The true cost of power generation

A report from Parsons Brinckerhoff, 'Powering the Nation', reveals that the cheapest power would come from either nuclear generation or combined-cycle gas turbines, which come in at as little as 0.06 per kW/hr, while the cheapest estimate for offshore wind is 0.15, with tidal energy even more expensive.

Public bodies and private investors in power plant depend on a good understanding of the costs of production of electricity from alternative technologies to make key business decisions. The cooling of the economy now has the potential to reduce costs of power plant, but the restricted availability of lending for project finance and working capital for suppliers has conflicted with this underlying trend of falling costs.

The 2010 update of 'Powering the Nation' addresses these changes, drawing upon current cost-estimates and data from recent studies of large-scale renewable technologies such as for Round 3 offshore wind and for exploitation of tidal power in the Severn estuary. The changing circumstances also make cost forecasting more difficult, and changes have been made to the presentation of data to emphasise the range of potential costs rather than the implication that there is a single correct value for costs for any technology.

'This report is in response to industry experts who are crying out for an independent view on the cost of new power plants,' says Paul Willson, author of the report. 'Hard facts like that should be shared out throughout the industry so that prospective investors know what they are in to. There is quite a lot of noise and disinformation around about the cost of these plants and there is quite a lot of opinion about costs not being fairly treated in one way or another.

'We have gone back to the nearest thing that we can get for proper numbers - commercial costs. No one has recently built a tidal power station, but there has been a recent large-scale study looking at the various prospects in the River Severn Estuary and those performance numbers have informed our figures for tidal. It means that the individual cases have been put in for this model.'

The costings in the report take into account: capital costs; operating costs; and, where relevant, costs for decommissioning at end of life. It also gives outputs at the cost electricity would need to be sold by generators to break even. There is no allowance for costs of transmission or distribution to the end user.

The reinforcement of the fact that nuclear power provides the most effective long-term option will make nice reading for the proponents of that technology. 'The important thing to say about nuclear is that the prices have been largely flushed out by a recent round of bidding for nuclear power station construction in Adu Dhabi,' Willson adds. 'It meant that all the major potential suppliers to the UK had to put in commercially attractive prices, so that has brought out quite a clarity in the price of nuclear that hasn't been seen for some time because competitive nuclear purchasing hasn't been that transparent.'

A habitual complaint of costing of nuclear power has been the high cost of decommissioning, But Willson is adamant that this report has treated the figures supplied with a healthy dose of cynicism. 'We have had long discussions about the decommissioning cost and the cost of putting fuels away safely,' he says. 'Those costs have been put together, suitably conservatively; they have taken numbers that people estimate are the reasonable requirement of cost to create a repository, to put the fuel in the repository, to set all those things up, to dismantle the reactor. All that has then been given a healthy dose of pessimism, but we multiplied them by three anyway.'

Even given that high mark-up decommissioning is still under 5 per cent of the total lifetime cost of a nuclear plant. Willson points to the fact that most projects for nuclear decommissioning come in well under budget, with the exception of military installations. 'It's the sites for military reprocessing materials, where they have made a complete mess, they are just grim and anybody who thinks they can estimate for those has been disappointed every time.'

The biggest disappointment will be the high cost predicted for offshore wind, at 0.15 to 0.21 per kWh. 'It is a big number,' Willson agrees. That is taken against the background of recent reports that claim the cost of offshore wind is coming down. 'People have different starting points,' he says. 'Some people are saying that the cost is definitely coming down, but it depends what you started with.

'Clearly, when building a 7MW or 8MW wind turbine, the cost per capacity will be lower than a 300kW machine. Economies of scale will work in your favour, so these big machines will be cheaper than the little machines. But if you start planting them in 200ft of seawater and you've got an expensive foundation to put in at the bottom there is a big extra cost you have to pay for that. It may be our first guess for the cost of the foundations was horrifying and our second guess is less horrifying, but as we go on we may find a cheaper way of doing it but it is never going to be cheaper than onshore wind.'

With other vital considerations other than cost the report is unlikely to change public opinion, but armed with true economic comparisons will make it easier to judge the relative merits of each generation technology.