Electricity Generation Costs

October 2012



Introduction

Electricity generation costs are a fundamental part of energy market analysis, and a good
understanding of these costs is important when analysing and designing policy.
DECC regularly updates estimates of the costs and technical specifications for different
generation technologies used in its analysis. Cost data is broken down into detailed
expenditure per MW or MWh for the lifetime of a plant, from planning costs right through
construction and operating costs to eventual decommissioning costs.
These detailed costs are used by DECC to calculate a levelised cost for each technology. A
levelised cost is the average cost over the lifetime of the plant per MWh of electricity
generated. These reflect the cost of building a generic plant for each technology, potential
revenue streams are not considered
1
.
For the purposes of this report data on the cost of electricity generation has been drawn from
Parsons Brinkerhoff (2012) for non-renewables technologies and evidence underpinning the
Renewables Obligation and Feed in Tariff scheme for renewable technologies. Based on this
detailed cost data, this report presents selected levelised costs of electricity generation
estimates generated using DECCs Levelised Cost Model.
This report firstly details the methodology and assumptions used in these estimates and
discusses some of the limitations of levelised costs estimates. The report then presents
selected levelised cost estimates generated using DECCs Levelised Cost Model. The final
section of this report also adds a brief explanation of how cost information is used in DECC
modelling.
It is important to note there is a large amount of uncertainty when estimating the future costs of
electricity generation.
The levelised costs in this report are not intended to provide any indication of potential future
strike prices for the Feed-in Tariff with Contracts for Difference (CfD) being introduced as part
of Electricity Market Reform.

1
With the exception of heat revenues for CHP technologies
Electricity Generation Costs
3
Explanatory Notes
Methodology
The levelised cost of electricity generation (LCOE) is defined as the ratio of the net present
value of total capital and operating costs of a generic plant to the net present value of the net
electricity generated by that plant over its operating life.
For further information on how levelised costs are calculated and DECCs Levelised Cost
Model please refer to section 4.2 Mott MacDonald (2010)
2
or see Annex 2: Calculating
Levelised Costs
Data Sources and Assumptions
The following data sources and assumptions have been used to calculate the levelised costs
estimates presented in this report :
Non-Renewables Data: Underlying data on non-renewable technologies has been provided
by Parsons Brinckerhoff. The underlying data and assumptions can be found in the PB
(2012) report
3
.
Renewables Data (over 5MW): Renewable technology estimates (for plant size over 5MW)
reflect data and evidence underpinning the Government response to the consultation on
proposals for the levels of banded support under the Renewables Obligation for the period
2013-17 and the Renewables Obligation Order 2012 for renewable technologies
4
. Please
note that the estimates for renewables over 5MW have been inflated from 2010 to 2012
prices and heat revenues have been updated to reflect new fuel, carbon, and electricity
prices when compared to those published as part of the Government Response to
Renewables Obligation.
5

Renewables Data (up to 5MW): Renewable technology estimates (for plant size up to 5MW)
reflect data and evidence from PB (2012) published as part of the government response to
Phase 2A and 2B comprehensive review of feed in tariffs
67
.

2
http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx
3
http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx
4
http://www.decc.gov.uk/assets/decc/11/consultation/ro-banding/5936-renewables-obligation-consultation-the-
government.pdf This is referred to as the Government Response to the RO throughout this report.
5
Please note that the data used to produce these levelised costs is consistent with the data underpinning the
Renewables Obligation and figures presented in the Call for Evidence on Onshore Wind
6
http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-energy/5381-solar-pv-cost-
update.pdf.
Electricity Generation Costs
4
Fuel and Carbon Prices: DECCs projected fossil fuel prices and Carbon Price Support.
Deployment Scenarios: Future cost estimates are driven by a combination of assumptions
of learning rates and global and UK deployment. Please see data sources referenced
above for detailed information about deployment scenarios used. In general IEA Bluemap
scenarios were the main source for global deployment. Four notable exceptions are;
offshore wind, ACT, marine and estimates for renewables technologies under 5MW which
are driven by technical potential for UK deployment
8


All estimates are in 2012 real prices. This is in contrast to previously published estimates which
were in 2010 real prices.

Technology Notes
This report will not discuss changes to individual technology estimates from previously
published figures. For more information on individual changes please refer to the source
material referenced in the Data Sources and Assumptions section above.

Estimates for Carbon Capture and Storage (CCS) technologies and Nuclear are shown on a
First of a Kind (FOAK) and Nth of a Kind (NOAK) basis. For these technologies with no
commercial experience in the UK, FOAK was defined as the first plant within the UK, not
including demonstration projects. For these technologies, FOAK costs assume experience has
been gained from international and demonstration projects
9
.

The period in which the cost moves from FOAK to NOAK is entirely dependent on the assumed
learning rate and the assumed build rate. For nuclear we have assumed a move to NOAK for
plants starting development in 2018 onwards. In practice this may occur later than we have
assumed. The movement between FOAK and NOAK for CCS is even more uncertain and as
such we have only used FOAK estimates in this report.

Unless indicated all other estimates presented are NOAK.


