In computing LCOE, data were taken from PCGE for Europe and North America. Recognising that significant regional differences exist and that some costs will vary over time, this section examines the sensitivity of the LCOE to changes in six key parameters namely,

carbon cost; fuel cost;

O&M cost; delays and accelerations in construction;

discount rate; overnight cost.

Nuclear decommissioning costs are not included because they are relatively small. For each parameter we assume ±50% variation from the mean which, for those parameters for which data are provided by PCGE, generally represents a variation of between one and two standard deviations. An exception is the discount rate where we take values of 5 and 10%. The calculations do not consider the effect of availability because, with the exception of wind, the variability is small. However, a 50% increase in availability, which is feasible for wind, has exactly the same effect on LCOE as a 50% decrease in overnight costs.

The results are presented as tornado plots in Fig. 5.3. What this shows is that wind, nuclear and coal+CC are most affected by changes in overnight cost and discount rates so that, while nuclear is marginally less expensive than gas at 7.5%

discount rate, it is significantly more expensive than gas at 10% discount rate. Wind becomes competitive with gas and nuclear when overnight costs are reduced by half or, analogously, availability is increased to around 40%. For nuclear, the strong overnight cost component of LCOE indicates that it will also be sensitive to the installation of first-of-a-kind (FOAK) plant where overnight costs are higher. The low LCOE values that are obtained for nuclear when overnight costs are reduced by half explains why development effort is so often directed towards

її і і її і і n

Coal + CC

Coal

Carbon / / /

Fuel і і i

O&M

Dclay/Ac cirri Discount rate Overnight

60 70 80 90 100 110 120 130 140

LCOE $/MWh(e)

5.3 Tornado plots showing LCOE changes with (reading down for each technology) 50% changes in carbon price, fuel cost, O&M cost, delays/acceleration, discount rate (with LCOE values at 5 and 10%) and overnight costs. Central values are the same as Table 5.3.

this area and why countries such as South Korea, Russia and China, which cite low overnight costs, may attract interest from around the world.

Gas and coal are most affected by fuel and carbon costs (and, therefore, thermal efficiency also). Countries where natural gas is plentiful and cheap will clearly find it difficult to make an economic case for other forms of electricity generation although strategic issues might override this. Comparing gas and coal+CC we see that in regions where low cost coal is available (e. g. Australia and South Africa) carbon capture may be a competitive option provided that they do not also have access to cheap gas. Least affected by fuel and carbon costs are wind (which has no sensitivity at all) and nuclear.

What the study clearly shows is that carbon pricing is double-edged: on the one hand it penalises technologies with high carbon emissions but, because we shall continue to rely on fossil-fuelled generation for many years, it inevitably raises electricity prices overall.