WIR SCHAFFEN WISSEN – HEUTE FÜR MORGEN

Overview of past work and recent advances in assessing the full costs of electricity provision

Stefan Hirschberg :: Laboratory for Energy Systems Analysis :: Paul Scherrer Institut

OECD NEA International Workshop, Paris, 20 January 2016

Internal Costs

External Costs: A cost is external when it is not paid by those who have generated it.

Total Costs: Internal + External + (System effects)

Negative externalities are internalised when they are passed on to those who generate them.

Total costs may serve as an aggregated measure of performance and as a basis for cost-benefit analysis.

Total costs have been proposed as a measure of sustainability performance of technologies.

Components of total costs

Costs & Purposes • Marginal technology costs are used for system

operation (electric system dispatch, oil/gas production, etc.)

• Average technology costs (e.g. average generation cost) are often used for planning (i.e. production or capacity factors are often assumed - it‘s better to model)

• System expansion planning should be based on the total system cost per unit (e.g. kWh) of service provided (to allow for both supply and demand side options, system costs, and load growth uncertainty).

Approaches to internal cost estimation

Bottom Up - Detailed, design-specific costing (component basis)

• Major effort, suitable for vendors

• Still contains many uncertain assumptions

Top Down - back of the envelope approximation (order of magnitude)

Intermediate - based on similar units, adjusting for

• Size (economies of scale)

• Time (Learning curves for state-of-the-art)

• Component costs (e.g. materials, labor and component cost shifts)

Historical nuclear costs

Source: Koomey J.& Hultman N., 2007, “A Reactor-Level Analysis of Busbar Costs for US nuclear plants, 1970-2005,” Energy Policy.

Source: Dr. N. Barkatullah, World Nuclear Association 2014 Symposium

Nuclear Capital Costs by Region

Recent Nuclear Cost Overruns

Source: Dr. N. Barkatullah, World Nuclear Association 2014 Symposium

Capital costs (new plants, Swiss conditions)

Source: PSI/Hirschberg et al., 2010

Generation costs (new plants, Swiss conditions)

Source: PSI/Hirschberg et al., 2010

Cost Sensitivities – EPR 2030

Source: Hirschberg et al., 2012

Deep geothermal energy: Sensitivity curves for model inputs

Source: Hirschberg et al., 2015

• Focus is on the interplay between nuclear and renewables

• Recognizes all major system costs & externalities, but only quantifies grid-related costs (5 categories)

• System problems caused by stochastic generation with zero marginal costs are due to subsidized penetration of solar/wind

• Damage to fossil and nuclear generators is due to “market competition,” but ultimately caused by renewables.

• Nuclear has a big role as swing capacity, but low capacity factors are a problem for recovering high capital costs, and hence a big problem for future nuclear construction

Nuclear & Renewables – System Effects

Source: Strupczewski 2016

The Polish case

The Polish case

Source: Strupczewski 2016

Impacts

Impacts on

human health,

crop yields,

buildings, land,

ecosystems, ...

Dispersion

& Chemical

Reactions

E.g.change of

pollutant

concentrations

Valuation Emissions

Emissions

from

operating

plant

Emissions

from rest of

chain

Life Cycle

Assessment

Other flows:

Land use

Resource use

The impact pathway approach including LCA

Monetary

valuation:

External costs

Development of external cost modeling

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1990 1992 1994 1996 1998 2000 2002 2004 2006

Euro

-Cent/

kW

h

Example:

Projected coal power plant, South Germany, parameters of power plant are constant. Only emissions from plant operation.

ExternE method.

CO2 costs not included.

Only local

r ≈ 100 km

+ Regional

r > 1000 km

„Chronic“

mortality

cases

(longterm) Years of

Life Lost

concept

E-R funct.

corrections,

100x100km2

grid regional

more E-R f.

corrections,

50x50km2

grid regional

New

Willingness

-To-Pay

E-R funct.: Exposure-Response function

Source: Heck 2004

Total costs (2050)

0 2 4 6 8 10 12 14 16

EURO cents / kWh

Generation cost Land use Pollution GHG low GHG high

Pulverised Coal (PC)

PC & Post comb.CCS

PC & Oxyfuel CCS

Integrated Gasification

Int. Gasification & CCS

Combined Cycle (CC)

