Paris, 29 November 2012


Low-carbon systems of the future must take system costs into account

A new study just released by the OECD Nuclear Energy Agency (NEA) recommends that decision-makers should take full electricity system costs into account in energy choices and that such costs should be internalised according to a "generator pays" principle.

The study, entitled Nuclear Energy and Renewables: System Effects in Low-carbon Electricity Systems, addresses the increasingly important interactions of variable renewables and dispatchable energy technologies, such as nuclear power, in terms of their effects on electricity systems.

System effects refer to the costs above plant-level costs to supply electricity at a given load and level of security of supply. This report focuses on "grid-level system costs", the subset of system costs mediated by the electricity grid, which include a) the costs of extending and reinforcing transport and distribution grids as well as connecting new capacity, and b) the costs of increased short-term balancing and maintaining the long-term adequacy of electricity supply.

Some of the study's key findings based on an analysis of six technologies – nuclear, coal, gas, onshore wind, offshore wind and solar – are the following:

The existence of sizeable system costs implies that significant changes will be needed to generate the flexibility required for an economically viable coexistence of nuclear energy and renewables in increasingly decarbonised electricity systems. Such changes may include more widespread use of carbon pricing, long-term contracts and capacity mechanisms in order to provide adequate incentives for investment.

Nuclear Energy and Renewables: System Effects in Low-carbon Electricity Systems
OECD, Paris, 2012 – ISBN 978-92-64-18851-8
Executive Summary

Related links

Q&A: Understanding system costs

NEA Nuclear Development Division

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