Cost of electricity by source
Encyclopedia
The cost of electricity generated by different sources measures the cost of generating
Electricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...

 electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...

 including initial capital, return on investment
Rate of return
In finance, rate of return , also known as return on investment , rate of profit or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or...

, as well as the costs of continuous operation, fuel
Fuel
Fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air...

, and maintenance
Maintenance, repair, and operations
Maintenance, repair, and operations or maintenance, repair, and overhaul involves fixing any sort of mechanical or electrical device should it become out of order or broken...

. The price is normally measured in units of local currency per unit of electricity, for example cents-per-kilowatt-hour for small numbers, or dollars-per-megawatt-hour for larger quantities.

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 on some energy and sources and taxes on others):
  • Capital costs (including waste
    Waste
    Waste is unwanted or useless materials. In biology, waste is any of the many unwanted substances or toxins that are expelled from living organisms, metabolic waste; such as urea, sweat or feces. Litter is waste which has been disposed of improperly...

     disposal and decommissioning
    Nuclear decommissioning
    Nuclear decommissioning is the dismantling of a nuclear power plant and decontamination of the site to a state no longer requiring protection from radiation for the general public...

     costs for nuclear energy) - tend to be low for fossil fuel
    Fossil fuel
    Fossil fuels are fuels formed by natural processes such as anaerobic decomposition of buried dead organisms. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650 million years...

     power station
    Power station
    A power station is an industrial facility for the generation of electric energy....

    s; high for wind turbines, solar PV and nuclear; very high for waste to energy, wave
    Wave power
    Wave power is the transport of energy by ocean surface waves, and the capture of that energy to do useful work — for example, electricity generation, water desalination, or the pumping of water...

     and tidal
    Tidal power
    Tidal power, also called tidal energy, is a form of hydropower that converts the energy of tides into useful forms of power - mainly electricity....

    , solar thermal.
  • Fuel costs - high for fossil fuel and biomass sources, very low for nuclear and renewables.
  • Factors such as the costs of waste (and associated issues) and different insurance costs are not included in the following: Works power, own use or parasitic load - i.e. the portion of generated power actually used to run the stations pumps and fans has to be allowed for.


To evaluate the total cost of production of electricity, the streams of costs are converted to a net present value
Net present value
In finance, the net present value or net present worth of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values of the individual cash flows of the same entity...

 using the time value of money
Time value of money
The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. The time value of money is the central concept in finance theory....

. These costs are all brought together using discounted cash flow here. and here.

Another collection of cost calculations is shown here:, here, and, and.

BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...

 claims renewables are on a decreasing cost curve - solar PV even more than wind turbines, while non-renewables are on an increasing cost curve, however the UK Energy Resource Centre found that the cost of building an offshore wind farm has doubled between 2003 and 2008.

Calculations

Levelised energy cost (LEC, also commonly abbreviated as LCOE ) is the price at which electricity must be generated from a specific source to break even. It is an economic assessment of the cost of the energy-generating system including all the costs over its lifetime: initial investment, operations and maintenance, cost of fuel, cost of capital
Cost of capital
The cost of capital is a term used in the field of financial investment to refer to the cost of a company's funds , or, from an investor's point of view "the shareholder's required return on a portfolio of all the company's existing securities"...

, and is very useful in calculating the costs of generation from different sources.

It can be defined in a single formula as:



where
  • = Average lifetime levelised electricity generation cost
  • = Investment expenditures in the year t
  • = Operations and maintenance expenditures in the year t
  • = Fuel expenditures in the year t
  • = Electricity generation in the year t
  • = Discount rate
    Discount rate
    The discount rate can mean*an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window....

