March 2021 © IEEJ2021

Power generation cost by technology:
A Japanese perspective

March 4, 2021
Yuji MATSUO
Institute of Energy Economics, Japan (IEEJ)

Data submitted from Japan: METI (2015)
Unit: JPY/kWh
Real discount rate: 3%Commissioning year: 2030

Source: Power generation cost analysis working group (2015)
https://www.meti.go.jp/english/press/2015/pdf/0716_01b.pdf(発電コスト検証ワーキンググループ)

IEEJ © 2021

- The latest version of LCOE estimation published by the Japanese government.
- Difference in the definition of LCOE: Including/excluding policy cost, fixed asset tax, etc.
- 2030 data have been submitted for wind and solar PV, considering the cost declines after
2015.

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Interregional comparison of LCOEIEEJ © 2021

Source: OECD/NEA & IEA, Projected costs of generating electricity 2020 Edition- 100 USD/MWh equals 10 cent/kWh, which is roughly equivalent to 10 JPY/kWh.
Overnight cost (unit construction cost)
Solar PV (residential) 2333 USD/kW, Solar PV (utility scale) 2006 USD/kW
Onshore wind 2282 USD/kW, Offshore wind 4039 USD/kW.

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Historical trends: Overnight cost (solar PV)
Utility scale

Unit: 10 thousand JPY/kW

2020:
278 thousand JPY/kW
Installation
Other equipment
Racking

Inverter

Panel
2013

Residential

2014

2015

2016

2017

2018

2019

2020

Unit: 10 thousand JPY/kW

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2020:
298 thousand JPY/kW
Source:Calculation Committee for
Procurement Price, etc.
(調達価格等算定委員会)
https://www.meti.go.jp/
shingikai/santeii/063.html

Existing
Average
New build
2012

2013

2014

2015

2016

2017

2018

2019

2020

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Historical trends: Overnight cost and LCOE
(onshore wind)
Unit: 10 thousand JPY/kW

Source: Calculation Committee for Procurement Price, etc.
(調達価格等算定委員会)
https://www.meti.go.jp/shingikai/santeii/063.html

Overnightcost
2019:383 thousand
JPY/kW2012

2013

2014

2015

2016

2017

2018

2019

Unit: JPY/kWhLCOE with
3% discount rate

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2019:～13 JPY/kWh

2012

2013

2014

2015

2016

2017

2018

2019

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Distribution of LCOE (onshore wind)
Number of projects with different LCOE (3% discount rate)
Number of projects

14
12
10
8
6
42IEEJ © 2021

0

Source: Calculation Committee for Procurement Price, etc.
(調達価格等算定委員会)
https://www.meti.go.jp/shingikai/santeii/063.html

7-8-9-10- 11- 12- 13- 14- 15- 16- 17- 18- 19- >20LCOE, JPY/kWh- LCOE of variable renewable energies
range widely from below 10 JPY/kWh toover 20 JPY/kWh.
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Overnight cost by country: Nuclear
Source: OECD/NEA & IEA, Projected costs of generating electricity 2020 Edition

USD/kW

6920

7000
6000
5000
4000

4013

4250

3963

3000
2000

2157

2271

Korea

Russia

2500

2778

1000

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0FranceJapan

Slovak
Rep.

U.S.

China

India

- “Overnight cost” (一夜費用) refers to the construction cost excluding interest during
construction.
- Overnight unit cost of nuclear ranges from 2,000 to 7,000 USD/kW.

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Lazard’s LCOE analysisIEEJ © 2021

Source: Lazard’s levelized cost of energy analysis ver. 14.0

-Lazard’s LCOE analysis expects higher overnight costs of nuclear power generation,
probably reflecting recent cost hikes in Europe and in North America - Olkiluoto3,
Hinkley point C, Vogtle 3&4, etc.

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Historical trends in unit construction cost ofnuclear power
Selected countries

JapanUnit construction cost,2011 JPY thousand/kW

400

United States

Japan

FranceLabor cost,2011 JPY thousand/person

India

South Korea

Lovering et al., (2016). Energy Policy, 91, 371-382.

8,000BWR3507,000300

6,000BWR-I&S

250

5,000ABWR

200

4,000

150

3,000100

2,00050

1,00001970

1980

1990

200002010

PWR
PWR-I&S
Labor cost(right axis)

Year of first commercial operation

Matsuo and Nei, (2019). Energy Policy, 124, 180-198.

IEEJ © 2021

- In the United States, the unit construction cost of nuclear rose sharply in the 1970s.
- In Japan, it remained roughly stable after 1985. This is probably thanks to thestable construction period (around five years).

8Value-adjusted LCOE (VALCOE)IEEJ © 2021

Source: OECD/NEA & IEA, Projected costs of generating electricity 2020 Edition- VALCOE modifies the LCOE of an individual technology in a particular electricity system
according to its system value, or its contribution to enabling all aspects of securely
operating the system.

9Examples of VALCOE: World Energy Outlook 2020
Source: IEA, World Energy Outlook 2020

USD/MWh

Nuclear LCOE

160

Nuclear VALCOE

140

Coal LCOE

120

Coal VALCOE100

Gas CCGT LCOE

80

Gas CCGT VALCOE

60

Solar PV LCOE

40

Solar PV VALCOE
Wind onshore LCOE

200

Wind onshore VALCOE

20192040

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European Union

20192040
China

Wind offshore LCOEWind offhsore VALCOE

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Similar metrics: Marginal costs of power sources
L. Hirth, F. Ueckerdt and O. Edenhofer, (2016). The Energy Journal, 37(3). Doi:10.5547/01956574.37.3.lhir.
Y. Matsuo and R. Komiyama, (2021). Sustainability Science. Doi:10.1007/s11625-021-00914-1

System LCOE (Hirth et al., 2016)
LHUE, i = ci – vi + vL

ci : LCOE of source ivi : Unit value of source ivL : Unit value of demand

Relative marginal system LCOE (Matsuo and Komiyama, 2021)- Measures the changes in the total cost of the power system caused by thesubstitution of two types of power sources.

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- The relative marginal system LCOE of the “reference technology” L0 is
assumed at a constant number, while that of technology i Li is defined by Li =L0 + LI, where LI denotes the total cost increase with the substitution oftechnologies 0 and i by 1kWh.
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Marginal and average costs of electricity:
Case of Japan
Y. Matsuo and R. Komiyama, (2021). Sustainability Science.
https://doi.org/10.1007/s11625-021-00914-1

2014 JPY/kWhSolar PV

60

Offshore wind50

Onshore wind
Nuclear

40Thermal (Reference technology)

30
201002050

100 200 300 400 500 600

Relative marginal system LCOE

2050

(Thermal power output, TWh)

100 200 300 400 500 600
Average system LCOEIEEJ © 2021

- Assumes that electricity is supplied by renewables, nuclear, and zero-emission thermalpower (e.g. thermal power with CCS or hydrogen thermal power) in 2050 in Japan.
- Marginal costs of variable renewables (solar PV and wind) increase significantly with very
high shares of VRE, or very low shares of thermal power.

12Thank you for your attention!

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Merci beaucoup pour votre attention!

Contact: report@tky.ieej.or.jp

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