CC & Post comb. CCS

Internal Comb. <1MW

MC Fuel cell <1MW

Coal

Nat gas

Nat gas

cogen

Fossil

EU Pressurised Reactor

EU Fast Reactor

Gen III

Gen IV Nuclear

MC Fuel cell <1MW

SRC Poplar 9MW

Waste straw 9MW

PV, Thin - film, 3kWp

Thermal power plant

Offshore 24MW

Biomass

cogen

Solar

Wind

Renewables

Source: PSI/Schenler & Hirschberg, 2009

China Energy Technology Program Internal and External Costs for Power Plant Options in Shandong Province

Source: Hirschberg et al., 2003

7.7

18.4

10.7

6.5 5.8 6.1

3.3

15.2

10.3

7.7 6.9 6.4

5.4 4.3

14.5

0

5

10

15

20

25

Global Warming Mortality Morbidity Crops Internal Costs

Shan

dong a

vera

ge

Weih

ai C

oal R

ef.

Heze C

oal R

ef.

Qin

gdao C

oal R

ef.

Qin

gdao D

ry F

GD

Qin

gdao S

ea W

ate

r F

GD

Qin

gdao W

et F

GD

Nucle

ar A

LW

R

Jin

an C

oal R

ef.

Jin

an N

ew

Coal, low

S

Jin

an C

oal D

ry F

GD

Jin

an C

oal W

et F

GD

Jin

an C

oal A

FB

C

Jin

an C

oal IG

CC

Jin

an G

as C

C

US

Cen

ts p

er

kW

h

Different estimates of external costs of CO2

-100

0

100

200

300

400

With 3%

discounting,

simple sum.

(Tol 2005)

With 1%

discounting,

equity

weighting

(Tol 2005)

Stern

Review

(Stern 2006)

Abatement

costs EU

(ExternE

2004)

Willingness-

To-Pay

Swiss

Referenda

(Heck 2004)

Very low

estimate

(Downing et

al. 2005)

Very high

estimate

(Downing et

al. 2005)

US

Interagency

Working

Group

(2010)

Germany

BMU

(Krewitt et

al. 2006)

Damage

costs, no

equity

weighting

Damage

costs, equity

weighting

Abatement

costs

Based on impact assessment and

damage costs

Based on

abatement

costs

Based on

referenda

Study of uncertainties Governments EU NEEDS 2009 final

Eu

ro2000/t

on

CO

2

• Severe accidents, terrorism, risk aversion

• Visual intrusion

• Resource depletion

• Nuclear proliferation

• Biodiversity losses

• Security of supply

Serious attempts to estimate the corresponding costs mostly lead

to low estimates, but this does not resolve the controversy!

Examples of controversial/difficult to estimate external effects

Survey I: Externality Concept, Results and Uses

In spite of the limitations, there is general acceptance of the concept of

externalities, of the internalisation of external costs and of most results, but…

Source: Faberi et al., 2007

0 10 20 30 40 50 60

Coal and oil technologies have the highest

external costs

Natural gas technologies have quite low

external costs due to low air pollution and

moderate external costs due to GHG emissions

Renewable technologies have mostly low

external costs

Nuclear energy has low external costs

%

Don‘t know

Don‘t know

Don‘t know

Don‘t know

Mostly agree

Fully agree

Mostly disagree

Fully disagree

Mostly agree

Fully agree

Mostly disagree

Fully disagree

Mostly agree

Fully agree

Mostly disagree

Fully disagree

Mostly agree

Fully agree

Mostly disagree

Fully disagree

0 2 4 6 8 10 12 14 16

Billion US $ in Year 2020

Cost

Benefit

Cost

Benefit

Coa

l, F

GD

C

lean C

oal-

Te

chnolo

gy +

D

ivers

ific

ation

Additional internal costs Crops Morbidity Mortality

Cost-Benefit Analysis for Selected Electric Sector Simulation Scenarios Province Shandong, China in Year 2020

Cost Benefit (avoided external damages)

compared to coal without FGD compared to coal without FGD

Source: Hirschberg et.al., 2003

15.4

0.9

10.2

0.5

incl. LCA

Sustainability Criteria

Sou

rce:

Hirs

chbe

rg e

t al.,

200

7&20

08

Criterion

RESOURCES

Energy Resources

Mineral Resources (Ores)

CLIMATE CHANGE

IMPACT ON ECOSYSTEMS

Impacts from Normal Operation

Impacts from Severe Accidents

WASTES

Special Chemical Wastes stored in Underground Depositories

EN

VIR

ON

ME

NT

AL

DIM

EN

SIO

N

Medium and High Level Radioactive Wastes to be stored in Geological Repositories

IMPACTS ON CUSTOMERS

Price of Electricity

IMPACTS ON OVERALL ECONOMY

Employment

Autonomy of Electricity Generation

IMPACTS ON UTILITY

Financial Risks

EC

ON

OM

IC D

IME

NS

ION

Operation

SECURITY/RELIABILITY OF ENERGY PROVISION

Political Threats to Continuity of Energy Service

Flexibility and Adaptation

POLITICAL STABILITY AND LEGITIMACY

Potential of Conflicts induced by Energy Systems.

