Electricity Generation Costs
October 2012
Introduction
Electricity generation costs are a fundamental part of energy market analysis, and a good
understanding of these costs is important when analysing and designing policy.
DECC regularly updates estimates of the costs and technical specifications for different
generation technologies used in its analysis. Cost data is broken down into detailed
expenditure per MW or MWh for the lifetime of a plant, from planning costs right through
construction and operating costs to eventual decommissioning costs.
These detailed costs are used by DECC to calculate a ‘levelised cost’ for each technology. A
‘levelised cost’ is the average cost over the lifetime of the plant per MWh of electricity
generated. These reflect the cost of building a generic plant for each technology, potential
revenue streams are not considered1.
For the purposes of this report data on the cost of electricity generation has been drawn from
Parsons Brinkerhoff (2012) for non-renewables technologies and evidence underpinning the
Renewables Obligation and Feed in Tariff scheme for renewable technologies. Based on this
detailed cost data, this report presents selected ‘levelised costs of electricity generation’
estimates generated using DECC’s Levelised Cost Model.
This report firstly details the methodology and assumptions used in these estimates and
discusses some of the limitations of levelised costs estimates. The report then presents
selected ‘levelised cost’ estimates generated using DECC’s Levelised Cost Model. The final
section of this report also adds a brief explanation of how cost information is used in DECC
modelling.
It is important to note there is a large amount of uncertainty when estimating the future costs of
electricity generation.
The levelised costs in this report are not intended to provide any indication of potential future
strike prices for the Feed-in Tariff with Contracts for Difference (CfD) being introduced as part
of Electricity Market Reform.
1
With the exception of heat revenues for CHP technologies
Electricity Generation Costs
Explanatory Notes
Methodology
The levelised cost of electricity generation (LCOE) is defined as the ratio of the net present
value of total capital and operating costs of a generic plant to the net present value of the net
electricity generated by that plant over its operating life.
For further information on how levelised costs are calculated and DECC’s Levelised Cost
Model please refer to section 4.2 Mott MacDonald (2010)2 or see Annex 2: Calculating
Levelised Costs
Data Sources and Assumptions
The following data sources and assumptions have been used to calculate the levelised costs
estimates presented in this report :
•
Non-Renewables Data: Underlying data on non-renewable technologies has been provided
by Parsons Brinckerhoff. The underlying data and assumptions can be found in the PB
(2012) report3.
Renewables Data (over 5MW): Renewable technology estimates (for plant size over 5MW)
reflect data and evidence underpinning the ‘Government response to the consultation on
proposals for the levels of banded support under the Renewables Obligation for the period
2013-17 and the Renewables Obligation Order 2012’ for renewable technologies4. Please
note that the estimates for renewables over 5MW have been inflated from 2010 to 2012
prices and heat revenues have been updated to reflect new fuel, carbon, and electricity
prices when compared to those published as part of the Government Response to
Renewables Obligation.5
Renewables Data (up to 5MW): Renewable technology estimates (for plant size up to 5MW)
reflect data and evidence from PB (2012) published as part of the government response to
Phase 2A and 2B comprehensive review of feed in tariffs67.
•
•
2
http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx
3
http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx
4
http://www.decc.gov.uk/assets/decc/11/consultation/ro-banding/5936-renewables-obligation-consultation-thegovernment.pdf This is referred to as the ‘Government Response to the RO’ throughout this report.
5
Please note that the data used to produce these levelised costs is consistent with the data underpinning the
Renewables Obligation and figures presented in the Call for Evidence on Onshore Wind
6
http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-energy/5381-solar-pv-costupdate.pdf.
3
Electricity Generation Costs
•
•
Fuel and Carbon Prices: DECC’s projected fossil fuel prices and Carbon Price Support.
Deployment Scenarios: Future cost estimates are driven by a combination of assumptions
of learning rates and global and UK deployment. Please see data sources referenced
above for detailed information about deployment scenarios used. In general IEA Bluemap
scenarios were the main source for global deployment. Four notable exceptions are;
offshore wind, ACT, marine and estimates for renewables technologies under 5MW which
are driven by technical potential for UK deployment8
All estimates are in 2012 real prices. This is in contrast to previously published estimates which
were in 2010 real prices.
Technology Notes
This report will not discuss changes to individual technology estimates from previously
published figures. For more information on individual changes please refer to the source
material referenced in the Data Sources and Assumptions section above.
Estimates for Carbon Capture and Storage (CCS) technologies and Nuclear are shown on a
First of a Kind (‘FOAK’) and Nth of a Kind (‘NOAK’) basis. For these technologies with no
commercial experience in the UK, FOAK was defined as the first plant within the UK, not
including demonstration projects. For these technologies, FOAK costs assume experience has
been gained from international and demonstration projects9.
The period in which the cost moves from FOAK to NOAK is entirely dependent on the assumed
learning rate and the assumed build rate. For nuclear we have assumed a move to NOAK for
plants starting development in 2018 onwards. In practice this may occur later than we have
assumed. The movement between FOAK and NOAK for CCS is even more uncertain and as
such we have only used FOAK estimates in this report.