7
http://www.decc.gov.uk/assets/decc/Consultations/fits-review/5900-update-of-nonpv-data-for-feed-in-tariff-.pdf
8
Please see Arup 2011 and PB 2012 for FiTs for more details. Please note that reductions in costs for offshore
wind are based on technical potential for deployment, if these levels of deployment do not materialise cost
reductions would be less pronounced..
9
All estimates for Carbon Capture and Storage (CCS) presented in this document are intended to illustrate the
cost of CCS for a commercial plant. In practice CCS would have be successfully demonstrated first. In order to
avoid confusion, we have not included estimates for CCS in the near future to illustrate the need for an initial
demonstration project
Electricity Generation Costs
5
Limitations of Levelised Costs
Levelised costs estimates are highly sensitive to the underlying data and assumptions used
including those on capital costs, fuel and carbon costs, operating costs, operating profile, load
factor and discount rates. Future levelised costs estimates are heavily driven by assumptions
of global and UK deployment and assumed learning rates (and to a limited extent market
effects
10
).
This report captures some of these uncertainties through ranges presented around key
estimates (for capex and fuel depending on the estimates). However, not all uncertainties are
captured in these ranges and estimates should be viewed in this context. It is often more
appropriate to consider a range of costs rather than point estimates.
Given these uncertainties, the levelised cost estimates in this report are not intended to provide
any indication of potential future strike prices for a particular technology or plant under the
Feed-in Tariff with Contracts for Difference (CfD) being introduced as part of Electricity Market
Reform. Strike prices will vary according to the length and design of the FiT CfD contract,
technology, financing costs and in a few limited cases specific project characteristics. To the
extent that project specific cost discovery processes are undertaken, these will form the
starting point of any process of setting a strike price, rather than relying on levelised cost data.
The levelised cost is a standardised measure of the net present value of lifetime costs divided
by generation for a generic plant under each technology. This measure makes no assumptions
about how particular generating stations would be financed, or the allocation of risk between
parties. A CfD stabilises revenues for a particular generating station at a fixed price level
known as the strike price over a specified term, at a rate of return which reflects contract
duration and design, financing costs, and risk allocation between parties.
The levelised cost measure does not explicitly include the financing costs attached to new
generating stations
11
. In most cases this report includes estimates using a standard 10%
discount rate (in line with the tradition used in reports produced by other organisations) across
all technologies. These estimates may be viewed as neutral in terms of financing and risk when
comparing across technologies.
In practice financing costs of individual projects will vary depending on a range of factors
including financing type, project developer, conditions in financial markets, maturity of
technology, and risk and political factors.
Annex 4 includes levelised cost estimates for renewable technologies using technology specific
hurdle rates as was done in previous reports on renewables. Currently uncertainties around the
cost of financing nuclear and CCS technologies means technology specific hurdle rate
estimates are only provided for renewables in this report.

10
Market effects can include short term imbalanced between the demand and supply for component costs.
11
While financing costs are included implicitly through the choice of discount rate used to produce the levelised
cost this is an approximation.
Electricity Generation Costs
6
Generation Cost Estimates
This section outlines the main results of the analysis of the levelised cost of electricity
generation. It focuses primarily on the main technologies likely to be deployed in the UK over
the next decade and a half.
The Levelised Cost of Electricity Generation is the discounted lifetime cost of ownership of
using a generation asset converted into an equivalent unit of cost of generation in /MWh. This
is sometimes called a life cycle cost, which emphasises the cradle to grave aspect of the
definition. The levelised cost estimates do not consider revenue streams available to
generators (e.g. from sale of electricity or revenues from other sources), with the exception of
heat revenues for CHP plant which are included so that the estimates reflect the cost of
electricity generation only.
A full set of estimates for renewable technologies not covered in the main report can be found
in Annex 3.

When looking at levelised cost estimates it is important to consider how they have been
reported in terms of project timing and what sensitivities (if any) are included. These are
discussed in more detail below.

Timing

Levelised cost estimates can be reported for different time points associated with a project
including Project Start, Financial Close and Commissioning. These are illustrated in Chart 1
below for an illustrative technology. A levelised cost estimate could be reported for project
start, financial close or commissioning basis and represent the same information but be
associated with different years.

For example, using the illustrative timings below for Technology 1. If the levelised cost of this
technology was 50/MWh for a project starting in 2012, this would be the same as saying
50/MWh for a project reaching financial close in 2017 (2012 plus the 5 year pre-development
period), or 50/MWh for a project commissioning in 2023 (2017 plus the 6 year construction
period).

It is important to consider this when comparing across technologies. Pre-development and
construction timings will vary by technology and therefore estimates reported for project start
or financial close may not represent technologies commissioning in the same year as each
other, and vice versa. Please see Annex 1 for key timings for selected technologies.











Electricity Generation Costs
7
Chart 1: Illustrative Timings
0 10 20 30 40 50
De-Commissioning
Operation
Construction
Pre-development
years
Project Start
Financial Close
Commissioning


Sensitivities

Levelised costs estimates are highly sensitive to the underlying data and assumptions used
including those on capital costs, fuel and carbon costs, operating costs, load factor and
discount rates. As such it is often more appropriate to consider a range of cost estimates rather
than point estimates.

In order to illustrate some of these sensitivities, ranges of estimates have been shown. The key
sensitivities explored are:

High and Low capital costs (including pre-development)

Unless specified all high and low estimates reported incorporate high and low capital costs
including high and low pre-development costs.

For non-renewable technologies this is a small change from previously reported estimates
which used central estimates for pre-development costs throughout. For non-renewables
technologies high and low capital costs include the full range from PB (2012) i.e. both site-
specific variation and uncertainty over future costs
12
.

