⚛ The 8th IEEJ Global Energy Webinar

IEEJ：March 2021 © IEEJ2021

The 8th IEEJ Global Energy Webinar
Projected Costs of GeneratingElectricity: 2020 Edition
Jan Horst Keppler

Stefan Lorenczik

Senior Economic Advisor
Division of Nuclear Technology Developmentand Economics
OECD Nuclear Energy Agency (NEA)

Energy Analyst
Gas, Coal and Power Markets DivisionInternational Energy Agency (IEA)

⚛ The 8th IEEJ Global Energy Webinar

Projected Costs of Generating Electricity: 2020 Edition
Table of Contents
Foreword, Acknowledgements, Executive summary
PART I: Methodology and data on levelised costs for generating technologies1. Introduction and context
2. Methodology, conventions and key assumptions
3. LCOE Overview tables by technology and country
4. The value adjusted levelised costs of electricity (VALCOE)
5. Sensitivity analyses
PART II: Boundary chapters
6. The levelised cost of storage (LCOS)
7. Carbon pricing and zero emission credits
8. A perspective on the costs of existing and new nuclear power plants
9. Sector coupling and electrification: Understanding how the electricity sector can drive decarbonisation
10. Hydrogen: An opportunity for the power sector
Annexes: List of acronyms, Participating members of EGC Expert Group⚛ The 8th IEEJ Global Energy Webinar

Overview of Country Data
Table 1.1: Summary of responses by country and technology
Country
Australia
Austria
Belgium
CanadaDenmark
FinlandFranceGermany
Hungary
Italy
Japan
Korea
MexicoNetherlands
NorwayRomania
RussiaSlovakRepublic
SwedenSwitzerland
United States

Naturalgas
3

Coal

Nuclear LTO

4631212311111Solar
Solar Onshore Offshore
Hydro CHP Storage OtherPV
thermal windwind
11111111442211472121131131471415
116211121131112112121282111218115141115231041114414123167162101446
883453332111TOTAL

82112
164

Non-OECD countries
Brazil
China
India
TOTAL

26

118123

130

12

28

1
14

769243⚛ The 8th IEEJ Global Energy Webinar

Key messages from Projected Costs: 2020 Edition
 Low carbon generation is becoming fully cost competitive in LCOE terms.
 Competitiveness depends on national and local conditions for all technologies (renewables, coal, gas or nuclear).
 Technologies have to fit into the market as system costs analysis is important to understand the full picture; storage isbecoming more important.
 Costs of renewable energies, especially onshore wind, have continued to decrease and at USD 30/tCO2 their LCOE costs
are now competitive with dispatchable fossil fuel-based electricity generation in most countries.
 The system value of variable renewables such as wind and solar however decreases as their share in the power supplyincreases.
 Nuclear remains the dispatchable low carbon technology with the lowest costs. Only large hydro reservoirs, whereavailable, can provide a similar system contribution at comparable costs.
 Coal is no longer competitive at USD 30/tCO2. CCGTs are very dependent on the gas price. They are very competitive inNorth America, less so in Asia and Europe.
 Electricity produced from nuclear long-term operations (LTO) is highly competitive and remains the least cost option not
only for low carbon generation but for all power generation across the board.
 Carbon capture technologies would only be competitive with unmitigated coal or gas at carbon prices higher than USD
30/tCO2.

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LCOE ranges for different technology⚛ The 8th IEEJ Global Energy Webinar

Competiveness depends on national and local conditions:median technology costs by region⚛ The 8th IEEJ Global Energy Webinar

In Japan, renewable energies continue to have high LCOEs
Japan Wind offshore (100 MW)
Korea, Republic of Wind offshore (99.0 MW)
Japan Wind onshore (>= 1 MW) (20.0 MW)
Korea, Republic of Wind onshore (>= 1 MW) (14.9 MW)
France Wind offshore (500 MW)
Belgium Wind offshore (50.0 MW)
Australia Wind offshore (100 MW)
China Wind offshore (50.0 MW)
Austria Wind onshore (>= 1 MW) (3.0 MW)
Russian Federation Wind onshore (>= 1 MW) (280 MW)
United States of America Wind offshore (median case) (600 MW)
Italy Wind onshore (>= 1 MW) (20.0 MW)
China Wind onshore (>= 1 MW) (50.0 MW)
Belgium Wind onshore (>= 1 MW) (30.0 MW)
France Wind onshore (>= 1 MW) (50.0 MW)
Canada Wind onshore (>= 1 MW) (200 MW)
Denmark Wind offshore (11.5 MW)
Finland Wind onshore (>= 1 MW) (30.0 MW)
Australia Wind onshore (>= 1 MW) (100 MW)
Netherlands Wind onshore (>= 1 MW) (50.0 MW)
United States of America Wind onshore (>= 1 MW) (median case) (100 MW)
India Wind onshore (>= 1 MW) (65.0 MW)
Brazil Wind onshore (>= 1 MW) (30.0 MW)
Norway Wind onshore (>= 1 MW) (130 MW)
Denmark Wind onshore (>= 1 MW) (4.5 MW)
050Construction, refurbishment & decommissioning

