{"id":612,"date":"2011-08-15T16:31:10","date_gmt":"2011-08-15T06:31:10","guid":{"rendered":"http:\/\/climatereview.net\/ChewTheFat\/?p=612"},"modified":"2020-10-21T11:57:20","modified_gmt":"2020-10-21T00:57:20","slug":"whats-the-relative-cost-of-energy-production","status":"publish","type":"post","link":"https:\/\/climatereview.net\/ChewTheFat\/?p=612","title":{"rendered":"What\u2019s the relative cost of energy production?"},"content":{"rendered":"<p><a href=\"https:\/\/climatereview.net\/ChewTheFat\/?attachment_id=680\" rel=\"attachment wp-att-680\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-680\" title=\"Relative Cost of Energy Banner - by James Follett\" src=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-Banner.jpg\" alt=\"\" width=\"640\" height=\"200\" srcset=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-Banner.jpg 640w, https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-Banner-300x93.jpg 300w\" sizes=\"auto, (max-width: 640px) 100vw, 640px\" \/><\/a><\/p>\n<p><strong>The relative cost of energy production is a golden nugget of information that should permeate any debate on energy planning.&nbsp; Should we decommission, &#8220;dirty&#8221; coal power stations and replace them with only slightly less &#8220;dirty&#8221;, gas-fired stations?&nbsp; Why not go the whole hog and replace coal with clean, green alternatives: wind farms, rooftop solar panels, geothermal or biomass?<br \/>\n<\/strong><\/p>\n<p><strong>Cheap energy is the basic building block of modern civilisation.&nbsp; We rely heavily upon it for our continued industrial and technological success.&nbsp; With that said, can we change our energy mix to a greener one, but still affording that new flatscreen next year?&nbsp; How much does being Green cost?<\/strong><\/p>\n<p>&nbsp;<\/p>\n<h3><strong>The relative cost of energy production<br \/>\n<\/strong><\/h3>\n<h5>(The Long Run Marginal Cost (<a href=\"http:\/\/en.wikipedia.org\/wiki\/Long_run_and_short_run\">LRMC<\/a>) of power generation technologies by source in AUD$\/MWh)<\/h5>\n<p><a href=\"https:\/\/climatereview.net\/ChewTheFat\/?attachment_id=666\" rel=\"attachment wp-att-666\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-666\" title=\"Relative Cost of Energy chart - by James Follett\" src=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-chart.jpg\" alt=\"\" width=\"640\" height=\"151\" srcset=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-chart.jpg 791w, https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-chart-300x70.jpg 300w\" sizes=\"auto, (max-width: 640px) 100vw, 640px\" \/><\/a><strong> Sources:<\/strong><\/p>\n<ul>\n<li>\n<address><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.aglblog.com.au\/wp-content\/uploads\/2010\/11\/No.18-Wind-Investment.pdf\">AGL energy<\/a> <\/span>(\u201cThe hidden costs of wind generation in a thermal power system: what cost?\u201d see \u201cFigure 1: LRMC of Generating Plant in the NEM (ex Carbon)\u201d)<\/address>\n<\/li>\n<li>\n<address><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.iea.org\/Textbase\/npsum\/ElecCostSUM.pdf\">International Energy Agency (IEA)<\/a> <\/span>(\u201cExecutive Summary\u201d)<\/address>\n<\/li>\n<li>\n<address><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.aemo.com.au\/planning\/419-0035.pdf\">ACIL Tasman<\/a><\/span> consultants (\u201cFuel resource, new entry and generation costs in the NEM\u201d \u2013 see \u201cTable 52 LRMC for new entrant technologies by NEM zone excluding carbon costs\u201d)<\/address>\n<\/li>\n<li>\n<address><span style=\"text-decoration: underline;\">Me<\/span> (I throw my 2 cents worth in, for what it\u2019s worth, and probably not much, as another source.&nbsp; To be fair, it\u2019s not just my perspective, but others I converse with in the energy industry, but, granted, it\u2019s still just another opinion)<\/address>\n<\/li>\n<\/ul>\n<h3><\/h3>\n<p>&nbsp;<\/p>\n<h3><strong>Discussion<\/strong><\/h3>\n<p>Why are these sources so variable?&nbsp; Well, the financial modeling employed is relatively complex and the assumptions they leverage off are both extensive and somewhat subjective.&nbsp; The cost of plant development has some highly sensitive inputs that can often make or break a particular project\u2019s viability.&nbsp; These variables include the <a href=\"http:\/\/www.mondofacto.com\/facts\/dictionary?overnight+capital+cost\">overnight capital cost<\/a> (the cost of the initial plant construction and grid\/fuel connection), the <a href=\"http:\/\/en.wikipedia.org\/wiki\/Economics_of_new_nuclear_power_plants\">discount rate<\/a> (the rate at which investors will happily loan you money), fuel cost, the <a href=\"http:\/\/nuclearfissionary.com\/2010\/03\/05\/why-capacity-factor-matters-to-energy-production\/\">capacity factor<\/a> (how frequently the plant runs) and maintenance costs.&nbsp; So, each of my data sources have made their own assumptions in these regards.&nbsp; They thus are valid in their own rights and, conversely, have their own limitations; for instance <a href=\"http:\/\/www.aemo.com.au\/planning\/419-0035.pdf\">ACIL Tasman<\/a><strong> <\/strong>assumes a 9.5% discount rate, but <a href=\"http:\/\/www.aglblog.com.au\/wp-content\/uploads\/2010\/11\/No.18-Wind-Investment.pdf\">AGL energy<\/a><strong> <\/strong>uses a 12% discount rate.&nbsp; This variable, in particular, can make a huge difference with highly expensive projects, such as nuclear.