Unless indicated all other estimates presented are NOAK.
7
http://www.decc.gov.uk/assets/decc/Consultations/fits-review/5900-update-of-nonpv-data-for-feed-in-tariff-.pdf
8
Please see Arup 2011 and PB 2012 for FiTs for more details. Please note that reductions in costs for offshore
wind are based on technical potential for deployment, if these levels of deployment do not materialise cost
reductions would be less pronounced..
9
All estimates for Carbon Capture and Storage (CCS) presented in this document are intended to illustrate the
cost of CCS for a commercial plant. In practice CCS would have be successfully demonstrated first. In order to
avoid confusion, we have not included estimates for CCS in the near future to illustrate the need for an initial
‘demonstration’ project
4
Electricity Generation Costs
Limitations of ‘Levelised Costs’
Levelised costs estimates are highly sensitive to the underlying data and assumptions used
including those on capital costs, fuel and carbon costs, operating costs, operating profile, load
factor and discount rates. Future levelised costs estimates are heavily driven by assumptions
of global and UK deployment and assumed learning rates (and to a limited extent market
effects10).
This report captures some of these uncertainties through ranges presented around key
estimates (for capex and fuel depending on the estimates). However, not all uncertainties are
captured in these ranges and estimates should be viewed in this context. It is often more
appropriate to consider a range of costs rather than point estimates.
Given these uncertainties, the levelised cost estimates in this report are not intended to provide
any indication of potential future strike prices for a particular technology or plant under the
Feed-in Tariff with Contracts for Difference (CfD) being introduced as part of Electricity Market
Reform. Strike prices will vary according to the length and design of the FiT CfD contract,
technology, financing costs and in a few limited cases specific project characteristics. To the
extent that project specific cost discovery processes are undertaken, these will form the
starting point of any process of setting a strike price, rather than relying on levelised cost data.
The levelised cost is a standardised measure of the net present value of lifetime costs divided
by generation for a generic plant under each technology. This measure makes no assumptions
about how particular generating stations would be financed, or the allocation of risk between
parties. A CfD stabilises revenues for a particular generating station at a fixed price level
known as the ‘strike price’ over a specified term, at a rate of return which reflects contract
duration and design, financing costs, and risk allocation between parties.
The levelised cost measure does not explicitly include the financing costs attached to new
generating stations11. In most cases this report includes estimates using a standard 10%
discount rate (in line with the ‘tradition’ used in reports produced by other organisations) across
all technologies. These estimates may be viewed as neutral in terms of financing and risk when
comparing across technologies.
In practice financing costs of individual projects will vary depending on a range of factors
including financing type, project developer, conditions in financial markets, maturity of
technology, and risk and political factors.
Annex 4 includes levelised cost estimates for renewable technologies using technology specific
hurdle rates as was done in previous reports on renewables. Currently uncertainties around the
cost of financing nuclear and CCS technologies means technology specific hurdle rate
estimates are only provided for renewables in this report.
10
11
Market effects can include short term imbalanced between the demand and supply for component costs.
While financing costs are included implicitly through the choice of discount rate used to produce the levelised
cost this is an approximation.
5
Electricity Generation Costs
Generation Cost Estimates
This section outlines the main results of the analysis of the levelised cost of electricity
generation. It focuses primarily on the main technologies likely to be deployed in the UK over
the next decade and a half.
The Levelised Cost of Electricity Generation is the discounted lifetime cost of ownership of
using a generation asset converted into an equivalent unit of cost of generation in £/MWh. This
is sometimes called a life cycle cost, which emphasises the cradle to grave aspect of the
definition. The levelised cost estimates do not consider revenue streams available to
generators (e.g. from sale of electricity or revenues from other sources), with the exception of
heat revenues for CHP plant which are included so that the estimates reflect the cost of
electricity generation only.
A full set of estimates for renewable technologies not covered in the main report can be found
in Annex 3.
When looking at levelised cost estimates it is important to consider how they have been
reported in terms of project timing and what sensitivities (if any) are included. These are
discussed in more detail below.
Timing
Levelised cost estimates can be reported for different time points associated with a project
including ‘Project Start’, ‘Financial Close’ and ‘Commissioning’. These are illustrated in Chart 1
below for an illustrative technology. A levelised cost estimate could be reported for ‘project
start’, ‘financial close’ or ‘commissioning’ basis and represent the same information but be
associated with different years.
For example, using the illustrative timings below for ‘Technology 1’. If the levelised cost of this
technology was £50/MWh for a project starting in 2012, this would be the same as saying
£50/MWh for a project reaching financial close in 2017 (2012 plus the 5 year pre-development
period), or £50/MWh for a project commissioning in 2023 (2017 plus the 6 year construction
period).