High and Low fuel and capital costs

In some cases, sensitivities which explore uncertainty over both fuel costs and capex costs are
provided . These are shown in charts like Chart 2 below. In these cases the thick blocks
represent high/low sensitivities around capex (including pre-development) costs and the thin

12
For more details on uncertainties please see PB (2012). Please note for nuclear technologies there was no
basis to distinguish between variation and uncertainty. Non-renewable technologies also include an adjustment for
market effects. These do not have a large impact on the cost estimates.
Electricity Generation Costs
8
lines represent high/low sensitivities around fuel prices on top of the uncertainty around capex
(including pre-development) costs.

Chart 2: Illustrative Sensitivities
0
20
40
60
80
100
120
Technology 1 Technology 2

/
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Estimates
Levelised cost estimates for three cases have been calculated using the DECC Levelised Cost
Model.

Case 1: projects starting in 2012, FOAK/ NOAK, 10% discount rate
13


Case 1 shows the levelised costs for projects starting in 2012 with technologies which have not
been deployed in the UK in their current form considered first of a kind (FOAK), and those that
have been deployed in the UK in their current form considered Nth of a kind (NOAK). A 10%
discount rate has been used in this case.

Table 1 and Chart 3 show the detailed breakdown of the central levelised cost estimates for
projects starting in 2012.

Table 2 and Chart 4 show the sensitivities around capex and capex and fuel prices for projects
starting in 2012.

13
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
Electricity Generation Costs
9
Table 1: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
Central Levelised Costs,
/MWh
Gas -
CCGT
Coal -
ASC with
FGD
Coal -
IGCC
Nuclear -
FOAK
Offshore
R2
Offshore
R3
Solar250
-5000kW
Pre-Development Costs 0 0 1 5 4 6 -
Capital Costs 9 22 26 55 81 91 143
Fixed O&M 3 5 7 11 32 37 26
Variable O&M 0 1 1 3 1 - -
Fuel Costs 48 28 30 5 - - -
Carbon Costs 19 45 56 - - - -
CO2 transport and storage - - - - - - -
Decomm and waste fund - - - 2 - - -
Heat Revenues - - - - - - -
TOTAL LEVELISED COST 80 102 122 81 118 134 169

Central Levelised Costs,
/MWh
Onshore
>5 MW
E&W
14

Onshore
>5 MW
UK
Dedicate
d
biomass
>50MW
Dedicate
d
biomass
<50MW
Co-firing
Conventi
onal
Biomass
Conversi
on
Pre-Development Costs 2 2 1 2 - 2
Capital Costs 79 71 38 52 5 11
Fixed O&M 19 17 14 16 5 13
Variable O&M 3 3 4 5 1 1
Fuel Costs - - 65 41 81 83
Carbon Costs - - - - - -
CO2 transport and storage - - - - - -
Decomm and waste fund - - - - - -
Heat Revenues - - - - - -
TOTAL LEVELISED COST 104 93 122 117 92 110

Table 2: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
Levelised Costs, /MWh
Gas -
CCGT
Coal -
ASC with
FGD
Coal -
IGCC
Nuclear -
FOAK
Offshore
R2
Offshore
R3
Solar250-
5000kW
Central 80 102 122 81 118 134 169
High Capex 81 105 125 92 134 156 203
High Capex and High
Fuel
100 118 140 93 - - -
Low Capex and Low
Fuel
58 90 108 72 - - -
Low Capex 78 99 118 73 104 117 145

Levelised Costs, /MWh
Onshore
>5 MW
E&W
Onshore
>5 MW
UK
Dedicate
d
biomass
>50MW
Dedicate
d
biomass
<50MW
Co-firing
Conventi
onal
Central 104 93 122 117 92
High Capex 125 111 155 139 94
High Capex and High
Fuel - - 165 160 108
Low Capex and Low Fuel - - 106 82 78
Low Capex 85 76 115 100 88


14
Estimates for onshore wind are shown using average load factors for UK and England and Wales E&W
Electricity Generation Costs
10
Chart 3: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
0
20
40
60
80
100
120
140
160
180

/
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h
Case 1: Project Start 2012, FOAK/NOAK, 10% discount rate
Pre-Development Costs Capital Costs Fixed O&M Variable O&M
Fuel Costs Carbon Costs CO2 transport and storage costs Decomm and waste fund

Chart 4: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
0
50
100
150
200
250

/
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h
Case 1: Project start 2012, FOAK/NOAK, 10% discount rate, sensitivities

Electricity Generation Costs
11
Case 2: projects starting in 2018, FOAK/ NOAK, 10% discount rate
15


Case 2 shows the levelised costs for projects starting in 2018 assuming that NOAK has been
reached for all technologies (with the exception of CCS). A 10% discount rate has been used in
this case.

Table 3 and Chart 5 show the detailed breakdown of the central levelised cost estimates for
projects starting in 2018.

Table 4 and Chart 6 show the sensitivities around capex and capex and fuel prices for projects
starting in 2018.

