Projected Costs of Generating Electricity: 2015 Update

Electricity is the fastest-growing final form of energy, and yet despite its increasing relevance to decarbonisation efforts, the future composition of the power sector remains uncertain. As policy makers work to ensure that the power sector is reliable and affordable, while making it increasingly clean and sustainable, it is ever more crucial that they understand what determines the relative cost of electricity generation using fossil fuel, nuclear or renewable technologies. This eighth edition of Projected Costs of Generating Electricity, which examines in depth the levelised costs of electricity (LCOE) generation for all main electricity generating technologies, reveals a number of interesting findings that have implications for policy makers. Drawing on a database that includes a greater variety of technologies and a larger number of countries than previous editions, this report reaffirms many of the insights and lessons of the prior editions. The drivers of the cost of different generating technologies remain both market- and technology-specific. Low-carbon technologies remain highly capital intensive, and their overall cost depends significantly on the cost of capital. The relative cost of coal and natural gas-fired generation, meanwhile, is heavily contingent on fuel costs and, should such policies be fully implemented, the price of CO2 emissions. One key trend that emerges is the significant decline in recent years in the cost of renewable generation as a result of the use of improved technologies and continued governmental support. The report also reveals that nuclear energy costs remain in line with the cost of other baseload technologies, despite persistent reports to the contrary. No single technology, however, can be said to be the cheapest under all circumstances. Rather, market structure, the policy environment and resource endowments all play a strong role in determining the final levelised cost of any given investment.

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