It is important to consider this when comparing across technologies. Pre-development and
construction timings will vary by technology and therefore estimates reported for ‘project start’
or ‘financial close’ may not represent technologies commissioning in the same year as each
other, and vice versa. Please see Annex 1 for key timings for selected technologies.
6
Electricity Generation Costs
Chart 1: Illustrative Timings
Project Start
Financial Close
Pre-development
Commissioning
Construction
Operation
De-Commissioning
0
10
20 years 30
40
50
Sensitivities
Levelised costs estimates are highly sensitive to the underlying data and assumptions used
including those on capital costs, fuel and carbon costs, operating costs, load factor and
discount rates. As such it is often more appropriate to consider a range of cost estimates rather
than point estimates.
In order to illustrate some of these sensitivities, ranges of estimates have been shown. The key
sensitivities explored are:
High and Low capital costs (including pre-development)
Unless specified all ‘high’ and ‘low’ estimates reported incorporate ‘high’ and ‘low’ capital costs
including ‘high’ and ‘low’ pre-development costs.
For non-renewable technologies this is a small change from previously reported estimates
which used ‘central’ estimates for pre-development costs throughout. For non-renewables
technologies ‘high’ and ‘low’ capital costs include the full range from PB (2012) i.e. both sitespecific variation and uncertainty over future costs12.
High and Low fuel and capital costs
In some cases, sensitivities which explore uncertainty over both fuel costs and capex costs are
provided . These are shown in charts like Chart 2 below. In these cases the thick blocks
represent ‘high/low’ sensitivities around capex (including pre-development) costs and the thin
12
For more details on ‘uncertainties’ please see PB (2012). Please note for nuclear technologies there was no
basis to distinguish between variation and uncertainty. Non-renewable technologies also include an adjustment for
market effects. These do not have a large impact on the cost estimates.
7
Electricity Generation Costs
lines represent ‘high/low’ sensitivities around fuel prices on top of the uncertainty around capex
(including pre-development) costs.
Chart 2: Illustrative Sensitivities
120
100
£/MWh
80
60
40
20
0
Technology 1
Technology 2
Estimates
Levelised cost estimates for three cases have been calculated using the DECC Levelised Cost
Model.
Case 1: projects starting in 2012, FOAK/ NOAK, 10% discount rate13
Case 1 shows the levelised costs for projects starting in 2012 with technologies which have not
been deployed in the UK in their current form considered ‘first of a kind’ (FOAK), and those that
have been deployed in the UK in their current form considered ‘Nth of a kind’ (NOAK). A 10%
discount rate has been used in this case.
Table 1 and Chart 3 show the detailed breakdown of the central levelised cost estimates for
projects starting in 2012.
Table 2 and Chart 4 show the sensitivities around capex and capex and fuel prices for projects
starting in 2012.
13
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
8
Electricity Generation Costs
Table 1: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
Central Levelised Costs,
£/MWh
Gas CCGT
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
CO2 transport and storage
Decomm and waste fund
Heat Revenues
TOTAL LEVELISED COST
0
9
3
0
48
19
80
Coal ASC with
FGD
0
22
5
1
28
45
102
Central Levelised Costs,
£/MWh
Onshore
>5 MW
14
E&W
2
79
19
3
104
Onshore
>5 MW
UK
2
71
17
3
93
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
CO2 transport and storage
Decomm and waste fund
Heat Revenues
TOTAL LEVELISED COST
Coal IGCC
Nuclear FOAK
Offshore
R2
Offshore
R3
1
26
7
1
30
56
122
5
55
11
3
5
2
81
4
81
32
1
118
6
91
37
134
Dedicate
d
biomass
>50MW
1
38
14
4
65
122
Dedicate
d
biomass
<50MW
2
52
16
5
41
117
Co-firing
Conventi
onal
5
5
1
81
92
Biomass
Conversi
on
2
11
13
1
83
110
Solar250
-5000kW
143
26
169
Table 2: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low Fuel
Low Capex
14
9
80
81
Coal ASC with
FGD
102
105
100
118
140
93
-
-
-
58
90
108
72
-
-
-
78
99
118
73
104
117
145
Gas CCGT
Onshore
>5 MW
E&W
Onshore
>5 MW
UK
104
125
85
Offshore
R2
Offshore
R3
Solar2505000kW
81
92
118
134
134
156
169
203
Coal IGCC
Nuclear FOAK
122
125
Dedicate
d
biomass
<50MW
117
139
Co-firing
Conventi
onal
93
111
Dedicate
d
biomass
>50MW
122
155
76
165
106
115
160
82
100
108
78
88
92
94
Estimates for onshore wind are shown using average load factors for UK and England and Wales ‘E&W’
Electricity Generation Costs
Chart 3: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
Case 1: Project Start 2012, FOAK/NOAK, 10% discount rate
180
160
140
£/MWh
120
100
80
60
40
20
0
Pre-Development Costs
Fuel Costs
Capital Costs
Carbon Costs
Fixed O&M
CO2 transport and storage costs
Variable O&M
Decomm and waste fund
Chart 4: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
Case 1: Project start 2012, FOAK/NOAK, 10% discount rate, sensitivities
250
200
£/MWh
150
100
50
0
10
Electricity Generation Costs
Case 2: projects starting in 2018, FOAK/ NOAK, 10% discount rate15
Case 2 shows the levelised costs for projects starting in 2018 assuming that NOAK has been
reached for all technologies (with the exception of CCS). A 10% discount rate has been used in
this case.