Table 3: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
Central Levelised Costs,
/MWh
Gas -
CCGT
Gas -
CCGT
with post
comb.
CCS
FOAK
Gas -
CCGT
retro
post
comb.
CCS
FOAK
Coal -
ASC with
FGD
Coal -
ASC with
post
comb.
CCS
FOAK
Coal -
IGCC
Coal -
IGCC
with CCS
Pre-Development Costs 0 1 1 0 1 1 1
Capital Costs 8 24 19 21 47 26 43
Fixed O&M 3 4 4 5 10 7 9
Variable O&M 0 2 2 1 3 1 2
Fuel Costs 48 55 56 28 37 30 36
Carbon Costs 26 4 4 57 9 66 9
CO2 transport and storage - 5 5 - 11 - 11
Decomm and waste fund - - - - - - -
Heat Revenues - - - - - - -
TOTAL LEVELISED COST 85 94 89 113 116 131 111

Central Levelised Costs,
/MWh Nuclear -
NOAK
Dedicate
d
biomass
>50MW
Dedicate
d
biomass
<50MW
Offshore
R2
Offshore
R3
Onshore
>5 MW
E&W
Onshore
>5 MW
UK
Pre-Development Costs 4 1 2 4 6 2 2
Capital Costs 50 37 51 71 76 76 68
Fixed O&M 9 14 16 28 31 19 17
Variable O&M 3 4 5 1 - 3 3
Fuel Costs 5 65 41 - - - -
Carbon Costs - - - - - - -
CO2 transport and storage - - - - - - -
Decomm and waste fund 2 - - - - - -
Heat Revenues - - - - - - -
TOTAL LEVELISED COST 73 121 115 103 113 101 90


15
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
Electricity Generation Costs
12
Table 3: (continued)
Central Levelised Costs,
/MWh
Cofiring
Conventional
Biomass
Conversion
Solar250-
5000kW
Pre-Development Costs - 2 -
Capital Costs 5 10 104
Fixed O&M 5 13 25
Variable O&M 1 1 -
Fuel Costs 81 83 -
Carbon Costs - - -
CO2 transport and storage - - -
Decomm and waste fund - - -
Heat Revenues - - -
TOTAL LEVELISED COST 92 109 129

Table 4: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
Levelised Costs, /MWh
Gas -
CCGT
Gas -
CCGT
with post
comb.
CCS
Gas -
CCGT
retro post
comb.
CCS
16

Coal -
ASC with
FGD
Coal -
ASC with
post
comb.
CCS
Coal -
IGCC
Coal -
IGCC with
CCS
Central 85 94 89 113 116 131 111
High Capex 86 104 98 117 136 135 141
High Capex and High
Fuel 106 127 121 131 155 151 160
Low Capex and Low
Fuel 64 63 59 100 88 116 75
Low Capex 84 86 82 109 101 127 87

Levelised Costs, /MWh
Nuclear -
EPWR
NOAK
Dedicated
biomass
>50MW
Dedicated
biomass
<50MW
Offshore
R2
Offshore
R3
Onshore
>5 MW
E&W
Onshore
>5 MW
UK
Central 73 121 115 103 113 101 90
High Capex 85 153 137 118 132 122 109
High Capex and High
Fuel 86 163 158 - - - -
Low Capex and Low
Fuel 64 105 80 - - - -
Low Capex 65 114 99 91 98 83 74

Levelised Costs, /MWh
Cofiring
Conventional
Solar250-
5000kW
Central 92 129
High Capex 93 154
High Capex and High
Fuel 107 -
Low Capex and Low
Fuel 78 -
Low Capex 88 112





16
Please note all retrofit estimates are for the retrofit of CCS only and do not include the cost of the base plant.
Electricity Generation Costs
13
Chart 5: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
0
20
40
60
80
100
120
140
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Case 2: Project Start 2018, FOAK/NOAK, 10% discount rate
Pre-Development Costs Capital Costs Fixed O&M Variable O&M
Fuel Costs Carbon Costs CO2 transport and storage costs Decomm and waste fund

Chart 6: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
0
20
40
60
80
100
120
140
160
180
Case 2: Project Start 2018, FOAK/NOAK, 10% discount rate, sensitivities

Electricity Generation Costs
14
Case 3: Commissioning in 2013, 2015, 2020, 2025, 2030, FOAK/ NOAK, 10%
discount rate
17

In order to also show the costs of technologies commissioning in the same year Case 3
illustrates the levelised costs for projects commissioning in 2013, 2015, 2020, 2025 and 2030,
using a 10% discount rate.
Table 5: Projects Commissioning
in 2013,2015, 2020, 2025 and
2030, FOAK/NOAK,
10%discount rate, capex
sensitivity Levelised Costs, /MWh
Commissioning Year Capex 2013 2015 2020 2025 2030
Gas - CCGT
High 77 79 84 88 91
Central 76 78 82 87 89
Low 75 77 81 85 87
Gas - CCGT with post comb. CCS
FOAK
High 104 105
Central 94 95
Low 86 86
Gas - CCGT retro post comb. CCS
FOAK
High 97 100
Central 89 90
Low 82 83
Coal - ASC with FGD
High 93 97 107 117 121
Central 90 94 104 113 117
Low 88 91 101 109 113
Coal - ASC with post comb. CCS
High 136 137
Central 116 116
Low 101 101
Coal - IGCC NOAK
High 108 121 131 136
Central 106 117 127 132
Low 103 114 123 128
Coal - IGCC with CCS FOAK
High 109 111
Central 111 111
Low 88 87
Nuclear - EPWR FOAK/NOAK
18

High 96 91 85
Central 85 79 73
Low 77 71 65
Dedicated biomass >50MW
High 157 156 154 153 152
Central 124 123 122 121 120
Low 117 116 115 114 114
Dedicated biomass <50MW
High 141 140 138 137 136
Central 119 118 116 115 115
Low 102 101 100 99 99
Offshore R2
High 174 159 134 120 110
Central 153 140 118 105 96
Low 135 124 104 93 85


17
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
18
We have assumed that Nuclear switches from FOAK to NOAK for projects commissioning in 2029 onwards.
Electricity Generation Costs
15
Table 5: (continued)
Levelised Costs, /MWh
Commissioning Year Capex 2013 2015 2020 2025 2030
Offshore R3
High

