid connect
gy projects, the
ment – and the
e final cost of en
rnments can lo
chemes, furthe
pport schemes
dictable, which
e certain. Again
y, which again d
s environments
9
0 kW
3MW
V
V112
ct energy invest
mpact on the in
be reduced by a
ainties: the mor
are around win
n investor will re
bank will deman
nd wind project
er and more tra
loping a projec
tion, and for all
e more certain
lower the cost
nergy.
ower the cost of
er reducing the
can make reve
h make the proj
n, this decrease
decreases the
s and requireme
IEC I
9.5
V80 2MW
V164 7MW
2 3MW Offshore
tments, and ev
terest rates for
ddressing
re political and
d energy, the
equire and the
nd. This higher
s – increasing t
ansparent the
ct, for financial
the other facto
the projected
of project fund
f energy throug
risk of investin
enue from a win
ected return on
es the cost of
cost of energy.
ents.
10
5
ery
r
risk
the
ors
ding,
gh
ng in
nd
n
O
We
ma
tec
on
Red
ren
affo
Bui
pric
pow
car
Oi
D
So
Our en
e keep the cost
king the right d
chnologies and
both the direct
ducing our dep
newable fuels is
ordable energy
ilding a power p
ces in terms of
wer plant is a b
rbon emissions
il price chronol
Dollars per barr
ource: EIA
nergy
of energy low a
decisions now r
what types of f
t and indirect co
endency on lim
s a way to secu
y supply for the
plant today is a
future cost of e
et on future fos
. Fossil fuel cos
ogy 1974-20
el
y futu
and stable in th
regarding what
fuel to rely on. W
omponents of c
mited resources
re a stable, pre
e future.
a bet on future e
energy. Buildin
ssil fuel prices a
sts have remain
11
ure
he future by
t power
We need to foc
cost of energy.
s such as non-
dictable and
energy and fue
g a fossil fueled
and the price o
ned high despit
cus
el
d
f
te
th
wo
re
W
ba
co
an
th
bo
en
su
he financial cris
orld and energy
bound in fuel c
Wind energy is a
ased energy be
ost model imbe
nd virtually no e
he safest bet fo
oth short- and l
nsuring a local,
upply for many
is and resulting
y experts includ
osts due to gro
less risky futu
cause wind ene
dded – there ar
environmental
r our energy fut
ong-term energ
stable, predict
countries.
g deep recessio
ding the IEA wa
owth in develop
re energy inves
ergy has a stab
re no fuel costs
costs. So all in
ture. Including
gy planning wi
table, clean and
on in most of th
arn of a further
ping economies
stment than fu
ble and certain
s, no carbon cos
all, wind energ
wind energy in
ll continue
d affordable po
6
he
s.
el-
sts
y is
n
wer
F
Q
Wbean
Wofpocoenen
Wdiofdi
Hbainw
RSo
EW
IEA
U.S
U.S
U.S
WinMo
FAQ
Question
What’s the diffeetween cost ofnd price of ene
Why use levelizf energy and nower plants foomparing costnergy for varionergy sources?
Why are there ifferences in thf energy calculifferent institu
ow about the alancing and s
ntegration costwind?
Referource
WEA
A
S. EIA
S. NAS
S. NREL
ndpower onthly
A
erence f energy
ergy?
Ththtradege
zed cost new-build or t of ous ?
Wtacopoopth
he cost lated by
utions?
Thsaofchthea
system ts for
LeleBaenat
ence
The Economi
iea.org; Proje
eia.doe.gov;
Hidden Costs
Wind Leveliz
Annual Poweenergy, Augu
Answer
he cost of energhe rates paid foansmission cosemand of poweenerating that e
When comparingakes into accouomparison shouower plants repperating time, w
hose of the sam
here are differeame power souf a power plant hoose differenthey are, the macach situation.
evelized cost ofvel; in order to alancing and synergy. For moret governmentre
s
ics of Wind Ene
ected costs of g
of Energy: Unp
zed Cost of Ene
er Costs Compaust 2010; all by
gy is what it cosr the use of ene
sts, among otheer and the existelectricity.
g power plants nt the full lifeti
uld always be mpresent the coswhich may have
me type.
ences in the estrces because toas net present
t costs and factcro-economic s
f energy can becompare techn
ystem integratie information oelations@vesta
ergy, 2009;
enerating elec
priced Conseque
ergy: A Compar
arison series, Jay David Milborr
sts to actually ergy. The price ers, beyond siming transmissio
the comparisoime costs, rathe
made between st of resources ae changed sign
timates for costo calculate cos value – what t
tors dependingsituation, and th
e used at the innologies, using ion costs are ren this please co
as.com.
tricity 2010 by
ences of Energ
rison of Techni
anuary 2011 arow
generate poweof energy may
mply the cost ofon infrastructu
n should alwayer than the enenew-build powat the time whe
nificantly compa
t of energy pubt of energy, youhose costs wou on the data th
heir assessmen
dividual projecit at the individ
elevant when dontact GR Oper
y OECD/NEA/I
y Production an
ical and Financ
nd January 20
er, whereas the include fees, ta
f energy. The pre – it may not
ys use the levelrgy price at anyer plants, since
en they were buared to new-bu
blished by diffeu need to expreuld be today. Diey have and th
nt of the risks fo
t level or at thedual project leviscussing the srations in Grou
EA;
nd Use, Nationa
cing Input Varia
10; Cutting the
price of energyaxes, grid and rice reflects suexpress the tru
ized cost of eny given time. M
e the costs for euilt and over thuild power plan
erent institutioness the full lifetifferent institut
he accuracy theor each techno
e electricity sysvel makes moresystem-wide co
p Government
al Academy of S
ables, October
e cost of offsho
y refers to
pply and ue cost of
ergy, which Moreover a
existing eir ts, even
ns for the time costs tions may reof, where
ology and
stem-wide e sense. ost of
Relations
Sciences, 2010
2009;
ore wind
7