COSTS AND SUBSIDIES
The cost of generating electricity from traditional sources (eg coal or nuclear power) is often quoted as being between 2 and 3 pence (4 to 6 US cents) per kWh (see, for example, The Cost of Generating Electricity from the Royal Academy of Engineering). But figures like these are highly misleading:note1
- Electricity from fossil fuels is artificially cheap:
- Fossil fuels are still receiving large subsidies around the world. In 2004, the New Economics Foundation made a conservative estimate that worldwide subsidies for fossil fuels were about US$235bn a year (see Fossil fuel subsidies 'must end', BBC News, 2004-06-21). There appears to have been little change since then.
- In a similar vein, it has been estimated that subsidies to the traditional fossil and nuclear sector amount to US$250 bn per year worldwide, representing “a substantial market distortion, discourage new entrants into the market, and undermine the pursuit of energy efficiency” (José Goldemberg, Thomas. B. Johansson, World Energy Assessment, Overview 2004 Update (UNDP, 2004, page 72)).
- To a large extent, companies that generate electricity by burning fossil fuels are still being allowed to use the atmosphere as a free dumping ground for CO2. It appears that the cost of CO2 emissions under the EU ETS is still too low (see Carbon trading 'undermined by boom and bust', The Guardian, 2009-03-23). Given the urgent need to cut worldwide emissions of CO2, the full environmental costs of those emissions need to be properly accounted for.
- The real price of nuclear electricity is disguised by several
hidden subsidies (see the Nuclear Subsidies report (PDF, 189 KB) from the Energy Fair group and Why we don't need nuclear power: subsidies)
and is certainly higher than CSP. A report by the New Economics Foundation (Mirage and oasis: energy choices in an age of global warming, PDF, 1.2 MB, June 2005) said that a kilowatt-hour of electricity from a nuclear generator will cost as much as 8.3 pence (16.3 US cents) once realistic construction and running costs are factored in, compared with about 3 pence (5.9 US cents) claimed by the nuclear industry. Those figures do not include costs arising from the wider risks associated with nuclear power such as terrorism, the danger of nuclear proliferation, storage of dangerous nuclear waste for thousands of years, and the danger of potentially catastrophic nuclear accidents (see Why we don't need nuclear power: subsidies).
If we use the artificially-low figures that are often quoted for the cost of coal-fired and nuclear electricity, then CSP appears to be more expensive. But:
- CSP can produce substantial benefits in addition to clean electricity (such as fresh water from the desalination of sea water) and these benefits should be factored in to any cost-benefit analysis of CSP.
- As the CSP industry expands, costs will fall because of economies of scale and refinements in the technologies (as has happened with wind power. There is relevant information in the TRANS-CSP report from the German Aerospace Centre (DLR)).
- US venture capitalist Vinod Khosla has said that CSP is already cheaper than electricity from "clean" coal (with carbon capture and storage).
- The TRANS-CSP report from the DLR calculates that CSP is likely to become one of the cheapest sources of
electricity in Europe, including the cost of transmitting it.
"More than half of the subsidies (in real terms) ever lavished on energy by OECD governments have gone to the nuclear industry."
From "Nuclear power out of Chernobyl's shadow", The Economist, print edition, May 6th 2004.
Taking all these things into account:
- It is likely that electricity from CSP is already cheaper than electricity from fossil fuels and nuclear power, when the environmental and hidden costs of those technologies are fully internalised.
- It is likely that the costs of those technologies will continue to increase, while the cost of CSP will continue falling.
Since we do not yet have a level playing field for renewable sources of power compared with electricity from fossil fuels and nuclear fission, there will probably be a need in the short-to-medium term, for price
support for CSP via direct subsidies or market mechanisms such as 'feed-in tariffs'.
Some figures for the cost of CSP and the proposed EUMENA-wide supergrid are given on another page.
note1 Apart from the misleadingly low figures for the cost of electricity from coal and nuclear power, The Cost of Generating Electricity from the RAE gives misleadingly high figures for the cost of wind power. This is because it assumes that there are additional costs arising from the provision of backup power to compensate for the intermittency of wind power. Not only does this overlook the fact that all sources of power are intermittent (including coal and nuclear power) but it overlooks the several mechanisms that are available to match variable supplies with variable demands. Since these mechanisms are required for all sources of electricity, it is unreasonable to load them all on to the cost of wind power.
Last updated: 2009-12-18