190 162 138 125
Central

164 139 118 107
Low

145 122 103 93
Onshore >5 MW E&W
High 129 127 123 121 119
Central 107 106 103 101 99
Low 88 87 84 83 81
Onshore >5 MW UK
High 115 114 110 108 106
Central 96 95 92 90 88
Low 79 78 76 74 73
Cofiring Conventional
High 94 94 93 93 93
Central 92 92 92 92 91
Low 88 88 88 88 88
Biomass Conversion Central 110 110 109 109 109
Solar250-5000kW
High 203 178 149 131 118
Central 169 149 125 110 100
Low 145 128 109 96 87

DECC Modelling
The estimates outlined in the above sections are intended to provide a high-level view on
the costs of different generating technologies.
In practice DECCs electricity market modelling, including for the Updated Energy &
Emissions Projections (which uses DECCs Dynamic Dispatch model), does not use
levelised cost estimates per se. Instead it models private investment decisions, at the
financial close for a project, using the same Capex and Opex assumptions incorporated in
the levelised cost estimates reported above; assumptions on investors foresight over fossil
fuel, carbon and wholesale electricity prices; and the financial incentives from policies e.g.
the RO.
In order to model the investment decision, the internal rate of return of a potential plant is
compared to a technology specific hurdle rate. The starting point for these is Oxera 2011
19

and other sources
20
, but these are adjusted to allow for the estimated impact of policies on
financing costs (e.g. the impact of CfDs). As these hurdle rates are understood to
incorporate an allowance for a return on pre-development costs, pre-development costs are
not separately included in the investment decision modelling to avoid double counting.


19

http://hmccc.s3.amazonaws.com/Renewables%20Review/Oxera%20low%20carbon%20discount%20rates%2018
0411.pdf
20
See Annex 4 for further details
Electricity Generation Costs
16
Annex 1: Key timings for selected technologies
Table 6:Central Estimates for project timings for
selected technologies
Pre-development
Period (years)
Construction Period
(years)
Gas - CCGT 2 3
Gas - CCGT with post comb. CCS FOAK 5 5
Gas - CCGT retro post comb. CCS FOAK 4 4
Coal - ASC with FGD 4 3
Coal - ASC with post comb. CCS FOAK 5 5
Coal IGCC 5 5
Coal - IGCC with CCS FOAK 5 6
Nuclear - NOAK 5 5
Nuclear - FOAK 5 6
Dedicated biomass >50MW 3 3
Dedicated biomass 5-50MW 4 2
Offshore R1/2 5 3
Offshore R3 6 3
Onshore >5 MW 4 2
Cofiring Conventional 1 1
Biomass Conversion 2 1
Please see assumptions section for details of sources





Annex 2: Calculating Levelised Cost Estimates
The below figure, demonstrates at a high level how Levelised Costs are calculated.
Step 2: Sum the net present value of total expected costs for each
year
NPV of Total
Costs

n
total capex and opex costs
n
(1 + discount rate)
n
=
n = time period
Step 3: Sum the net present value of expected generation for each
year
NPV of Electricity
Generation

n
net electricity generation
n
(1 + discount rate)
n
=
n = time period
Step 4: Divide total costs by net generation
Levelised Cost of Electricity
Generation Estimate
NPV of Total Costs
NPV of Electricity Generation
=
Step 1: Gather Plant Data and Assumptions
Capex Costs:
-Pre-
development
costs
-Construction
costs*
-Infrastructure
cost*
(*adjusted over
time for
learning)
Opex Costs:
-Fixed opex*
-Variable opex
-Insurance
-Connection costs
-Carbon transport and storage costs
-Decommissioning fund costs
-Heat revenues
-Fuel Prices
-Carbon Costs
Expected Generation
Data:
-Capacity of plant
-Expected Availability
-Expected Efficiency
-Expected Load
Factor
( all assumed
baseload)

Electricity Generation Costs
18
Annex 3: Additional Estimates for Renewables Technologies
This Annex presents estimates for the same Cases described in the main report for additional
renewable technologies.
Case 1: projects starting in 2012, NOAK, 10% discount rate
21


Table 7: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate
Levelised Costs, /MWh
Co-firing
Standard
CHP
Hydro
Large
STORE
ACT
standard Bioliquids
Bioliquids
CHP
EfW
CHP EfW
Pre-Development Costs - 2 7 5 5 - -
Capital Costs 62 90 84 21 21 95 75
Fixed O&M 32 8 58 22 22 42 36
Variable O&M 2 6 24 6 6 30 24
Fuel Cost 63 - -27 272 272 -121 -100
Carbon Costs - - - - - - -
Heat Revenues -57 - - - -14 -13
TOTAL LEVELISED
COST 102 106 145 325 211 32 35

Levelised Costs, /MWh Geother
mal
Geother
mal CHP
Hydropo
wer 5-
16MW
ACT
advanced ACT CHP
Sewage
Gas Landfill
Pre-Development Costs 3 3 2 8 2 0 3
Capital Costs 66 72 110 104 101 69 41
Fixed O&M 14 14 17 58 67 18 9
Variable O&M 11 10 6 13 24 - 9
Fuel Costs - - - -23 -32 - -
Carbon Costs - - - - - - -
Heat Revenues - -55 - - -16 - -
TOTAL LEVELISED
COST
94 45 134 159 145 87 62