Table 3 and Chart 5 show the detailed breakdown of the central levelised cost estimates for
projects starting in 2018.
Table 4 and Chart 6 show the sensitivities around capex and capex and fuel prices for projects
starting in 2018.
Table 3: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
Central Levelised Costs,
£/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
CO2 transport and storage
Decomm and waste fund
Heat Revenues
TOTAL LEVELISED COST
Central Levelised Costs,
£/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
CO2 transport and storage
Decomm and waste fund
Heat Revenues
TOTAL LEVELISED COST
15
Gas CCGT
0
8
3
0
48
26
85
Nuclear NOAK
4
50
9
3
5
2
73
Gas CCGT
with post
comb.
CCS
FOAK
1
24
4
2
55
4
5
94
Dedicate
d
biomass
>50MW
1
37
14
4
65
121
Gas CCGT
retro
post
comb.
CCS
FOAK
1
19
4
2
56
4
5
89
Dedicate
d
biomass
<50MW
2
51
16
5
41
115
Coal ASC with
FGD
0
21
5
1
28
57
113
Coal ASC with
post
comb.
CCS
FOAK
1
47
10
3
37
9
11
116
Coal IGCC
1
26
7
1
30
66
131
Coal IGCC
with CCS
1
43
9
2
36
9
11
111
Offshore
R2
4
71
28
1
103
Offshore
R3
6
76
31
113
Onshore
>5 MW
E&W
2
76
19
3
101
Onshore
>5 MW
UK
2
68
17
3
90
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
11
Electricity Generation Costs
Table 3: (continued)
Central Levelised Costs,
£/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
CO2 transport and storage
Decomm and waste fund
Heat Revenues
TOTAL LEVELISED COST
Cofiring
Conventional
5
5
1
81
92
Biomass
Conversion
2
10
13
1
83
109
Solar2505000kW
104
25
129
Table 4: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
Gas CCGT
85
86
Gas CCGT
with post
comb.
CCS
94
104
Gas CCGT
retro post
comb.
16
CCS
89
98
106
127
64
84
Coal ASC with
FGD
113
117
Coal ASC with
post
comb.
CCS
116
136
Coal IGCC
131
135
Coal IGCC with
CCS
111
141
121
131
155
151
160
63
86
59
82
100
109
88
101
116
127
75
87
Nuclear EPWR
NOAK
73
85
Dedicated
biomass
>50MW
121
153
Dedicated
biomass
<50MW
115
137
Offshore
R2
103
118
Offshore
R3
113
132
Onshore
>5 MW
E&W
101
122
Onshore
>5 MW
UK
90
109
86
163
158
-
-
-
-
64
65
105
114
80
99
91
98
83
74
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
16
Cofiring
Conventional
92
93
Solar2505000kW
129
154
107
-
78
88
112
Please note all retrofit estimates are for the retrofit of CCS only and do not include the cost of the base plant.
12
Electricity Generation Costs
Chart 5: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
Case 2: Project Start 2018, FOAK/NOAK, 10% discount rate
140
120
£/MWh
100
80
60
40
20
Pre-Development Costs
Fuel Costs
Capital Costs
Carbon Costs
Fixed O&M
CO2 transport and storage costs
Solar250-5000kW
Biomass Conversion
Cofiring Conventional
Onshore >5 MW UK
Onshore >5 MW E&W
Offshore R3
Offshore R2
Dedicated biomass <50MW
Dedicated biomass >50MW
Nuclear NOAK
Coal - IGCC with CCS
Coal - IGCC
Coal - ASC with post comb. CCS
Coal - ASC with FGD
Gas - CCGT retro post comb. CCS
Gas - CCGT with post comb. CCS
Gas - CCGT
0
Variable O&M
Decomm and waste fund
Chart 6: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
Case 2: Project Start 2018, FOAK/NOAK, 10% discount rate, sensitivities
180
160
140
120
100
80
60
40
20
0
13
Electricity Generation Costs
Case 3: Commissioning in 2013, 2015, 2020, 2025, 2030, FOAK/ NOAK, 10%
discount rate17
In order to also show the costs of technologies commissioning in the same year Case 3
illustrates the levelised costs for projects commissioning in 2013, 2015, 2020, 2025 and 2030,
using a 10% discount rate.
