4.4.2 Cost analyses

This section places emphasis on the costs and mitigation potentials of the electricity-supply sector. Heat and CHP potentials are more difficult to determine due to lack of available data, and transport potentials are analysed in Chapter 5.

Cost estimates are sensitive to assumptions used and inherent data inconsistencies. They vary over time and with location and chosen technology. There is a tendency for some countries, particularly where regulations are lax, to select the cheapest technology option (at times using second-hand plant) regardless of total emission or environmental impact (Royal Academy of Engineering, 2004; Sims et al, 2003a). Here, based upon full life-cycle analyses in the literature, only broad cost comparisons are possible due to the wide variations in specific site costs and variations in labour charges, currency exchange rates, discount rates used, and plant capacity factors. Cost uncertainties in the electricity sector also exist due to the rate of market liberalization and the debate over the maximum level of intermittent renewable energy sources acceptable to the grid without leading to reliability issues and needing costly back-up.

One analysis compared the levelized investment, operations and maintenance (O&M), fuel and total generation costs from 27 coal-fired, 23 gas-fired, 13 nuclear, 19 wind- and 8 hydro-power plants, either operational or planned in several countries (IEA/NEA, 2005). The technologies and plant types included several units under construction or due to be commissioned before 2015, but for which cost estimates had been developed through paper studies or project bids (Figure 4.27). The economic competitiveness of selected electricity-generation systems depends upon plant-specific features. The projected total levelized generation cost ranges tend to overlap (Figure