a brief on cost of eenergy issue

7
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

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Page 1: A brief on Cost of Eenergy issue

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

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

Page 2: A brief on Cost of Eenergy issue

Ma

Cos

W

Eve

lim

like

cos

bus

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pro

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bec

to b

ene

get

fut

ma

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ind

the

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CA

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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

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our

to

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su

alt

en

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and

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em

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co

en

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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

Page 3: A brief on Cost of Eenergy issue

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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

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Costs of di

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Wind power, like

ompared to ope

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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

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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

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ind farm

ration

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hore wind farm

3

ent

t of

r

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cost,

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t

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t

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m

Page 4: A brief on Cost of Eenergy issue

Cos

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/MW

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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

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ory

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ty

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an

he graph below

osts for fossil fu

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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

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m EER 2009 and

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Stern Review 20

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s. Nuclear data ba

ost components

mponents of en

n unique ways

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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.

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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

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nd is zero.

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t costs es

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Page 5: A brief on Cost of Eenergy issue

R

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is means that w

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ble, predictabl

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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.

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focused way to

echnological ad

we make turbin

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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

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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

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ecific wind spee

7

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of en

es over time an

The cost of win

ering the cost o

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ely tuned to eac

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turbines as

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thereby reduci

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nergy compared

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wind project

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able support sc

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roject more pre

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8.5

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isks can impac

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ment – and the

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ct energy invest

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9.5

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tments, and ev

terest rates for

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Page 6: A brief on Cost of Eenergy issue

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regarding what

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omponents of c

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cost of energy.

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Page 7: A brief on Cost of Eenergy issue

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nt of the risks fo

t level or at thedual project leviscussing the srations in Grou

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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

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2009;

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7