Table 5: Projects Commissioning
in 2013,2015, 2020, 2025 and
2030, FOAK/NOAK,
10%discount rate, capex
sensitivity Levelised Costs, £/MWh
Commissioning Year
Gas - CCGT
Gas - CCGT with post comb. CCS
FOAK
Gas - CCGT retro post comb. CCS
FOAK
Coal - ASC with FGD
Coal - ASC with post comb. CCS
Coal - IGCC NOAK
Coal - IGCC with CCS FOAK
Nuclear - EPWR FOAK/NOAK
Dedicated biomass >50MW
Dedicated biomass <50MW
Offshore R2
18
Capex
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
2013
77
76
75
2015
79
78
77
2020
84
82
81
93
90
88
97
94
91
107
104
101
108
106
103
121
117
114
156
123
116
140
118
101
159
140
124
96
85
77
154
122
115
138
116
100
134
118
104
157
124
117
141
119
102
174
153
135
2025
88
87
85
104
94
86
97
89
82
117
113
109
136
116
101
131
127
123
109
111
88
91
79
71
153
121
114
137
115
99
120
105
93
2030
91
89
87
105
95
86
100
90
83
121
117
113
137
116
101
136
132
128
111
111
87
85
73
65
152
120
114
136
115
99
110
96
85
17
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
18
We have assumed that Nuclear switches from FOAK to NOAK for projects commissioning in 2029 onwards.
14
Electricity Generation Costs
Table 5: (continued)
Levelised Costs, £/MWh
Commissioning Year
Offshore R3
Onshore >5 MW E&W
Onshore >5 MW UK
Cofiring Conventional
Biomass Conversion
Solar250-5000kW
Capex
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
Central
High
Central
Low
2013
129
107
88
115
96
79
94
92
88
110
203
169
145
2015
190
164
145
127
106
87
114
95
78
94
92
88
110
178
149
128
2020
162
139
122
123
103
84
110
92
76
93
92
88
109
149
125
109
2025
138
118
103
121
101
83
108
90
74
93
92
88
109
131
110
96
2030
125
107
93
119
99
81
106
88
73
93
91
88
109
118
100
87
DECC Modelling
The estimates outlined in the above sections are intended to provide a high-level view on
the costs of different generating technologies.
In practice DECC’s electricity market modelling, including for the Updated Energy &
Emissions Projections (which uses DECC’s Dynamic Dispatch model), does not use
‘levelised cost estimates’ per se. Instead it models private investment decisions, at the
financial close for a project, using the same Capex and Opex assumptions incorporated in
the levelised cost estimates reported above; assumptions on investors’ foresight over fossil
fuel, carbon and wholesale electricity prices; and the financial incentives from policies e.g.
the RO.
In order to model the investment decision, the internal rate of return of a potential plant is
compared to a technology specific hurdle rate. The starting point for these is Oxera 201119
and other sources20, but these are adjusted to allow for the estimated impact of policies on
financing costs (e.g. the impact of CfDs). As these hurdle rates are understood to
incorporate an allowance for a return on pre-development costs, pre-development costs are
not separately included in the investment decision modelling to avoid double counting.
19
http://hmccc.s3.amazonaws.com/Renewables%20Review/Oxera%20low%20carbon%20discount%20rates%2018
0411.pdf
20
See Annex 4 for further details
15
Electricity Generation Costs
Annex 1: Key timings for selected technologies
Pre-development
Period (years)
Construction Period
(years)
Gas - CCGT
2
3
Gas - CCGT with post comb. CCS FOAK
5
5
Gas - CCGT retro post comb. CCS FOAK
4
4
Coal - ASC with FGD
4
3
Coal - ASC with post comb. CCS FOAK
5
5
Coal – IGCC
5
5
Coal - IGCC with CCS FOAK
5
6
Nuclear - NOAK
5
5
Nuclear - FOAK
5
6
Dedicated biomass >50MW
3
3
Dedicated biomass 5-50MW
4
2
Offshore R1/2
5
3
Offshore R3
6
3
Onshore >5 MW
4
2
Cofiring Conventional
1
1
Biomass Conversion
2
1
Table 6:Central Estimates for project timings for
selected technologies
Please see assumptions section for details of sources
16
Annex 2: Calculating Levelised Cost Estimates
The below figure, demonstrates at a high level how Levelised Costs are calculated.
Step 1: Gather Plant Data and Assumptions
Capex Costs:
-Predevelopment
costs
-Construction
costs*
-Infrastructure
cost*
(*adjusted over
time for
learning)
Opex Costs:
-Fixed opex*
-Variable opex
-Insurance
-Connection costs
-Carbon transport and storage costs
-Decommissioning fund costs
-Heat revenues
-Fuel Prices
-Carbon Costs
Expected Generation
Data:
-Capacity of plant
-Expected Availability
-Expected Efficiency
-Expected Load
Factor
( all assumed
baseload)
Step 2: Sum the net present value of total expected costs for each
year
NPV of Total ∑ total capex and opex costs
n
= n
Costs
(1 + discount rate) n
n = time period
Step 3: Sum the net present value of expected generation for each
year
NPV of Electricity
∑ net electricity generation
= n (1 + discount rate) n n
Generation
n = time period
Step 4: Divide total costs by net generation
NPV of Total Costs
Levelised Cost of Electricity =
NPV of Electricity Generation
Generation Estimate
Electricity Generation Costs
Annex 3: Additional Estimates for Renewables Technologies
This Annex presents estimates for the same Cases described in the main report for additional
renewable technologies.
