The "levelized cost", which is the present value of the total cost of building and operating a generating plant over its financial life, is an attempt to make the costs of different technologies comparable. The US Energy Information Administration (EIA) has developed a standard way of estimating levelized costs. The most recent estimates of the comparative costs of different ways of generating electricity have been developed by the EIA for the Annual Energy Outlook 2010 (AEO2010) reference case.
The factors contributing to EIA's levelized costs include
- cost of constructing the plant
- time required to construct the plant
- non-fuel costs of operating the plant
- fuel costs
- cost of financing
- utilization of the plant
Capital costs are amortized over the exepected finacial life of a generating facility. The levelized costs are the true economic cost and do not include state or federal incentives such as tax credits.They are also a national average and in reality would vary in different regions of the country. Estimates have been made for typical capacity factors for each technology. An estimated cost of greenhouse gas (GHG) emissions is also included by adding a three percentage point increase in the cost of capital, corresponding to a $15 per ton CO2 emissions fee, for GHG intensive technologies such as coal-fired power plants without carbon control and sequestration (CCS) and coal-to-liquids (CTL) plants.
SunShot to Reduce Cost of Solar PV
You can see that solar photovoltaic (PV) cells are by a wide margin the most expensive technology from a cost perspective. To address this the US Energy Secretary has just announced the SunShot initiative, the goal of which is to reduce the total costs of solar PV by 75% by the end of the decade.