This report analyzes the factors that determine the cost of electricity from new power plants. These factors—including construction costs, fuel expense, environmental regulations, and financing costs—can all be affected by government energy and economic policies. Government decisions to influence, or not influence, these factors can largely determine the kind of power plants that are built in the future. For example, government policies aimed at reducing the cost of constructing power plants could especially benefit nuclear plants, which are costly to build. Policies that reduce the cost of fossil fuels could benefit natural gas plants, which are inexpensive to build but rely on an expensive fuel. The report provides projections of the possible cost of power for new fossil, nuclear, and renewable plants built in 2015. The projections illustrate how different assumptions, such as for the availability of federal incentives, change the cost rankings of the technologies. Key observations include the following:
Government incentives can change the relative costs of the generating technologies. For example, federal loan guarantees can turn nuclear power from a high cost technology to a relatively low cost option. The natural gas-fired combined cycle power plant, the most commonly built type of large natural gas plant, is a competitive generating technology under a wide variety of assumptions for fuel price, construction cost, government incentives, and carbon controls. This raises the possibility that power plant developers will continue to follow the pattern of the 1990s and rely heavily on natural gas plants to meet the need for new power generation. With current technology, coal-fired power plants using carbon capture equipment are an expensive source of electricity in a carbon control case. Other power sources, such as wind, nuclear, geothermal, and the natural gas combined cycle plant without capture technology, currently appear to be more economical. None of the projections is intended to be a "most likely" case. Future uncertainties preclude firm forecasts. The value of this discussion is not as a source of point estimates of future power costs, but as a source of insight into the factors that can determine future outcomes, including factors that can be influenced by the Congress. The rankings of the technologies by cost are therefore also an approximation and should not be viewed as definitive estimates of the relative cost-competitiveness of each option. As shown below in Table 15 :
A 12% increase in the price of gas would equalize the cost of electricity from the combined cycle plant without carbon capture with wind power (column 3); A 20% increase would equalize the power cost of the combined cycle plant and the nuclear plant; The price of natural gas would have to more than double for the power cost of the gas-fired combined cycle plant to equal the cost of coal power with carbon controls, or increase by 75% to match the cost of solar thermal power.
This report analyzes the factors that determine the cost of electricity from new power plants. These factors—including construction costs, fuel expense, environmental regulations, and financing costs—can all be affected by government energy, environmental, and economic policies. Government decisions to influence, or not influence, these factors can largely determine the kind of power plants that are built in the future. For example, government policies aimed at reducing the cost of constructing power plants could especially benefit nuclear plants, which are costly to build. Policies that reduce the cost of fossil fuels could benefit natural gas plants, which are inexpensive to build but rely on an expensive fuel.
The report provides projections of the possible cost of power from new fossil, nuclear, and renewable plants built in 2015, illustrating how different assumptions, such as for the availability of federal incentives, change the cost rankings of the technologies.
None of the projections is intended to be a "most likely" case. Future uncertainties preclude firm forecasts. The rankings of the technologies by cost are therefore also an approximation and should not be viewed as definitive estimates of the relative cost-competitiveness of each option. The value of the discussion is not as a source of point estimates of future power costs, but as a source of insight into the factors that can determine future outcomes, including factors that can be influenced by the Congress.
Key observations include the following:
Government incentives can change the relative costs of the generating technologies. For example, federal loan guarantees can turn nuclear power from a high cost technology to a relatively low cost option. The natural gas-fired combined cycle power plant, the most commonly built type of large natural gas plant, is a competitive generating technology under a wide variety of assumptions for fuel price, construction cost, government incentives, and carbon controls. This raises the possibility that power plant developers will continue to follow the pattern of the 1990s and rely heavily on natural gas plants to meet the need for new generating capacity. With current technology, coal-fired power plants using carbon capture equipment are an expensive source of electricity in a carbon control case. Other power sources, such as wind, nuclear, geothermal, and the natural gas combined cycle without capture technology currently appear to be more economical.