Monday, March 06, 2006
There is a rather meaty discussion of the differing costs of power generation posted by the blogger known as ‘Jerome a Paris’ on the European Tribune. Jerome works in finance and the power industry and has good links to hard data. His posting is repeated over on Daily Kos which attracted a substantial US-based response.
Amongst his points:
There are several items that influence the cost of electricity:
the initial investment amount, and the discount rate used to amortise it over the life of the power plant;
the fuel costs (for those power plants that need a fuel, like coal, natural gas or uranium);
the operating costs;
the externalities, i.e. the cost imposed on society by the power plant, if not internalised by regulation.
Any comparison between various power sources that does not explicitly states which assumptions are made with regards to fuel costs and discount rate should be considered as dubious.
Jerome goes into considerable detail on the differing impact of various assumptions on assessing the environmental costs of coal-fired, gas-fired, nuclear powered and wind powered electricity generation. As an example of his arguments (backed by figures in the main text)
The sources most sensitive to the discount rate used are, in decreasing order, wind, nuclear, coal and gas. Thus, making the hypothesis of a high financing cost structurally favors gas and coal against nuclear and wind. Conversely, providing cheap financing is most helpful to wind and nuclear.
It is thus not neutral at all to campaign for private ownership of generation assets, as it will always skew investments towards gas-fired and coal-fired plants, unless you have - gasp - specific regulations or -double gasp - subsidies that encourage investments in other sectors like renewables (or nuclear).
These contributions may be helpful to those in the LibDems struggling with the Nuclear Power question.