Case 1: projects starting in 2012, NOAK, 10% discount rate21
Table 7: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Cost
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
21
Co-firing
Standard
CHP
62
32
2
63
-57
Hydro
Large
STORE
2
90
8
6
-
ACT
standard
7
84
58
24
-27
-
Bioliquids
5
21
22
6
272
-
Bioliquids
CHP
5
21
22
6
272
-14
EfW
CHP
95
42
30
-121
-13
EfW
75
36
24
-100
-
102
106
145
325
211
32
35
Geother
mal
3
66
14
11
94
Geother
mal CHP
3
72
14
10
-55
45
Hydropo
wer 516MW
2
110
17
6
134
ACT
advanced
8
104
58
13
-23
159
ACT CHP
2
101
67
24
-32
-16
145
Sewage
Gas
0
69
18
87
Landfill
3
41
9
9
62
AD CHP
3
67
58
21
-56
-15
78
Solar<4k
W
281
29
310
Energy
crops
(small)
2
52
16
5
96
172
Energy
crops
(large)
1
38
14
4
82
139
Onshore
<15kW
414
49
463
Onshore
1MW<5M
W
107
14
121
Biomass
CHP
2
63
24
10
119
-35
182
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
18
Electricity Generation Costs
Table 7: (continued)
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
AD <
250kW
134
176
310
AD >
500kW
75
102
-70
107
Hydropo
wer
<15kW
341
36
377
Hydropo
wer
100kW1000kW
162
34
196
Table 8: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
Low Capex
19
ACT
standard
145
225
Bioliquids
325
378
Bioliquids
CHP
211
365
EfW CHP
32
43
EfW
35
40
Geotherm
al
94
125
Geotherm
al CHP
45
77
245
392
379
61
55
-
-
58
72
225
313
210
298
3
21
15
30
59
7
Hydropo
wer 516MW
134
149
ACT
advanced
159
172
ACT CHP
145
229
Sewage
Gas
87
131
Landfill
62
90
Biomass
CHP
182
202
AD CHP
78
134
-
190
253
-
-
219
164
82
117
129
45
61
62
40
146
163
-53
38
Solar<4k
W
310
400
Energy
crops
(small)
172
194
Energy
crops
(large)
139
172
Onshore
<15kW
463
503
Onshore
1MW<5M
W
121
137
AD <
250kW
310
358
AD >
500kW
107
134
-
210
186
-
-
-
166
248
138
156
117
133
429
100
265
-14
82
Hydropo
wer
<15kW
377
805
187
Hydropo
wer
100kW1000kW
196
393
106
Electricity Generation Costs
Case 2: projects starting in 2018, NOAK, 10% discount rate22
Table 7: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Cost
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
22
Co-firing
Standard
CHP
1
62
32
2
63
-56
Hydro
Large
STORE
2
102
9
-
ACT
standard
7
80
55
23
-24
-
Bioliquids
5
20
21
5
264
-
Bioliquids
CHP
5
20
21
5
264
-14
EfW
CHP
93
42
30
-121
-14
EfW
74
36
24
-100
-
104
117
140
316
302
30
34
Geother
mal
3
64
14
11
92
Geother
mal CHP
3
70
14
10
-55
42
Hydropo
wer 516MW
2
123
17
6
148
ACT
advanced
8
100
55
12
-21
154
ACT CHP
2
96
63
23
-28
-16
140
Sewage
Gas
66
18
84
Landfill
3
40
10
9
61
AD CHP
3
64
59
21
0
-15
131
Solar<4k
W
204
28
231
Energy
crops
(small)
2
51
16
5
97
171
Energy
crops
(large)
1
37
14
4
83
139
Onshore
<15kW
414
49
463
Onshore
1MW<5M
W
107
14
121
Biomass
CHP
2
62
23
9
119
-35
180
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
20
Electricity Generation Costs
Table 9: (continued)
Levelised Costs, £/MWh
Pre-Development Costs
Capital Costs
Fixed O&M
Variable O&M
Fuel Costs
Carbon Costs
Heat Revenues
TOTAL LEVELISED
COST
AD <
250kW
134
176
310
AD >
500kW
75
102
-3
174
Hydropo
wer
<15kW
341
36
377
Hydropo
wer
100kW1000kW
162
36
196
Table 10: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
High Capex and High
Fuel
Low Capex and Low
Fuel
Low Capex
Levelised Costs, £/MWh
Central
High Capex
Low Capex
21
ACT
standard
140
217
Bioliquids
316
367
Bioliquids
CHP
302
355
EfW CHP
30
41
EfW
34
38
Geotherm
al
92
123
Geotherm
al CHP
42
74
237
387
371
19
53
-
-
56
69
224
303
210
289
59
-1
14
29
58
5
Hydropo
wer 516MW
148
164
ACT
advanced
154
166
ACT CHP
140
220
Sewage
Gas
84
126
Landfill
61
90
Biomass
CHP
180
199
AD CHP
131
185
-
184
244
-
-
217
215
89
113
124
43
59
60
39
144
161
3
93
Solar<4k
W
231
297
Energy
crops
(small)
171
193
Energy
crops
(large)
139
170
Onshore
<15kW
463
530
Onshore
1MW<5M
W
121
144
AD <
250kW
310
369
AD >
500kW
174