  • = Life of the system


Typically LECs are calculated over 20 to 40 year lifetimes, and are given in the units of currency per kilowatt-hour, for example AUD/kWh or EUR/kWh or per megawatt-hour, for example AUD/MWh (as tabulated below). However, care should be taken in comparing different LCOE studies and the sources of the information as the LCOE for a given energy source is highly dependent on the assumptions, financing terms and technological deployment analyzed. Thus, a key requirement for the analysis is a clear statement of the applicability of the analysis based on justified assumptions. See a recent review on the subject stating reporting requirements and clearing up misconceptions about inputs : A Review of Solar Photovoltaic Levelized Cost of Electricity, Renewable and Sustainable Energy Reviews, 15, pp.4470-4482 (2011) http://www.appropedia.org/Review_of_Solar_Levelized_Cost

System boundaries

When comparing LECs for alternative systems, it is very important to define the boundaries of the 'system' and the costs that are included in it. For example, should transmissions lines and distribution systems be included in the cost? Typically only the costs of connecting the generating source into the transmission system is included as a cost of the generator. But in some cases wholesale upgrade of the Grid is needed. Careful thought has to be given to whether or not these costs should be included in the cost of power.

Should R&D, tax, and environmental impact studies be included? Should the costs of impacts on public health and environmental damage be included? Should the costs of government subsidies be included in the calculated LEC?

Discount rate

Another key issue is the decision about the value of the discount rate . The value that is chosen for can often 'weigh' the decision towards one option or another, so the basis for choosing the discount must clearly be carefully evaluated. See Internal rate of return
Internal rate of return
The internal rate of return is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return or the rate of return . In the context of savings and loans the IRR is also called the effective interest rate...

. The discount rate depends on the cost of capital
Cost of capital
The cost of capital is a term used in the field of financial investment to refer to the cost of a company's funds , or, from an investor's point of view "the shareholder's required return on a portfolio of all the company's existing securities"...

, including the balance between debt-financing and equity-financing, and an assessment of the financial risk
Financial risk
Financial risk an umbrella term for multiple types of risk associated with financing, including financial transactions that include company loans in risk of default. Risk is a term often used to imply downside risk, meaning the uncertainty of a return and the potential for financial loss...

.

US Department of Energy estimates

The tables below list the estimated cost of electricity by source for plants entering service in 2016. The tables are from a December 16, 2010 report of the Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) of the U.S. Department of Energy (DOE) called "Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011".
  • Total System Levelized Cost (the rightmost column) gives the dollar cost per megawatt-hour that must be charged over time in order to pay for the total cost. Divide by 1000 to get the cost per kilowatt-hour (move the decimal point
    Decimal separator
    Different symbols have been and are used for the decimal mark. The choice of symbol for the decimal mark affects the choice of symbol for the thousands separator used in digit grouping. Consequently the latter is treated in this article as well....

     3 places to the left).


These calculations reflect an adjustment to account for the high level of carbon dioxide produced by coal plants. From the EIA report:
"a 3-percentage point increase in the cost of capital is added when evaluating investments in greenhouse gas (GHG) intensive technologies like coal-fired power and coal-to-liquids (CTL) plants without carbon control and sequestration (CCS). While the 3-percentage point adjustment is somewhat arbitrary, in levelized cost terms its impact is similar to that of a $15 per metric ton of carbon dioxide (CO2) emissions fee. ... As a result, the levelized capital costs of coal-fired plants without CCS are higher than would otherwise be expected."


No tax credits or incentives are incorporated in the tables. From the EIA report (emphasis added):
"Levelized cost represents the present value of the total cost of building and operating a generating plant over an assumed financial life and duty cycle, converted to equal annual payments and expressed in terms of real dollars to remove the impact of inflation. Levelized cost reflects overnight capital cost, fuel cost, fixed and variable O&M cost, financing costs, and an assumed utilization rate for each plant type. The availability of various incentives including state or federal tax credits can also impact the calculation of levelized cost. The values shown in the tables below do not incorporate any such incentives."


Incentives, tax credits, production mandates, etc. are discussed in the overall comprehensive EIA report: "Annual Energy Outlook 2011".
  • O&M = operation and maintenance
    Maintenance, repair, and operations
    Maintenance, repair, and operations or maintenance, repair, and overhaul involves fixing any sort of mechanical or electrical device should it become out of order or broken...

    .
  • CC = combined cycle
    Combined cycle
    In electric power generation a combined cycle is an assembly of heat engines that work in tandem off the same source of heat, converting it into mechanical energy, which in turn usually drives electrical generators...