100O&M150

200250USD/MWh⚛ The 8th IEEJ Global Energy Webinar

In Japan, renewable energies continue to have high LCOEs
Japan Solar PV (utility scale) (2.0 MW)
Korea, Republic of Solar PV (utility scale) (3.0 MW)
Belgium Solar PV (utility scale) (1.0 MW)
Canada Solar PV (utility scale) (20.0 MW)
Hungary Solar PV (utility scale) (20.0 MW)
Netherlands Solar PV (utility scale) (8.0 MW)
Italy Solar PV (utility scale) (0.83 MW)
Canada Solar PV (utility scale) (20.0 MW)
Italy Solar PV (utility scale) (0.83 MW)
United States of America Solar PV (utility scale) (100 MW)
China Solar PV (utility scale) (20.0 MW)
United States of America Solar PV (utility scale) (100 MW)
Brazil Solar PV (utility scale) (25.0 MW)
United States of America Solar PV (utility scale) (median case) (100 MW)
Denmark Solar PV (utility scale) (8.0 MW)
Denmark Solar PV (utility scale) (8.0 MW)
Australia Solar PV (utility scale) (100 MW)
United States of America Solar PV (utility scale) (100 MW)
India Solar PV (utility scale) (35.0 MW)
United States of America Solar PV (utility scale) (100 MW)
France Solar PV (utility scale) (25.0 MW)
0204060

Construction, refurbishment & decommissioning

80O&M100120140160

180200USD/MWh⚛ The 8th IEEJ Global Energy Webinar

In Japan, renewable energies continue to have high LCOEs

USD/MWh⚛ The 8th IEEJ Global Energy Webinar

System costs are important to show the full picture LCOE is a well-known, relatively simple and transparent metric for comparing baseload technologies under a set ofcommon assumptions.
 However, LCOE neglects the system contribution of different technologies, which depends on variability,
dispatchability, response time, cost structure and place in the merit order, but also on system configuration andflexibility resources.
 In particular, increasing amounts of variable wind and solar PV capacity impact the load factors and LCOE of flexible
technologies such as gas, coal or nuclear, which remain indispensable as dispatchable back-up.
 The system contribution of VRE declines with their share in the mix as shown by their average remuneration per
MWh. This is due to the autocorrelation of generators with zero variable costs.
 Optimised least cost electricity systems thus require system-level analysis (IEA 2019, NEA 2019).
 To assess system contribution, the IEA has reported value adjusted LCOE (VALCOE) for existing brownfield systems inthree regions.

⚛ The 8th IEEJ Global Energy WebinarStorage

 Increasing shares of variable renewables in the energy mix increase the volatility of electricity prices and therefore
trigger demand for flexibility and balancing options.
 Falling investment costs, for example for battery units, are already making short-term storage an economicallyattractive option in some niche applications (e.g., ancillary services markets).
 In markets with shares of VRE and thus more volatile electricity prices, storage could become an attractive alternative
to peaking units such as open cycle gas turbines.
 Long-term storage, such as seasonal storage remains elusive. Here dispatchable low carbon generators such ashydropower or nuclear energy are required.
 Future low carbon systems will work with a mix of flexibility options such as storage, demand response anddispatchable low carbon generation.
 Projected Costs of Generating Electricity: 2020 Edition for the first time includes the levelised cost of storage (LCOS) as
well as an in-depth methodological discussion in Chapter 6.

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Storage (continued)⚛ The 8th IEEJ Global Energy Webinar

Nuclear power⚛ The 8th IEEJ Global Energy Webinar

Nuclear power (continued)⚛ The 8th IEEJ Global Energy Webinar

Generation costs critically depend on the capacity factor

Note: Values at 7% discount rate. Lines indicate median values, areas the 50% central region.

