PCGE uses constant fuel costs that it says ‘are comparable with the assumptions used in the World Energy Outlook (IEA, 2009)’. Reference to the World Energy Outlook (WEO) 2009 10 indicates that the PCGE gas and coal prices broadly correspond to the fossil-fuel price assumptions in the reference scenario at around 2015. Predicting long-term fuel prices is, clearly, very difficult (one reason, perhaps, why WEO 2009 runs to almost 700 pages). Nevertheless, as Eq. 5.3 makes clear, when comparing technologies for future electricity generation, it is not today’s price of fuel but the long-term average that is relevant. Consequently, future movements in fuel prices are crucial, especially those of fossil fuels, which are likely to remain the key determinants of electricity prices for the foreseeable future. Sensitivity of LCOE to fuel price variability is discussed in Section 5.2.6.

For nuclear fuel, costs are relatively constant across the world and, unless plant-specific data are available, PCGE uses a standard figure of $9.33 per MWh(e). This is made up of two elements: front — and back-end costs. The former include uranium mining, conversion, enrichment and fuel fabrication and amount to $7 per MWh(e). Back-end costs include spent fuel storage, reprocessing and disposal and are estimated at $2.33 per MWh(e). This figure is taken by PCGE to apply whether the fuel cycle is open or closed and, presumably, is based on an assumption that the additional cost involved in fabricating fuel elements from mixed (i. e. uranium-plutonium) oxide fuel is offset by the savings on mining, conversion, enrichment and disposal.

When allowance is made for thermal efficiency (assumed to be 33% net for nuclear), fuel price is a little above $3 per MWh(th). The cost of uranium (U3O8) is a relatively small part of this but it is the component that, with an expansion of nuclear power, is most likely to increase. PCGE and WNA point to a long-term price of around $23 per pound of U3O8 (and rising), which broadly corresponds to a natural uranium price of around $0.5 per MWh(th).[9] This increase could be offset to some extent by the economies of scale for conversion, enrichment and fabrication. Assuming that uranium prices will double, a long-term nuclear fuel price of $3.5 per MWh(th) is assumed here (Table 5.2). In coming to this figure, we assume that mixed oxide (MOX) fuel will not serve as a significant brake on uranium prices due to the high cost of reprocessing. In passing we note that this assumption is not entirely compatible with the view taken by PCGE that the costs of open and closed fuel cycles are comparable.

The PCGE study provides detailed data on the cost of coal of various types in a range of countries that produce a mean price of $8.2 per MWh(th). There is wide variability from one country to another with a minimum of less than $3 per MWh(th) occurring in Australia and South Africa. WEO 2009 suggests that, partly because of movements away from coal-fired electricity generation, the price of steam coal in OECD countries will increase only slowly to produce a 2020 price of around $104 per tonne which corresponds to about $13 per MWh(th); this is the value assumed here (Table 5.2) although the large regional differences need to be recognised.

For gas-fired plants, the PCGE study provides 27 fuel cost values, which, after allowing for thermal efficiency differences, produce a mean of $30.7 per MWh(th). Maximum and minimum values are about $16 and $40 per MWh(th) respectively. This spread reflects regional differences — the highest prices occur in Japan and Korea and the lowest in China and Russia. Since PCGE was published, however, gas prices have fallen significantly due to reduced demand in the economic downturn and increased supply due to new fields being opened and the development of so-called unconventional gas resources. A 2011 edition of the IEA World Energy Outlook11 — subtitled ‘Are we entering a golden age for gas?’ — points out that conventional gas reserves are sufficient to last 150 years at the current rate of use and that unconventional reserves (e. g. shale gas) are at least equal to that. Furthermore, gas reserves have a wide geographical distribution. Consequently, IEA sees gas consumption peaking in 2035 at a level that is about 54% greater than today. USA prices are expected to almost double while European prices will increase by almost 50% over the 2009 average. These changes produce 2035 prices that are very similar to those used in PCGE and, for that reason, a figure of $30 per MWh(th) is adopted here (Table 5.2).