Necessity of Participative Decision-making Processes

SOCIAL AND INDIVIDUAL RISKS

Expert-based Risk Estimates for Normal Operation

Expert-based Risk Estimates for Accidents

Perceived Risks

Terrorist Threat

QUALITY OF RESIDENTIAL ENVIRONMENT

Effects on the Quality of Landscape

SO

CIA

L D

IME

NS

ION

Noise Exposure

Society

Environment

Economy

North

Today‘s

generation

South/East

Tomorrow‘s

generation

Society

Environment

Economy

North

Today‘s

generation

South/East

Tomorrow‘s

generation

Effects on the

utility/operator

8%

Effects on the national

economy

7%Electricity production

costs

13%

Waste

8%

Ecosystem quality

11%

Security of power

supply

7%

Political stability &

legitimacy

5%

Social & individual

risks

7%

Local effects on

residential areas

5%

Climate change

18%

Resources

11%

ENVIRONMENT

49%

ECONOMY

27%

SOCIAL

ASPECTS

24%

Weighting of MCDA indicators

1st level

2nd level

Sou

rce:

PS

I/Sch

enle

r &

Hirs

chbe

rg.,

2009

Total costs and MCDA ranking

0 2 4 6 8 10 12 14 16 18

EU Pressurised Reactor

EU Fast Reactor

Pulverised Coal (PC)

PC & Post comb.CCS

PC & Oxyfuel CCS

Integrated Gasification

Int. Gasification & CCS

Combined Cycle (CC)

CC & Post comb. CCS

Internal Comb. <1MW

MC Fuel cell <1MW

MC Fuel cell <1MW

SRC Poplar 9MW

Waste straw 9MW

PV, Thin-film, 3kWp

Thermal power plant

Offshore 24MW

Gen III

Gen IV

Coal

Nat gas

Nat gas

cogen

Biomass

cogen

Solar

Wind

Total costs: EURO cents / kWh

Generation cost Land use Pollution GHG low GHG high

Nuclear

Fossil

Renewable

Average MCDA ranking

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

• •

•

•

•

•

•

•

•

•

•

•

•

•

•

• •

Source: Schenler & Hirschberg, 2009

Technology ranks and stakeholder weighting

Nat gas

fuel cell

Nat gas Nat gas

CCS Coal

CCS

Coal Nuclear

EFR

Nuclear

EPR

PV Solar-

thermal Biomass

CHP Wind

offshore

0

5

10

15

20

25

30

MC

DA

ran

kin

g

Focus ENVIRONMENT

Focus ECONOMY

Focus SOCIETY

Quality of the

residential

environment 25%

Public and individual

risks 25%

Political stability 25%

Electricity supply security

25%

Impacts on the utility

24%

Impacts on the economy

2%

Electricity price 71%

Waste

11%

Damage to ecosystems

23%

Climate

change 30%

Resources 24%

Source: PSI/Hirschberg et al., 2010

Conclusions

• Most basic distinction between generation technologies is in fixed v. variable costs, i.e. capital cost v. dispatch costs.

• Common features of “good” NPPs include: turn-key delivery contract, not first-of-its-kind, short construction time, clear licensing regime with no major changes during the construction, reasonably low interest rates, and high load factors with minimum unplanned interruptions of operation.

• External environmental costs may be substantial but large variety between technologies and sites. Good technologies including advanced fossil have rather low pollution costs.

• External costs of nuclear and renewables are low; external costs of natural gas are moderate; external costs of coal and oil are highest.

• Social aspects of energy systems are represented to limited extent by current estimates of external costs.

• Internalisation of external costs is economically and socially justified. It leads to more efficient overall economy.

• Total costs are attractive as an aggregated measure of performance and as a basis for cost-benefit analysis.

• Total costs remain to be controversial as a measure of sustainability performance of technologies.

• Total cost approach favours nuclear.

Thank you!