&nbsp; Nuclear has a huge start-up cost, but a tiny running cost.&nbsp; Thus, if a plant takes 5 years to construct or ends up being delayed to 10 years (which is pretty common) that could change a LRMC cost $40\/MWh project into perhaps a $120\/MWh.&nbsp; There is a large sovereign risk with nuclear power projects as political sentiment can change rapidly and dramatically.&nbsp; Money markets recognise this and will often charge large interest rates to cover the risk they undertake in funding such projects.&nbsp; Therefore, considering this, a nuclear plant in <a title=\"Nuclear power by country\" href=\"http:\/\/en.wikipedia.org\/wiki\/Nuclear_power_by_country\" target=\"_blank\" rel=\"noopener noreferrer\">pro-nuclear<\/a> France or Japan may cost far less than one in currently, anti-nuclear Britain purely on financing costs.<\/p>\n<p>The other contentious technology with respect to costing is Geothermal because this is still an <a href=\"http:\/\/www.theaustralian.com.au\/news\/opinion\/unproven-technologies-a-poor-power-option\/story-e6frg6zo-1226102319560\">unproven<\/a> technology in Australia.&nbsp; So, whilst AGL includes the technological development costs, ACIL Tasman hasn\u2019t.&nbsp; This can easily account for the difference between a cheap $85\/MWh and an expensive $180\/MWh.&nbsp; Apart from these 2 noticeable exceptions (nuclear and geothermal), all 4 data sources are relatively consistent in their evaluations.<\/p>\n<p>These sources may only provide indicative costings as each individual plant development has to be valued on its own merits. &nbsp;However, I believe it is useful to find some common ground between these 4 energy pricing models.&nbsp; So, here&#8217;s a reasonable summary of the studies:<\/p>\n<p><a href=\"https:\/\/climatereview.net\/ChewTheFat\/?attachment_id=677\" rel=\"attachment wp-att-677\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-677\" title=\"Relative Cost of Energy graph - by James Follett\" src=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-graph1.jpg\" alt=\"\" width=\"640\" height=\"455\" srcset=\"https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-graph1.jpg 640w, https:\/\/climatereview.net\/ChewTheFat\/wp-content\/uploads\/2011\/08\/Relative-Cost-of-Energy-graph1-300x213.jpg 300w\" sizes=\"auto, (max-width: 640px) 100vw, 640px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Conclusion<\/strong><\/h3>\n<p>Australia is on the cusp of signing up for a European style Carbon Tax.&nbsp; The government <a title=\"Creating a Clean Energy Future\" href=\"http:\/\/www.youtube.com\/watch?v=RQ4EFCPHwus\" target=\"_blank\" rel=\"noopener noreferrer\">advert<\/a> I just saw on T.V. literally a few minutes ago said,<em> &#8220;It is not a tax on individuals, it&#8217;s a charge paid only by Australia&#8217;s biggest polluters<\/em>&#8220;.&nbsp; Phew, that&#8217;s fortunate, for a second there, I thought we tax-payers would be coughing up the bill.&nbsp; It&#8217;s actually just the coal power stations that sustain us that will have to&#8230;<\/p>\n<p>As you can see from these relative costings, all the Renewables technologies are, sadly, uncompetitive without substantial, tax-payer subsidies.&nbsp; In the majority of countries globally, coal power provides us with the bulk of our electricity.&nbsp; This is with good reason.&nbsp; It is a cheap, simple and reliable technology.&nbsp; As you can see from all these studies, there are currently no competitive alternatives to replace coal as our major, baseload, energy source.<\/p>\n<p>&nbsp;<\/p>\n<address><strong>A note on technology Terminology:<\/strong><\/address>\n<ul>\n<li>\n<address>CCGT = Combined Cycle Gas Turbine (one turbine burns natural gas, then this exhaust is used in a second, steam turbine)<\/address>\n<\/li>\n<li>\n<address>OCGT = Open Cycle Gas Turbine (one turbine that burns natural gas only)<\/address>\n<\/li>\n<li>\n<address>Solar (Thermal) = Mirrors used to boil water to run a steam turbine (usually on an industrial scale)<\/address>\n<\/li>\n<li>\n<address>Solar (PhotoVoltaics) = Semi-conductor panels (usually on houses)<\/address>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The relative cost of energy production is a golden nugget of information that should permeate any debate on energy planning.&nbsp; Should we decommission, &#8220;dirty&#8221; coal power stations and replace them with only slightly less &#8220;dirty&#8221;, gas-fired stations?&nbsp; Why not go &hellip; <a href=\"https:\/\/climatereview.net\/ChewTheFat\/?p=612\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[72],"tags":[77,364,43,363,44,75,42,76,73],"class_list":["post-612","post","type-post","status-publish","format-standard","hentry","category-cost-of-energy","tag-mwh","tag-biomass","tag-coal","tag-cost-of-energy","tag-gas","tag-geothermal","tag-nuclear","tag-solar","tag-wind"],"_links":{"self":[{"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/posts\/612","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=612"}],"version-history":[{"count":111,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/posts\/612\/revisions"}],"predecessor-version":[{"id":2078,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=\/wp\/v2\/posts\/612\/revisions\/2078"}],"wp:attachment":[{"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/climatereview.net\/ChewTheFat\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}