Levelised Costs, /MWh Biomass
CHP AD CHP
Solar<4k
W
Energy
crops
(small)
Energy
crops
(large)
Onshore
<15kW
Onshore
1MW<5M
W
Pre-Development Costs 2 3 - 2 1 - -
Capital Costs 63 67 281 52 38 414 107
Fixed O&M 24 58 29 16 14 49 14
Variable O&M 10 21 - 5 4 - -
Fuel Costs 119 -56 - 96 82 - -
Carbon Costs - - - - - - -
Heat Revenues -35 -15 - - - - -
TOTAL LEVELISED
COST
182 78 310 172 139 463 121




21
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
Electricity Generation Costs
19

Table 7: (continued)
Levelised Costs, /MWh
AD <
250kW
AD >
500kW
Hydropo
wer
<15kW
Hydropo
wer
100kW-
1000kW
Pre-Development Costs - - - -
Capital Costs 134 75 341 162
Fixed O&M 176 102 36 34
Variable O&M - - - -
Fuel Costs - -70 - -
Carbon Costs - - - -
Heat Revenues - - - -
TOTAL LEVELISED
COST
310 107 377 196

Table 8: Levelised Cost Estimates for Projects Starting in 2012, 10% discount rate, sensitivities
Levelised Costs, /MWh
ACT
standard Bioliquids
Bioliquids
CHP EfW CHP EfW
Geotherm
al
Geotherm
al CHP
Central 145 325 211 32 35 94 45
High Capex 225 378 365 43 40 125 77
High Capex and High
Fuel 245 392 379 61 55 - -
Low Capex and Low
Fuel 58 225 210 3 15 - -
Low Capex 72 313 298 21 30 59 7

Levelised Costs, /MWh
Hydropo
wer 5-
16MW
ACT
advanced ACT CHP
Sewage
Gas Landfill
Biomass
CHP AD CHP
Central 134 159 145 87 62 182 78
High Capex 149 172 229 131 90 202 134
High Capex and High
Fuel - 190 253 - - 219 164
Low Capex and Low
Fuel - 117 45 - - 146 -53
Low Capex 82 129 61 62 40 163 38

Levelised Costs, /MWh Solar<4k
W
Energy
crops
(small)
Energy
crops
(large)
Onshore
<15kW
Onshore
1MW<5M
W
AD <
250kW
AD >
500kW
Central 310 172 139 463 121 310 107
High Capex 400 194 172 503 137 358 134
High Capex and High
Fuel - 210 186 - - - 166
Low Capex and Low
Fuel - 138 117 - - - -14
Low Capex 248 156 133 429 100 265 82

Levelised Costs, /MWh
Hydropo
wer
<15kW
Hydropo
wer
100kW-
1000kW
Central 377 196
High Capex 805 393
Low Capex 187 106

Electricity Generation Costs
20

Case 2: projects starting in 2018, NOAK, 10% discount rate
22

Table 7: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate
Levelised Costs, /MWh
Co-firing
Standard
CHP
Hydro
Large
STORE
ACT
standard Bioliquids
Bioliquids
CHP
EfW
CHP EfW
Pre-Development Costs 1 2 7 5 5 - -
Capital Costs 62 102 80 20 20 93 74
Fixed O&M 32 9 55 21 21 42 36
Variable O&M 2 - 23 5 5 30 24
Fuel Cost 63 - -24 264 264 -121 -100
Carbon Costs - - - - - - -
Heat Revenues -56 - - - -14 -14 -
TOTAL LEVELISED
COST 104 117 140 316 302 30 34

Levelised Costs, /MWh Geother
mal
Geother
mal CHP
Hydropo
wer 5-
16MW
ACT
advanced ACT CHP
Sewage
Gas Landfill
Pre-Development Costs 3 3 2 8 2 - 3
Capital Costs 64 70 123 100 96 66 40
Fixed O&M 14 14 17 55 63 18 10
Variable O&M 11 10 6 12 23 - 9
Fuel Costs - - - -21 -28 - -
Carbon Costs - - - - - - -
Heat Revenues - -55 - - -16 - -
TOTAL LEVELISED
COST
92 42 148 154 140 84 61

Levelised Costs, /MWh Biomass
CHP AD CHP
Solar<4k
W
Energy
crops
(small)
Energy
crops
(large)
Onshore
<15kW
Onshore
1MW<5M
W
Pre-Development Costs 2 3 - 2 1 - -
Capital Costs 62 64 204 51 37 414 107
Fixed O&M 23 59 28 16 14 49 14
Variable O&M 9 21 - 5 4 - -
Fuel Costs 119 0 - 97 83 - -
Carbon Costs - - - - - - -
Heat Revenues -35 -15 - - - - -
TOTAL LEVELISED
COST
180 131 231 171 139 463 121



22
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
Electricity Generation Costs
21
Table 9: (continued)
Levelised Costs, /MWh
AD <
250kW
AD >
500kW
Hydropo
wer
<15kW
Hydropo
wer
100kW-
1000kW
Pre-Development Costs - - - -
Capital Costs 134 75 341 162
Fixed O&M 176 102 36 36
Variable O&M - - - -
Fuel Costs - -3 - -
Carbon Costs - - - -
Heat Revenues - - - -
TOTAL LEVELISED
COST
310 174 377 196

Table 10: Levelised Cost Estimates for Projects Starting in 2018, 10% discount rate, sensitivities
Levelised Costs, /MWh
ACT
standard Bioliquids
Bioliquids
CHP EfW CHP EfW
Geotherm
al
Geotherm
al CHP
Central 140 316 302 30 34 92 42
High Capex 217 367 355 41 38 123 74
High Capex and High
Fuel 237 387 371 19 53 - -
Low Capex and Low
Fuel 56 224 210 59 14 - -
Low Capex 69 303 289 -1 29 58 5