208
-
209
184
-
-
-
240
187
139
155
118
132
425
98
264
52
149
Hydropo
wer
<15kW
377
852
185
Hydropo
wer
100kW1000kW
196
415
105
Electricity Generation Costs
Case 3: Commissioning in 2013, 2015, 2020, 2025, 2030, NOAK, 10% discount
rate23
Table 11: Projects Commissioning in 2013,2015, 2020, 2025 and 2030, NOAK, 10%discount
rate, capex sensitivity, £/MWh
Commissioning, £/MWh
Co-firing Standard CHP
Hydro_LargeSTORE
ACT standard
Bioliquids
Bioliquids CHP
EfW CHP
EfW
Geothermal
Geothermal CHP
Hydropower 5-16MW
ACT advanced
ACT CHP
Sewage Gas
Landfill
23
Capex
Central
Central
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
2013
103
104
230
149
73
380
327
315
368
314
301
44
33
22
41
36
31
157
116
70
111
69
19
142
128
79
176
163
132
235
149
62
132
88
62
91
62
40
2015
103
108
226
146
72
375
323
310
363
309
296
44
32
21
40
36
30
143
106
65
96
58
13
147
132
81
173
161
130
231
147
61
131
87
62
90
62
40
2020
104
117
218
141
70
367
316
303
355
302
289
42
31
20
39
34
29
124
93
58
76
44
6
159
144
87
168
155
125
222
141
59
127
85
60
90
61
39
2025
104
122
214
138
68
366
314
302
353
300
288
41
30
19
38
34
28
122
92
58
73
42
5
164
149
89
164
152
122
217
138
57
125
84
60
89
61
39
2030
104
122
209
133
64
365
314
301
351
299
286
40
30
19
38
33
28
120
90
57
70
40
4
164
149
90
160
147
118
211
132
53
124
83
59
89
61
39
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
22
Electricity Generation Costs
Table 11: (continued)
Commissioning, £/MWh
Biomass CHP
AD CHP
Solar<4kW
Onshore <15kW
Onshore 1MW<5MW
AD < 250kW
AD > 500kW
Hydropower <15kW
Hydropower 100kW-1000kW
Energy crops (small)
Energy crops (large)
Amalgamated Wave
Tidal stream shallow
Tidal stream deep
Tidal range
23
Capex
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
Central
High
Central
Low
High
Central
Low
High
Central
Low
2013
206
185
165
118
62
22
400
310
248
503
463
429
137
121
100
358
310
265
134
107
82
805
377
187
394
196
106
196
174
157
174
141
134
2015
204
184
164
148
92
53
346
269
216
512
463
429
139
121
99
362
310
265
167
137
112
820
377
187
400
196
106
195
173
156
173
140
133
2020
201
182
162
185
93
93
287
224
181
535
463
423
146
121
98
371
310
263
212
177
151
860
377
185
419
196
105
193
171
155
171
139
132
2025
199
180
161
183
93
93
252
198
160
559
462
413
152
121
96
381
310
261
218
177
150
902
377
181
439
196
103
193
171
155
170
138
132
194
168
163
133
164
147
130
283
229
172
2030
198
179
160
182
93
93
230
181
147
585
462
404
159
121
94
392
310
259
223
177
149
947
377
177
459
196
101
192
170
154
169
138
131
160
144
146
120
143
128
114
283
229
172
Electricity Generation Costs
Annex 4: Estimates for Renewables Technologies using technology
specific hurdle rates
This annex shows estimates using technology-specific ‘discount’ or ‘hurdle’ rates24 for
renewable technologies, in line with the approach used in reports on renewables levelised
costs commissioned by DECC and its predecessor departments in recent years.
The starting point for these rates is Oxera 201125 along with other sources26. These are
adjusted to allow for the estimated impact of policies on financing costs (e.g. the impact of the
Renewables Obligation, Feed in Tariffs and Energy Market Reforms).
Case 4: renewable projects commissioning in 2013-16, 2020, 2025, 2030, NOAK,
technology specific hurdle rates27
Table 12: Projects Commissioning in 2013,2015, 2020, 2025 and 2030, NOAK, technology
specific hurdle rates, capex sensitivity
Commissioning, £/MWh
Co-firing Standard CHP
Hydro_LargeSTORE
ACT standard
Capex
Central
Central
High
Central
Low
2013
109
83
224
145
73
2015
108
86
221
143
72
2020
106
88
200
132
68
2025
106
91
196
128
66
2030
106
92
191
124
62
24
Please note that hurdle rates are themselves uncertain and likely to vary between projects and financing
structures/providers.
