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Key messages

The levelised costs of electricity generation of low-carbon generation technologies are falling and are increasingly below the costs of conventional fossil fuel generation, finds the 2020 edition of the Projected Costs of Generating Electricity. It is the ninth report in the series on the levelised costs of electricity (LCOE) jointly prepared every five years by the OECD Nuclear Energy Agency (NEA) and the International Energy (IEA). With the analysis of 243 plants based on data from 24 countries, the report presents the plant-level costs of generating electricity for baseload electricity generated from fossil fuel, nuclear energy and a range of renewable technologies, such as wind and solar, hydro and biofuels.

Despite differences in regional, national and local conditions, the report finds that low-carbon generation is overall becoming increasingly cost competitive. Renewable energy costs have continued to decrease in recent years and the costs of wind and solar PV are now competitive with fossil fuel-based electricity generation in many countries. Electricity from nuclear power plants is also expected to have lower costs in the near future. Due to cost reductions stemming from the lessons learnt from first-of-a-kind projects in several OECD countries, new nuclear power will remain the dispatchable low-carbon technology with the lowest expected costs in 2025. The report also finds that prolonging the operation of existing nuclear power plants, known as long-term operation (LTO), is the most cost-effective source of low carbon electricity. Hydroelectric power can provide a similar contribution at comparable costs, however remains highly dependent on the natural endowments of individual countries.

LCO by technology, EGC 2020

“As has been demonstrated by the ongoing COVID-19 pandemic, access to electricity is key to advanced societies,” said NEA Director General William D. Magwood, IV. “Reliable and cost-effective electricity is the source of economic growth in both developed and developing countries that face the need to bring more people out of poverty, to provide healthcare and to educate future generations.”

As in previous editions, the report uses the LCOE methodology as a well-established and widely-used metric in policy making and modelling. However, for the first time the report also presents a new complementary metric, the “value-adjusted” LCOE measure in order to account for the increasing importance of system considerations within the context of the growing share of variable renewable energy (VRE) technologies. Costs associated with storage, fuel cells and the long-term operation (LTO) of nuclear power plants are also included in the analysis for the first time. In addition, the report includes five “boundary chapters”, free-standing articles contributed by experts in the respective areas that discuss different aspects of current and future electricity systems.

Also for the first time, the report is also accompanied by an online Levelised Cost of Electricity Calculator. The calculator allows for easy download of all data tables in the report, and empowers the user to examine the impact of changing select variables, such as the discount rate, fuel prices or the cost of carbon. These improvements will make the report’s information easier to access and help users explore the sensitivity of results to certain key variables.

Levelised Cost of Electricity Calculator

“The electricity sector is essential for the functioning of modern societies, as the Covid-19 crisis has highlighted yet again, and also has a crucial role to play in reducing global emissions.” said IEA Executive Director Fatih Birol. “Investing in affordable low-carbon electricity generation technologies supports economic growth but is also necessary if we are to put global emissions into structural decline.”

“All countries have the right and responsibility to do what they think is right for their citizens,” added NEA Director‑General Magwood. “But decarbonisation commitments made as part of post-COVID-19 economic recovery must be approached with a full understanding of the costs & impacts of various technologies in the electricity system as a whole. From an economic and sustainable standpoint, it is crucial to have the right balance of variable renewables and dispatchable resources, such as nuclear and hydro, in order to enable a resilient long-term energy infrastructure.”

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Notes to editors

The Nuclear Energy Agency (NEA) is an intergovernmental agency which operates within the framework of the Organisation for Economic Co‑operation and Development (OECD). It facilitates co‑operation among countries with advanced nuclear technology infrastructures to seek excellence in nuclear safety, technology, science, related environmental and economic matters and law. The mission of the NEA is to assist its member countries in maintaining and further developing, through international co‑operation, the scientific, technological and legal bases required for a safe, environmentally sound and economical use of nuclear energy for peaceful purposes. It strives to provide authoritative assessments and to forge common understandings on key issues as input to government decisions on nuclear technology policies. NEA membership includes 33 countries that co‑operate through joint research, consensus building among experts and development of best practices.

The goal of the NEA in the area of nuclear technology development and economics is to provide governments and other relevant stakeholders with authoritative, reliable information and analyses on current and future nuclear technologies, as well as on the role of nuclear energy now and in the future from a sustainable development perspective. Studies cover subjects as key and diverse as techno‑economics, finance, resource analysis, energy and electricity demand and supply forecast and analysis, public opinion assessment, advances in nuclear reactor design, as well as nuclear fuel and fuel cycle technologies. The NEA can thus advise policymakers on national and international energy policies aiming to provide low‑carbon energy and electricity in a cost‑effective, reliable manner. To meet this goal, NEA staff in the division work closely with the Committee for Technical and Economic Studies on Nuclear Energy Development and the Fuel Cycle (NDC) and its expert groups. The nature of this area is such that some efforts are necessarily cross‑cutting, and the staff thus ensure co‑ordination with other NEA and OECD work as needed.

The International Energy Agency (IEA) is at the heart of global dialogue on energy, providing authoritative analysis, data, policy recommendations, and real-world solutions to help countries provide secure and sustainable energy for all. Taking an all-fuels, all-technology approach, the IEA advocates policies that enhance the reliability, affordability and sustainability of energy. It examines the full spectrum issues including renewables, oil, gas and coal supply and demand, energy efficiency, clean energy technologies, electricity systems and markets, access to energy, demand-side management, and much more. Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 8 association countries and beyond.

As with previous editions, Projected Costs of Generating Electricity – 2020 Edition relies on the direct contributions on generation cost data from the governments of both OECD and non-OECD countries, which in turn consulted widely with national experts and industry organisations. This data is then vetted and processed according to a common methodology by the EGC Expert Group, composed of experts from government, academia and industry. The EGC Expert Group provides advice on methodology and data as well as on the content and format of the final report. Over the years, the Projected Cost series of reports on electricity generating costs has become a widely used tool for policymakers, modellers and experts, as well as the interested public, to inform discussions about the economics of power generation.

Low-carbon generation is becoming cost competitive, NEA and IEA say in new report

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Key messages

Launch webinar

Notes to editors