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Historical costs of coal-fired electricity and implications for the future

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  • McNerney, James
  • Doyne Farmer, J.
  • Trancik, Jessika E.

Abstract

We study the cost of coal-fired electricity in the United States between 1882 and 2006 by decomposing it in terms of the price of coal, transportation cost, energy density, thermal efficiency, plant construction cost, interest rate, capacity factor, and operations and maintenance cost. The dominant determinants of cost have been the price of coal and plant construction cost. The price of coal appears to fluctuate more or less randomly while the construction cost follows long-term trends, decreasing from 1902 to 1970, increasing from 1970 to 1990, and leveling off since then. Our analysis emphasizes the importance of using long time series and comparing electricity generation technologies using decomposed total costs, rather than costs of single components like capital. By taking this approach we find that the history of coal-fired electricity suggests there is a fluctuating floor to its future costs, which is determined by coal prices. Even if construction costs resumed a decreasing trend, the cost of coal-based electricity would drop for a while but eventually be determined by the price of coal, which fluctuates while showing no long-term trend.

Suggested Citation

  • McNerney, James & Doyne Farmer, J. & Trancik, Jessika E., 2011. "Historical costs of coal-fired electricity and implications for the future," Energy Policy, Elsevier, vol. 39(6), pages 3042-3054, June.
  • Handle: RePEc:eee:enepol:v:39:y:2011:i:6:p:3042-3054
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    2. Wilson, Charlie, 2012. "Up-scaling, formative phases, and learning in the historical diffusion of energy technologies," Energy Policy, Elsevier, vol. 50(C), pages 81-94.
    3. repec:eee:rensus:v:77:y:2017:i:c:p:861-874 is not listed on IDEAS
    4. Boccard, Nicolas, 2014. "The cost of nuclear electricity: France after Fukushima," Energy Policy, Elsevier, vol. 66(C), pages 450-461.
    5. Farmer, J. Doyne & Lafond, François, 2016. "How predictable is technological progress?," Research Policy, Elsevier, vol. 45(3), pages 647-665.
    6. Barry Ball & Bertram Ehmann & John Foster & Craig Froome & Ove Hoegh-Guldberg & Paul Meredith & Lynette Molyneaux & Tapan Saha & Liam Wagner, 2011. "Delivering a Competitive Australian Power System. Part 1: Australia’s Global Position," Energy Economics and Management Group Working Papers 13, School of Economics, University of Queensland, Australia.
    7. Magee, Christopher L. & Devezas, Tessaleno C., 2017. "A simple extension of dematerialization theory: Incorporation of technical progress and the rebound effect," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 196-205.
    8. Bela Nagy & J. Doyne Farmer & Quan M. Bui & Jessika E. Trancik, 2012. "Statistical Basis for Predicting Technological Progress," Papers 1207.1463, arXiv.org.
    9. Bolinger, Mark & Wiser, Ryan, 2012. "Understanding wind turbine price trends in the U.S. over the past decade," Energy Policy, Elsevier, vol. 42(C), pages 628-641.
    10. Verdolini, Elena & Anadon, Laura Diaz & Lu, Jiaqi & Nemet, Gregory F., 2015. "The effects of expert selection, elicitation design, and R&D assumptions on experts' estimates of the future costs of photovoltaics," Energy Policy, Elsevier, vol. 80(C), pages 233-243.
    11. Rubin, Edward S. & Azevedo, Inês M.L. & Jaramillo, Paulina & Yeh, Sonia, 2015. "A review of learning rates for electricity supply technologies," Energy Policy, Elsevier, vol. 86(C), pages 198-218.
    12. Matteson, Schuyler & Williams, Eric, 2015. "Residual learning rates in lead-acid batteries: Effects on emerging technologies," Energy Policy, Elsevier, vol. 85(C), pages 71-79.
    13. Sascha Samadi, 2016. "A Review of Factors Influencing the Cost Development of Electricity Generation Technologies," Energies, MDPI, Open Access Journal, vol. 9(11), pages 1-25, November.
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    15. Lovering, Jessica R. & Yip, Arthur & Nordhaus, Ted, 2016. "Historical construction costs of global nuclear power reactors," Energy Policy, Elsevier, vol. 91(C), pages 371-382.
    16. Yuan, Jiahai & Xu, Yan & Kang, Junjie & Zhang, Xingping & Hu, Zheng, 2014. "Nonlinear integrated resource strategic planning model and case study in China's power sector planning," Energy, Elsevier, vol. 67(C), pages 27-40.
    17. Rupert Way & Franc{c}ois Lafond & J. Doyne Farmer & Fabrizio Lillo & Valentyn Panchenko, 2017. "Wright meets Markowitz: How standard portfolio theory changes when assets are technologies following experience curves," Papers 1705.03423, arXiv.org.
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    Keywords

    Coal Electricity Historical cost;

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