Levelised Costs, /MWh
Hydropo
wer 5-
16MW
ACT
advanced ACT CHP
Sewage
Gas Landfill
Biomass
CHP AD CHP
Central 148 154 140 84 61 180 131
High Capex 164 166 220 126 90 199 185
High Capex and High
Fuel - 184 244 - - 217 215
Low Capex and Low
Fuel - 113 43 - - 144 3
Low Capex 89 124 59 60 39 161 93

Levelised Costs, /MWh Solar<4k
W
Energy
crops
(small)
Energy
crops
(large)
Onshore
<15kW
Onshore
1MW<5M
W
AD <
250kW
AD >
500kW
Central 231 171 139 463 121 310 174
High Capex 297 193 170 530 144 369 208
High Capex and High
Fuel - 209 184 - - - 240
Low Capex and Low
Fuel - 139 118 - - - 52
Low Capex 187 155 132 425 98 264 149

Levelised Costs, /MWh
Hydropo
wer
<15kW
Hydropo
wer
100kW-
1000kW
Central 377 196
High Capex 852 415
Low Capex 185 105


Electricity Generation Costs
22


Case 3: Commissioning in 2013, 2015, 2020, 2025, 2030, NOAK, 10% discount
rate
23

Table 11: Projects Commissioning in 2013,2015, 2020, 2025 and 2030, NOAK, 10%discount
rate, capex sensitivity, /MWh
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Co-firing Standard CHP Central 103 103 104 104 104
Hydro_LargeSTORE Central 104 108 117 122 122
ACT standard
High 230 226 218 214 209
Central 149 146 141 138 133
Low 73 72 70 68 64
Bioliquids
High 380 375 367 366 365
Central 327 323 316 314 314
Low 315 310 303 302 301
Bioliquids CHP
High 368 363 355 353 351
Central 314 309 302 300 299
Low 301 296 289 288 286
EfW CHP
High 44 44 42 41 40
Central 33 32 31 30 30
Low 22 21 20 19 19
EfW
High 41 40 39 38 38
Central 36 36 34 34 33
Low 31 30 29 28 28
Geothermal
High 157 143 124 122 120
Central 116 106 93 92 90
Low 70 65 58 58 57
Geothermal CHP
High 111 96 76 73 70
Central 69 58 44 42 40
Low 19 13 6 5 4
Hydropower 5-16MW
High 142 147 159 164 164
Central 128 132 144 149 149
Low 79 81 87 89 90
ACT advanced
High 176 173 168 164 160
Central 163 161 155 152 147
Low 132 130 125 122 118
ACT CHP
High 235 231 222 217 211
Central 149 147 141 138 132
Low 62 61 59 57 53
Sewage Gas
High 132 131 127 125 124
Central 88 87 85 84 83
Low 62 62 60 60 59
Landfill
High 91 90 90 89 89
Central 62 62 61 61 61
Low 40 40 39 39 39


23
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report
Electricity Generation Costs
23

Table 11: (continued)
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Biomass CHP
High 206 204 201 199 198
Central 185 184 182 180 179
Low 165 164 162 161 160
AD CHP
High 118 148 185 183 182
Central 62 92 93 93 93
Low 22 53 93 93 93
Solar<4kW
High 400 346 287 252 230
Central 310 269 224 198 181
Low 248 216 181 160 147
Onshore <15kW
High 503 512 535 559 585
Central 463 463 463 462 462
Low 429 429 423 413 404
Onshore 1MW<5MW
High 137 139 146 152 159
Central 121 121 121 121 121
Low 100 99 98 96 94
AD <250kW
High 358 362 371 381 392
Central 310 310 310 310 310
Low 265 265 263 261 259
AD >500kW
High 134 167 212 218 223
Central 107 137 177 177 177
Low 82 112 151 150 149
Hydropower <15kW
High 805 820 860 902 947
Central 377 377 377 377 377
Low 187 187 185 181 177
Hydropower 100kW-1000kW
High 394 400 419 439 459
Central 196 196 196 196 196
Low 106 106 105 103 101
Energy crops (small)
High 196 195 193 193 192
Central 174 173 171 171 170
Low 157 156 155 155 154
Energy crops (large)
High 174 173 171 170 169
Central 141 140 139 138 138
Low 134 133 132 132 131
Amalgamated Wave Central 194 160
Tidal stream shallow
High 168 144
Central 163 146
Low 133 120
Tidal stream deep
High 164 143
Central 147 128
Low 130 114
Tidal range
High 283 283
Central 229 229
Low 172 172


Electricity Generation Costs
24
Annex 4: Estimates for Renewables Technologies using technology
specific hurdle rates
This annex shows estimates using technology-specific discount or hurdle rates
24
for
renewable technologies, in line with the approach used in reports on renewables levelised
costs commissioned by DECC and its predecessor departments in recent years.
The starting point for these rates is Oxera 2011
25
along with other sources
26
. These are
adjusted to allow for the estimated impact of policies on financing costs (e.g. the impact of the
Renewables Obligation, Feed in Tariffs and Energy Market Reforms).

