The recently published joint publication by the International Energy Agency (IEA) and the OECD Nuclear Energy Agency (NEA), “Projected Costs of Generating Electricity – 2020” is the ninth edition of this report, which is produced every five years. 

The 223-page document focuses on the cost of electricity generation from a wide set of technologies in a large range of countries. It concludes that “the increasing competitiveness of low-carbon technologies for electricity generation remains the key insight of this report”. This applies to variable renewables such as wind and solar PV, as well as flexible low-carbon generators such as hydro and nuclear energy.

It says: “Even at a modest carbon price of $30 per tonne of CO2, unmitigated coal is no longer competitive. Gas-fired electricity generation remains competitive in some markets, especially OECD North America, due to very low gas prices.” However, carbon capture, utilisation and storage (CCUS) “would require considerably higher carbon prices than those seen in most markets today to become competitive”.

The report also considers for the first time in some depth the costs of the system effects of different generating options. It includes cost data on storage, fuel cells and the long-term operation (LTO) of nuclear power plants. Overall, the report provides in total data for 243 plants in 24 countries.

The report says low-carbon generation is becoming cost competitive and the levelised costs of electricity generation of low-carbon generation technologies “are falling and are increasingly below the costs of conventional fossil fuel generation”.

Renewable energy costs have continued to decrease in recent years. The report shows that onshore wind is expected to have, on average, the lowest levelised costs of electricity generation in 2025. Although costs vary from country to country. Also solar PV, if deployed at large scales and under favourable climatic conditions, can be very cost competitive. Offshore wind is experiencing a major cost decrease compared with the previous edition.

Electricity from new nuclear power plants has lower expected costs in the 2020 edition than in 2015, although regional differences are considerable. “However, on average, overnight construction costs reflect cost reductions due to learning from first-of-a-kind (FOAK) projects in several OECD countries”. Nuclear remains the dispatchable low-carbon technology with the lowest expected costs in 2025. Only large hydro reservoirs can provide a similar contribution at comparable costs but remain highly dependent on the natural endowments of individual countries.

Compared with fossil fuel-based generation, nuclear plants are expected to be more affordable than coal-fired plants. While gas-based combined-cycle gas turbines (CCGTs) are competitive in some regions, this very much depend on the prices for natural gas and carbon emissions in individual regions. Electricity produced from nuclear LTO by lifetime extension is highly competitive and remains not only the least cost option for low-carbon generation - when compared with  building new power plants - but for all power generation across the board.

Competitiveness depends on national and local conditions, the report notes. Whereas renewables are very competitive in most countries participating in this report, the data shows that they still have higher costs than fossil fuel- or nuclear-based generation in some countries (in this report: Japan, Korea and Russia). In China and India, variable renewables are having the lowest expected levelised generation costs: utility scale solar PV and onshore wind are the least-cost options in both countries. “Nuclear energy is also competitive, showing that both countries have promising options to transition out of their currently still highly carbon-intensive electricity generation.”

Lifetime extensions of nuclear plants can be very cost effective

Beyond investments in new sites (greenfield projects), the report includes levelised cost estimates for nuclear LTO – representing extensive refurbishments to enable a secure operation beyond the originally intended lifetime. The report shows that making use of the existing facilities and infrastructure, significantly reduces costs compared with building new greenfield plants. Even at lower utilisation rates, a potential scenario for nuclear units in systems with high shares of variable renewables, costs are below those of new investments in other low-carbon technologies.

Depending on their position in the merit order, technologies will be affected differently. In the United States, with low gas prices, for instance, coal units will typically be dispatched last, and will have lower capacity factors. The results show that, due to their relatively low investment costs and in many regions moderate variable costs, gas-fired CCGTs are well suited for handling different generation levels. Nuclear units, on the other hand, due to high investment costs, require high utilisation rates.

Chapter 8, authored by the NEA, presents a current view of the potential role of nuclear energy in decarbonised electricity systems. It highlights the cost advantages of LTO, potentially significant cost reductions for new constructions after gaining experience with new designs and the potential of small modular reactors (SMRs).

To reduce energy-related emissions, it is not sufficient to decarbonise the electricity sector, but electricity also has to replace fossil fuels in other end-use sectors.

Date: Monday, 14 December 2020
Original article: neimagazine.com/news/newselectricity-generation-costs-examined-in-new-ieanea-report-8407206