    .
  • CCS = carbon capture and sequestration
    Carbon capture and storage
    Carbon capture and storage , alternatively referred to as carbon capture and sequestration, is a technology to prevent large quantities of from being released into the atmosphere from the use of fossil fuel in power generation and other industries. It is often regarded as a means of mitigating...

    .
  • PV = photovoltaics
    Photovoltaics
    Photovoltaics is a method of generating electrical power by converting solar radiation into direct current electricity using semiconductors that exhibit the photovoltaic effect. Photovoltaic power generation employs solar panels composed of a number of solar cells containing a photovoltaic material...

    .
  • GHG = greenhouse gas
    Greenhouse gas
    A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...

    .

UK 2010 estimates

In March 2010, a new report on UK levelised generation costs was published by Parsons Brinckerhoff
Parsons Brinckerhoff
Parsons Brinckerhoff is a professional services firm with 14,000 employees in 150 offices providing construction and operation management, planning, design, engineering, program management, strategic consulting, environmental and sustainability services for clients and communities in the Americas,...

. It puts a range on each cost due to various uncertainties. Combined cycle gas turbines without CO2 capture are not directly comparable to the other low carbon emission generation technologies in the PB study. The assumptions used in this study are given in the report, the report did not cover Solar power or include the New Nuclear's " hidden " government subsidies of 18 £/MWh to 67 £/MWh above the stated figures.
UK energy costs for different generation technologies in pounds
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...

 per megawatt hour (2010)
Technology Cost range (£/MWh)
New nuclear 80–105
Onshore wind 80–110
Biomass 60–120
Natural gas turbines with CO2 capture 60–130
Coal with CO2 capture 100–155
Solar farms 125–180
Offshore wind 150–210
Natural gas turbine, no CO2 capture 55–110
Tidal power 155–390

Divide the above figures by 10 to obtain the price in pence per kilowatt-hour "unit".

A further UK 2010 estimate is the Mott MacDonald study released by DECC in June 2010 :

Analysis from different sources

A draft report of LECs used by the California Energy Commission is available. From this report, the price per MWh for a municipal energy source is shown here:
California levelized energy costs for different generation technologies in US dollars per megawatt hour (2007)
Technology Cost (USD/MWh)
Advanced Nuclear 067  67
Coal 074  74–88
Gas 087  87–346
Geothermal 067  67
Hydro power
Hydropower
Hydropower, hydraulic power, hydrokinetic power or water power is power that is derived from the force or energy of falling water, which may be harnessed for useful purposes. Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as...

048  48–86
Wind power
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....

060  60
Solar 116  116–312
Biomass 047  47–117
Fuel Cell
Fuel cell
A fuel cell is a device that converts the chemical energy from a fuel into electricity through a chemical reaction with oxygen or another oxidizing agent. Hydrogen is the most common fuel, but hydrocarbons such as natural gas and alcohols like methanol are sometimes used...

086  86–111
Wave Power
Wave power
Wave power is the transport of energy by ocean surface waves, and the capture of that energy to do useful work — for example, electricity generation, water desalination, or the pumping of water...

611  611


Note that the above figures incorporate tax breaks for the various forms of power plants. Subsidies range from 0% (for Coal) to 14% (for nuclear) to over 100% (for solar).

Other sources are given here,

The following table gives a selection of LECs from two major government reports from Australia. Note that these LECs do not include any cost for the greenhouse gas
Greenhouse gas
A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...

 emissions (such as under carbon tax
Carbon tax
A carbon tax is an environmental tax levied on the carbon content of fuels. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel and is released as carbon dioxide when they are burnt. In contrast, non-combustion energy sources—wind, sunlight, hydropower, and nuclear—do not...

 or emissions trading
Emissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....

 scenarios) associated with the different technologies.
Levelised energy costs for different generation technologies in Australian dollars per megawatt hour (2006)
Technology Cost (AUD/MWh)
Nuclear
Economics of new nuclear power plants
The economics of new nuclear power plants is a controversial subject, since there are diverging views on this topic, and multi-billion dollar investments ride on the choice of an energy source...

