Annex
EXPLANATION OF
UNIT COST
RANGES
Carbon capture and storage
The technology is not yet proven at large scale
and therefore the cost range reflects the uncertainties of the
cost and reliability of such developments. The cost of monitoring
CO2 storage over the long term, and the maintenance
of the storage sites is also not well defined at present. The
legal and regulatory environment does not exist for off-shore
storage of carbon dioxide and this would need to be settled before
large scale investment was committed. Carbon capture and storage
is only likely to be deployed if there were to be a belief in
the long-term market value of avoiding carbon emissions.
CCGTs
The expected cost of generation from new CCGTs
is most heavily influenced by the future cost of gas and carbon
dioxide emissions: the figures are based on a gas price in the
range 20-40 p/therm gcv and carbon, 0-50
/tCO2. The EU ETS is at a very early stage
of development and there is currently no certainty that it will
exist beyond 2012, which justifies the 0
/t lower bound for investments commissioning around
that date. At current gas prices of above 50p/therm, CCGTs would
be more expensive than the top of the range shown.
Coal-fired plant
We expect the cost of international coal to
be less volatile than gas and so, for simplicity, have estimated
the cost of conventional coal plant at a constant coal price of
1.4£/GJ ncv, but the same range of carbon prices. Conventional
coal produces approximately twice as much carbon dioxide as CCGT
plant per kWh.
Wind
On-shore and off-shore wind developments will
continue to be deployed provided they are supported by the Renewable
Obligation and capital grants, as at present. The cost range above
reflects the variability between higher cost offshore sites and
those onshore, before these support mechanisms. We expect the
cost of sites to increase over time as the best sites are used
first, but the costs offshore of equipment and installation should
reduce as more experience is gained and larger units are installed.
The economics of wind power are heavily influenced by the wind
resource available at particular locations. Wind is intermittent
and hence not directly comparable with other large-scale generation
alternatives without including the cost of either back-up capacity
or energy storage. The cost of supplementing wind capacity with
additional resources is not that material at the current low levels
of penetration, but would increase if it were to become a more
significant proportion of the total system capacity.
Nuclear
The estimated cost of new nuclear developments
is chiefly influenced by the uncertainties surrounding planning
and regulatory processes as these affect expected capital cost,
development and construction schedule and the competitiveness
of the plant supply market. If the Government is able to mitigate
the effect of these uncertainties promptly and effectively, then
it would be feasible to commission new nuclear plant in about
10 years. The timing of new build would also be heavily influenced
by price expectations in the gas and carbon markets.
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