Case 4: renewable projects commissioning in 2013-16, 2020, 2025, 2030, NOAK,
technology specific hurdle rates
27


Table 12: Projects Commissioning in 2013,2015, 2020, 2025 and 2030, NOAK, technology
specific hurdle rates, capex sensitivity
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Co-firing Standard CHP Central 109 108 106 106 106
Hydro_LargeSTORE Central 83 86 88 91 92
ACT standard
High 224 221 200 196 191
Central 145 143 132 128 124
Low 73 72 68 66 62


24
Please note that hurdle rates are themselves uncertain and likely to vary between projects and financing
structures/providers.
25

http://hmccc.s3.amazonaws.com/Renewables%20Review/Oxera%20low%20carbon%20discount%20rates%2018
0411.pdf
26
Please see Arup 2011, Government Response to the RO and the following Feed in Tariff Impact Assessment
for more details:
2a: Impact Assessment: Government response to consultation on Feed-in Tariffs Comprehensive Review Phase
2A: Solar PV Tariffs and cost control:
http://www.decc.gov.uk/en/content/cms/consultations/fits_rev_ph2a/fits_rev_ph2a.aspx
2b: Impact Assessment: Government Response to Consultation on the Comprehensive Review Phase 2B - on
Feed-in Tariffs for anaerobic digestion, wind, hydro and micro-CHP installations:
http://www.decc.gov.uk/en/content/cms/consultations/fits_rev_ph2b/fits_rev_ph2b.aspx

27
Please note these estimates should be viewed in the context of the sensitivities and uncertainties highlighted in
the text of this report.
Electricity Generation Costs
25
Table 12: (continued)
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Dedicated biomass >50MW
High 176 174 166 158 157
Central 134 133 128 124 123
Low 125 124 120 117 116
Dedicated biomass 5-50MW
High 160 158 150 142 141
Central 132 131 125 119 118
Low 111 110 106 102 101
Offshore R2
High 193 177 138 110 101
Central 169 155 121 97 88
Low 148 136 107 86 78
Offshore R3
High

231 188 146 116
Central

198 161 125 100
Low

172 139 108 87
Onshore >5 MW E&W
High 125 124 112 110 108
Central 105 103 94 92 91
Low 86 85 78 77 75
Onshore >5 MW UK
High 112 111 100 99 97
Central 93 92 84 83 81
Low 77 76 70 68 67
Bioliquids
High 391 386 374 369 368
Central 331 326 318 315 315
Low 317 312 305 303 302
Bioliquids CHP
High 383 378 366 360 358
Central 319 314 305 302 301
Low 304 299 291 289 287
Cofiring Conventional
High 94 94 93 93 93
Central 92 92 92 92 91
Low 88 88 88 88 88
Biomass Conversion Central 111 111 110 110 110
EfW CHP
High 74 73 62 61 60
Central 60 58 49 48 47
Low 45 44 36 35 34
EfW
High 56 55 47 47 46
Central 50 50 42 42 41
Low 44 43 36 36 36
Geothermal
High 357 322 254 176 137
Central 252 228 181 128 102
Low 137 125 101 75 63
Geothermal CHP
High 328 288 213 132 94
Central 216 187 135 80 55
Low 84 69 44 20 9
Hydropower 5-16MW
High 114 117 120 124 124
Central 103 106 109 113 113
Low 65 67 69 71 71
ACT advanced
High 205 202 186 171 166
Central 189 186 171 157 153
Low 151 148 137 126 122
ACT CHP
High 301 296 270 247 240
Central 185 181 167 154 148
Low 67 65 63 59 55

Electricity Generation Costs
26
Table 12: (continued)
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Sewage Gas
High 128 118 114 113 112
Central 86 79 77 76 76
Low 61 57 55 55 55
Landfill
High 89 89 85 84 84
Central 61 61 58 58 58
Low 39 39 38 38 38
Biomass CHP
High 233 231 221 211 210
Central 206 204 196 189 188
Low 179 177 172 167 166
AD CHP
High 143 170 213 201 199
Central 69 101 146 140 139
Low 16 52 99 96 96
Solar<4kW
High 305 288 271 253 238
Central 238 208 174 154 142
Low 192 151 126 114 107
Solar250-5000kW
High 165 150 138 127 117
Central 138 117 100 88 80
Low 119 92 79 71 65
Onshore <15kW
High 461 469 490 512 535
Central 425 425 424 424 423
Low 394 394 388 379 371
Onshore 1MW<5MW
High 126 128 134 140 146
Central 111 111 111 111 111
Low 92 92 90 88 86
AD <250kW
High 399 392 403 397 409
Central 340 332 332 320 320
Low 285 280 278 268 266
AD >500kW
High 148 179 230 227 233
Central 115 145 190 183 183
Low 84 116 159 154 153
Hydropower <15kW
High 635 647 678 711 746
Central 302 302 302 302 302
Low 153 153 152 149 146
Hydropower 100kW-1000kW
High 314 320 334 349 366
Central 160 160 160 160 160
Low 90 90 89 88 86
Energy crops (small)
High 215 213 205 198 197
Central 187 186 180 175 174
Low 166 165 161 158 157
Energy crops (large)
High 192 191 183 176 175
Central 150 150 145 141 141
Low 142 141 137 134 134
Amalgamated Wave Central 216 166
Tidal stream shallow
High 202 167
Central

185 153
Low 150 126
Tidal stream deep
High 187 150
Central 167 135
Low 147 119

Electricity Generation Costs
27
Table 12: (continued)
Commissioning, /MWh Capex 2013 2015 2020 2025 2030
Tidal range
High 218 218
Central 165 165
Low 126 126







Crown copyright 2012
Department of Energy & Climate Change
3 Whitehall Place
London SW1A 2AW
www.decc.gov.uk

URN 12D/383