 (to COTS
Commercial off-the-shelf
In the United States, Commercially available Off-The-Shelf is a Federal Acquisition Regulation term defining a nondevelopmental item of supply that is both commercial and sold in substantial quantities in the commercial marketplace, and that can be procured or utilized under government contract...

 plan)
040  40–70
Nuclear
Economics of new nuclear power plants
The economics of new nuclear power plants is a controversial subject, since there are diverging views on this topic, and multi-billion dollar investments ride on the choice of an energy source...

 (to suit site; typical)
040  75–105
Coal 028  28–38
Coal: IGCC
Integrated Gasification Combined Cycle
An integrated gasification combined cycle is a technology that turns coal into gas—synthesis gas . It then removes impurities from the coal gas before it is combusted and attempts to turn any pollutants into re-usable byproducts. This results in lower emissions of sulfur dioxide, particulates, and...

 + CCS
Carbon capture and storage
Carbon capture and storage , alternatively referred to as carbon capture and sequestration, is a technology to prevent large quantities of from being released into the atmosphere from the use of fossil fuel in power generation and other industries. It is often regarded as a means of mitigating...

053  53–98
Coal: supercritical pulverized + CCS
Carbon capture and storage
Carbon capture and storage , alternatively referred to as carbon capture and sequestration, is a technology to prevent large quantities of from being released into the atmosphere from the use of fossil fuel in power generation and other industries. It is often regarded as a means of mitigating...

064  64–106
Open-cycle Gas Turbine
Gas turbine
A gas turbine, also called a combustion turbine, is a type of internal combustion engine. It has an upstream rotating compressor coupled to a downstream turbine, and a combustion chamber in-between....

101  101
Hot fractured rocks 089  89
Gas: combined cycle
Combined cycle
In electric power generation a combined cycle is an assembly of heat engines that work in tandem off the same source of heat, converting it into mechanical energy, which in turn usually drives electrical generators...

037  37–54
Gas: combined cycle + CCS
Carbon capture and storage
Carbon capture and storage , alternatively referred to as carbon capture and sequestration, is a technology to prevent large quantities of from being released into the atmosphere from the use of fossil fuel in power generation and other industries. It is often regarded as a means of mitigating...

053  53–93
Small Hydro power
Hydropower
Hydropower, hydraulic power, hydrokinetic power or water power is power that is derived from the force or energy of falling water, which may be harnessed for useful purposes. Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as...

055  55
Wind power
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....

: high capacity factor
Capacity factor
The net capacity factor or load factor of a power plant is the ratio of the actual output of a power plant over a period of time and its potential output if it had operated at full nameplate capacity the entire time...

055  63
Solar thermal
Solar thermal energy
Solar thermal energy is a technology for harnessing solar energy for thermal energy . Solar thermal collectors are classified by the United States Energy Information Administration as low-, medium-, or high-temperature collectors. Low-temperature collectors are flat plates generally used to heat...

085  85
Biomass 088  88
Photovoltaics
Photovoltaics
Photovoltaics is a method of generating electrical power by converting solar radiation into direct current electricity using semiconductors that exhibit the photovoltaic effect. Photovoltaic power generation employs solar panels composed of a number of solar cells containing a photovoltaic material...

120  120

In 1997 the Trade Association for Wind Turbines (Wirtschaftsverband Windkraftwerke e.V. –WVW) ordered  a study into the costs of electricity production in newly constructed conventional power plants from the Rheinisch-Westfälischen Institute for Economic Research –RWI). The RWI predicted costs of electricity production per kWh for the basic load for the year 2010 as follows:
Fuel Cost per kilowatt hour in euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

 cents.
Nuclear Power
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...

10.7 €ct – 12.4 €ct
Brown Coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

 (Lignite
Lignite
Lignite, often referred to as brown coal, or Rosebud coal by Northern Pacific Railroad,is a soft brown fuel with characteristics that put it somewhere between coal and peat...

)
8.8 €ct – 9.7 €ct
Black Coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

 (Bituminous)
10.4 €ct – 10.7 €ct
Natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

11.8 €ct – 10.6 €ct.