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Nuclear long-term operation (LTO) with low costs evenwith low capacity factors

Note: Values at 7% discount rate. Lines indicate median values, areas the 50% central region⚛ The 8th IEEJ Global Energy Webinar

Technologies to different extents exposed to financing costs

Note: Values at 7% discount rate. Lines indicate median values, areas the 50% central region⚛ The 8th IEEJ Global Energy Webinar

Chapter 6: The levelised costs of storage (LCOS)
In addition to a host of empirical information, Chapter 6 considers the following three storage cost metrics:(1) The required average operational profit (RAOP), which is similar to traditional LCOE, i.e., the constant pricerequired to recuperate costs assuming that charging costs are zero and that there are no efficiency losses;(2) The required average price spread (RAPS) is similar to the RAOP but includes also the round-trip efficiency
losses when charging and discharging; and(3) The required average discharge price (RADP) includes charging costs and thus corresponds to thedifference required to break even between the average price obtained for discharged electricity and theaverage cost of electricity used for charging.

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Chapter 7: Carbon pricing and zero emission credits
Shows how different forms of carbon pricing (taxes, emissions trading, fixed or sliding feed-in premia etc.) serve to render
explicit the differences in the full cost of different generation technologies.
Considers Swedish experience of decoupling GDP from CO2 emissions following the introduction of a carbon tax in 1991.
Includes case study of US experience of remunerating low carbon generation with zero emission credits (ZECs).
Provides evidence of impact of emission trading under the EU ETS on the inframarginal rents of low carbon and fossil
generators on Germany and France under both grandfathering and auctioning.

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Chapter 8: A perspective on the costs of existing and newnuclear power plants

Overnight onstruction costs (USD/kWe)Long-term operation (LTO) of existing nuclear power plants: today the most cost-effective solution for low carbon
generation but the pool of projects is limited (see NEA, forthcoming 2021).
Construction of new nuclear power plants (Gen-III reactors): cost reductions are realized as projects move past FOAK (seeNEA (2020) Unlocking Reductions in the Construction Costs of Nuclear and figure below on drivers of cost reductions).
Technology innovation through SMRs: new technical features promise cost reduction. However, challenges need to be
overcome to reach commercial viability.

Designmaturity

FOAK reactor

Effective
Regulation
projectstability &management predictability
What new nuclear should costTechnologyDelivery

Multi unit &series effects

Designoptimisation

Technology &process
innovation

post-FOAK
reactorRegulation

Revisiting Harmonisation:
regulatory
licensing,interactions
codes &standards

What new nuclear could cost

PolicySMRs and advanced reactors

NOAK reactor⚛ The 8th IEEJ Global Energy Webinar

Chapter 9: Sector coupling and electrification –Understanding how the electricity sector can drive
decarbonisation of the overall economy
Overview of recent advances in analysing
and understanding the impacts, benefits
and constraints of sector coupling,
contributed by the French transmission
system operator RTE, followed by study
results regarding• Electric mobility• Power-to-hydrogen• Heating in buildings

Projected changes in the numbers oflight-duty electric vehicles in France⚛ The 8th IEEJ Global Energy WebinarChapter 10: Hydrogen – An opportunity for the power sector
Based on the 2019 IEA report The Future of Hydrogen: Seizing Today’s Opportunities• Hydrogen demand today and potential for the future: Industry, road transport and domestic heat
• Hydrogen production technologies and costs today and in the future: Using gas, coal and electricity• Linkages to the electricity system: Integration of variable renewables, long-term storage and hydrogen as a fuel forelectricity generation.
Hydrogen costs from hybrid solar PV-onshore wind systems in the long term (USD/kg H2)

⚛ The 8th IEEJ Global Energy Webinar

Summary: Key points ofProjected Costs of Generating Electricity: 2020 Edition
Low carbon generation now fully cost competitive
1)Holds for variable renewables such as wind and solar PV as well as for dispatchable low carbon generators hydro andnuclear
2)LTO lowest cost option not only for low carbon but all power generation3)At modest carbon price of USD 30 per tonne of CO2, unmitigated coal is no longer competitive.
4)CCUS would require considerably higher carbon prices to become competitive.
Regional differences remain importantLargest overall number of submissions for Projected Cost series
Includes for the first time1)Costs data on storage, fuel cells and nuclear LTO2)System approach
Conceptual boundary chapters on LCOS (new methodology) and carbon pricing (new policies)
Thematic boundary chapters on new nuclear, sector coupling and hydrogen.

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Download the reportwww.oecd-nea.org/egc-2020
orwww.iea.org/reports/projected-costs-of-generating-electricity-2020
LCOE calculators

www.iea.org/articles/levelised-cost-of-electricity-calculatoror

www.oecd-nea.org/lcoe⚛ The 8th IEEJ Global Energy Webinar

Thank you!

Contact: report@tky.ieej.or.jp