25
http://hmccc.s3.amazonaws.com/Renewables%20Review/Oxera%20low%20carbon%20discount%20rates%2018
0411.pdf
26
Please see Arup 2011, Government Response to the RO and the following Feed in Tariff Impact Assessment
for more details:
2a: Impact Assessment: Government response to consultation on Feed-in Tariffs Comprehensive Review Phase
2A: Solar PV Tariffs and cost control:
http://www.decc.gov.uk/en/content/cms/consultations/fits_rev_ph2a/fits_rev_ph2a.aspx
2b: Impact Assessment: Government Response to Consultation on the Comprehensive Review Phase 2B - on
Feed-in Tariffs for anaerobic digestion, wind, hydro and micro-CHP installations:
http://www.decc.gov.uk/en/content/cms/consultations/fits_rev_ph2b/fits_rev_ph2b.aspx
27
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
24
Electricity Generation Costs
Table 12: (continued)
Commissioning, £/MWh
Dedicated biomass >50MW
Dedicated biomass 5-50MW
Offshore R2
Offshore R3
Onshore >5 MW E&W
Onshore >5 MW UK
Bioliquids
Bioliquids CHP
Cofiring Conventional
Biomass Conversion
EfW CHP
EfW
Geothermal
Geothermal CHP
Hydropower 5-16MW
ACT advanced
ACT CHP
25
Capex
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
Central
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
2013
176
134
125
160
132
111
193
169
148
125
105
86
112
93
77
391
331
317
383
319
304
94
92
88
111
74
60
45
56
50
44
357
252
137
328
216
84
114
103
65
205
189
151
301
185
67
2015
174
133
124
158
131
110
177
155
136
231
198
172
124
103
85
111
92
76
386
326
312
378
314
299
94
92
88
111
73
58
44
55
50
43
322
228
125
288
187
69
117
106
67
202
186
148
296
181
65
2020
166
128
120
150
125
106
138
121
107
188
161
139
112
94
78
100
84
70
374
318
305
366
305
291
93
92
88
110
62
49
36
47
42
36
254
181
101
213
135
44
120
109
69
186
171
137
270
167
63
2025
158
124
117
142
119
102
110
97
86
146
125
108
110
92
77
99
83
68
369
315
303
360
302
289
93
92
88
110
61
48
35
47
42
36
176
128
75
132
80
20
124
113
71
171
157
126
247
154
59
2030
157
123
116
141
118
101
101
88
78
116
100
87
108
91
75
97
81
67
368
315
302
358
301
287
93
91
88
110
60
47
34
46
41
36
137
102
63
94
55
9
124
113
71
166
153
122
240
148
55
Electricity Generation Costs
Table 12: (continued)
Commissioning, £/MWh
Sewage Gas
Landfill
Biomass CHP
AD CHP
Solar<4kW
Solar250-5000kW
Onshore <15kW
Onshore 1MW<5MW
AD < 250kW
AD > 500kW
Hydropower <15kW
Hydropower 100kW-1000kW
Energy crops (small)
Energy crops (large)
Amalgamated Wave
Tidal stream shallow
Tidal stream deep
26
Capex
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
High
Central
Low
Central
High
Central
Low
High
Central
Low
2013
128
86
61
89
61
39
233
206
179
143
69
16
305
238
192
165
138
119
461
425
394
126
111
92
399
340
285
148
115
84
635
302
153
314
160
90
215
187
166
192
150
142
2015
118
79
57
89
61
39
231
204
177
170
101
52
288
208
151
150
117
92
469
425
394
128
111
92
392
332
280
179
145
116
647
302
153
320
160
90
213
186
165
191
150
141
2020
114
77
55
85
58
38
221
196
172
213
146
99
271
174
126
138
100
79
490
424
388
134
111
90
403
332
278
230
190
159
678
302
152
334
160
89
205
180
161
183
145
137
2025
113
76
55
84
58
38
211
189
167
201
140
96
253
154
114
127
88
71
512
424
379
140
111
88
397
320
268
227
183
154
711
302
149
349
160
88
198
175
158
176
141
134
216
202
185
150
187
167
147
2030
112
76
55
84
58
38
210
188
166
199
139
96
238
142
107
117
80
65
535
423
371
146
111
86
409
320
266
233
183
153
746
302
146
366
160
86
197
174
157
175
141
134
166
167
153
126
150
135
119
Electricity Generation Costs
Table 12: (continued)
Commissioning, £/MWh
Tidal range
27
Capex
High
Central
Low
2013
2015
2020
2025
218
165
126
2030
218
165
126
© Crown copyright 2012
Department of Energy & Climate Change
3 Whitehall Place
London SW1A 2AW
www.decc.gov.uk
URN 12D/383