The part of a base load represents approx. 64% of the electricity production in total. The costs of electricity production for the mid-load and peak load are considerably higher. There is a mean value for the costs of electricity production for all kinds of conventional electricity production and load profiles in 2010 which is 10.9 €ct to 11.4 €ct per kWh. The RWI calculated this on the assumption that the costs of energy production would depend on the price development of crude oil and that the price of crude oil would be approx. 23 US$ per barrel in 2010. In fact the crude oil price is about 80 US$ in the beginning of 2010. This means that the effective costs of conventional electricity production still need to be higher than estimated by the RWI in the past.

The WVW takes the legislative feed-in-tariff as basis for the costs of electricity production out of renewable energies because renewable power plants are economically feasible under the German law (German Renewable Energy Sources Act-EEG).

The following figures arise for the costs of electricity production in newly constructed power plants in 2010:
Energy source Costs of electricity production in euros per megawatt hour
Nuclear Energy 107.0 – 124.0
Brown Coal 88.0 –   97.0
Black Coal 104.0 – 107.0
Domestic Gas 106.0 – 118.0
Wind Energy Onshore 49.7 –   96.1
Wind Energy Offshore 35.0 – 150.0
Hydropower 34.7 – 126.7
Biomass 77.1 – 115.5
Solar Electricity 284.3 – 391.4

Other estimates

A 2010 study by the Japanese government, 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
Masayoshi Son , born a Zainichi Korean and now a naturalized Japanese citizen, is a businessman and the founder and current chief executive officer of SoftBank Capital, and the chief executive officer of SoftBank Mobile...

, an advocate for 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.

Beyond the power station terminals, or system costs

The raw costs developed from the above analysis are only part of the picture in planning and costing a large modern power grid. Other considerations are the temporal load profile
Load profile
In electrical engineering, a load profile is a graph of the variation in the electrical load versus time. A load profile will vary according to customer type , temperature and holiday seasons....

, i.e. how load varies second to second, minute to minute, hour to hour, month to month. To meet the varying load, generally a mix of plant options is needed, and the overall cost of providing this load is then important. Wind power has poor capacity contribution, so during windless periods, some form of back up must be provided. All other forms of power generation also require back up, though to a lesser extent. To meet peak demand on a system, which only persist for a few hours per year, it is often worth using very cheap to build, but very expensive to operate plant - for example some large grids also use load shedding coupled with diesel generator
Diesel generator
A diesel generator is the combination of a diesel engine with an electrical generator to generate electrical energy....

s at peak or extreme conditions - the very high kWh production cost being justified by not having to build other more expensive capacity and a reduction in the otherwise continuous and inefficient use of spinning reserve.

In the case of wind energy, the additional costs in terms of increased back up and grid interconnection to allow for diversity of weather and load may be substantial. This is because wind stops blowing frequently even in large areas at once and for prolonged periods of time. Some wind advocates have argue that in the pan-European case back up costs are quite low, resulting in overall wind energy costs about the same as present day power. However, such claim are generally considered too optimistic, except possibly for some marginal increases that, in particular circumstances, may take advantage of the existing infrastructure.

The cost in the UK of connecting new offshore wind in transmission terms, has been consistently put by Grid/DECC/Ofgem at £15billion by 2020. This £15b cost does not include the cost of any new connections to Europe - interconnectors, or a supergrid, as advocated by some. The £15b cost is the cost of connecting offshore wind farms by cables typically less than 12 km in length, to the UK's nearest suitable onshore connection point. There are total forecast onshore transmission costs of connecting various new UK generators by 2020, as incurred from 2010, of £4.7 billion, by comparison.

When a new plant is being added to a power system or grid, the effects are quite complex - for example, when wind energy is added to a grid, it has a marginal cost associated with production of about £20/MWh (most incurred as lumpy but running-related maintenance - gearbox and bearing failures, for instance, and the cost of associated downtime), and therefore will always offer cheaper power than fossil plant - this will tend to force the marginally most expensive plant off the system. A mid range fossil plant, if added, will only force off those plants that are marginally more expensive. Hence very complex modelling of whose systems is required to determine the likely costs in practice of a range of power generating plant options, or the effect of adding a given plant.

With the development of markets, it is extremely difficult for would-be investors to estimate the likely impacts and cost benefit of an investment in a new plant, hence in free market electricity systems, there tends to be an incipient shortage of capacity, due to the difficulties of investors accurately estimating returns, and the need to second guess what competitors might do.

