The Social Costs of Electricity Generation—Categorising Different Types of Costs and Evaluating Their Respective Relevance

Abstract

Various electricity generation technologies using different primary energy sources are available. Many published studies compare the costs of these technologies. However, most of those studies only consider plant-level costs and do not fully take into account additional costs that societies may face in using these technologies. This article reviews the literature on the costs of electricity generation technologies, aiming to determine which types of costs are relevant from a societal point of view when comparing generation technologies. The paper categorises the relevant types of costs, differentiating between plant-level, system and external costs as the main categories. It discusses the relevance of each type of cost for each generation technology. The findings suggest that several low-carbon electricity generation technologies exhibit lower social costs per kWh than the currently dominant technologies using fossil fuels. More generally, the findings emphasise the importance of taking not only plant-level costs, but also system and external costs, into account when comparing electricity generation technologies from a societal point of view. The article intends to inform both policymakers and energy system modellers, the latter who may strive to include all relevant types of costs in their models.

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