Assessing the Costs of Electricity

Abstract

We review the economics of electricity generated, or conserved, from a diverse range of fossil-fuel, nuclear, and renewable energy sources and energy efficiency options. At the same time, we survey the methods used to compute the costs of generated and delivered electricity and power, including bus bar costs; wholesale and retail marketplace costs; life-cycle accounting systems; premiums associated with political, social, and environmental risks; costs that reflect explicit and implicit subsidies; costs inclusive of externalities calculated by a variety of means; and net costs, including a range of proposed and potential environmental tax regimes. These diverse and at times conflicting analytic methods reflect a wide range of assumptions and biases in how the inputs for energy generation as well as how the subsidies and social and environmental costs are computed or, is often the case, neglected. This review and tutorial provides side-by-side comparisons of these methods, international cost comparisons, as well as analysis of the magnitude and effects of a range of technological, market-based, and subsidy-driven costs on the final price of electricity. Comparability of costs between supply and conservation technologies and methods in the energy sector has consistently been a problem, and the diversity of energy cost accounting schemes provides significant opportunity for very different arguments to be made for specific technologies, regulatory and market regimes, and a wide range of social and environmental taxes. We provide a review of the tools and a commentary on how these methods are used to determine the cost of energy services. The conclusion contains an analysis of how these methods of energy valuation are similar, how they differ, as well as an analysis of the explicit and implicit assumptions that underlie each approach.

Transforming U.S. Energy Innovation

“…As a result of these market failures, econometric studies have consistently estimated that the social returns to investments in innovation are far higher than the returns experienced by any one company, suggesting that the government has a major role to play in stimulating socially optimal levels of innovation (Margolis & Kammen, 1999;Audretsch et al, 2002;Brown, 2001;Jaffe, Newell, & Stavins, 2005 To compound the problem, all energy-related issues are also subject to multiple market failures (Brown, 2001;Jaffe, Newell, & Stavins, 2005;Jaffe, 1998). Energy availability and reliability are public goods, and energy use and production create externalities ranging from local pollution to global damage (Kammen & Pacca, 2004). As an element of infrastructure, the energy system often requires large-scale investments, oversight, and coordination.…”

The avian and wildlife costs of fossil fuels and nuclear power

“…Another assessment calculated that if damages to the environment in the form of noxious emissions and impacts on human health resulting from combustion of coal, oil, and natural gas were included in electricity prices, coal would cost 261.8% more than it does (Norland and Ninassi 1998). Kammen and Pacca (2004) found that if they internalized the cost of mortality and asthma, just two items, into electricity rates, then the annual cost of operation for conventional coal power plants in Illinois, Massachusetts, and Washington was 50 ¢/ kWh, almost eight times higher than the average 6.5 ¢/kWh paid by consumers at the time.…”

The potential of III‐V semiconductors as terrestrial photovoltaic devices

“…3,4 Moreover, it has been calculated that building new nuclear power plants (even with the latest fission light-water technology), costs twice as much as building new wind farms, 5 to 10 times as much as gas-fired cogeneration or trigeneration in buildings and factories (at the net of credit for their recovered heat), and 3 to 30 times as much as making electrical apparatus more efficient. 5 It should also be mentioned that the different renewable sources are not in competition as they fulfil many different needs and are suitable in extremely different environments.…”