Additional nuclear power costs

Nuclear power plants built recently, or in the process of being built, have incurred many cost overruns. Those being built now are expected to incur further cost overruns due to design changes after the Fukushima Daiichi nuclear disaster
Fukushima Daiichi nuclear disaster
The is a series of equipment failures, nuclear meltdowns, and releases of radioactive materials at the Fukushima I Nuclear Power Plant, following the Tōhoku earthquake and tsunami on 11 March 2011. The plant comprises six separate boiling water reactors originally designed by General Electric ,...

.

Nuclear power has in the past been granted indemnity from the burden of carrying full third party insurance liabilities in accordance with the Paris convention on nuclear third-party liability
Paris Convention on Third Party Liability in the Field of Nuclear Energy
The Paris Convention on Third Party Liability in the Field of Nuclear Energy is an OECD Convention on liability and compensation for damage caused by accidents occurring while producing nuclear energy.The convention:...

, the Brussels supplementary convention, and the Vienna convention on civil liability for nuclear damage
Vienna Convention on Civil Liability for Nuclear Damage
Vienna Convention on Civil Liability for Nuclear Damage-Background:In September 1997, many of the world's governments took a significant step forward in improving the liability regime for nuclear damage...

.

The limited insurance that is required does not cover the full cost of a major nuclear accident of the kind that occurred at Chernobyl
Chernobyl disaster
The Chernobyl disaster was a nuclear accident that occurred on 26 April 1986 at the Chernobyl Nuclear Power Plant in Ukraine , which was under the direct jurisdiction of the central authorities in Moscow...

 or Fukushima
Fukushima Daiichi nuclear disaster
The is a series of equipment failures, nuclear meltdowns, and releases of radioactive materials at the Fukushima I Nuclear Power Plant, following the Tōhoku earthquake and tsunami on 11 March 2011. The plant comprises six separate boiling water reactors originally designed by General Electric ,...

. An April 2011 report by Versicherungsforen Leipzig, a Leipzig
Leipzig
Leipzig Leipzig has always been a trade city, situated during the time of the Holy Roman Empire at the intersection of the Via Regia and Via Imperii, two important trade routes. At one time, Leipzig was one of the major European centres of learning and culture in fields such as music and publishing...

 company that specializes in actuarial calculations shows that full insurance against nuclear disasters would increase the price of nuclear electricity by €0.14/kWh ($0.20/kWh) to €2.36/kWh ($3.40/kWh).

See also

  • Comparisons of life-cycle greenhouse gas emissions
    Comparisons of life-cycle greenhouse gas emissions
    Comparisons of life-cycle greenhouse gas emissions attempt to calculate the emissions of greenhouse gases or solely carbon dioxide over the full life of a power source, from groundbreaking to fuel sources to waste management back to greenfield status....

  • Distributed generation
    Distributed generation
    Distributed generation, also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or distributed energy, generates electricity from many small energy sources....

  • Economics of new nuclear power plants
    Economics of new nuclear power plants
    The economics of new nuclear power plants is a controversial subject, since there are diverging views on this topic, and multi-billion dollar investments ride on the choice of an energy source...

  • Demand response
    Demand response
    In electricity grids, demand response is similar to dynamic demand mechanisms to manage customer consumption of electricity in response to supply conditions, for example, having electricity customers reduce their consumption at critical times or in response to market prices...

  • Intermittent energy source
  • National Grid Reserve Service
  • Calculating the cost of the UK Transmission network: cost per kWh of transmission
  • List of countries by electricity production from renewable sources
  • List of U.S. states by electricity production from renewable sources
  • Environmental concerns with electricity generation
    Environmental concerns with electricity generation
    The environmental impact of electricity generation is significant because modern society uses large amounts of electrical power. This power is normally generated at power plants that convert some other kind of energy into electrical power...

  • Grid parity
    Grid parity
    Grid parity is the point at which alternative means of generating electricity is at least as cheap as grid power.For solar energy, it is achieved first in areas with abundant sun and high costs for electricity such as in California, Hawaii, Spain and Japan. Many solar power advocates predict that...


Further reading

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