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Incorporating externalities into a full cost approach to electric power generation life-cycle costing

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  • Roth, Ian F.
  • Ambs, Lawrence L.

Abstract

This study presents a full cost approach to determine the levelized cost of energy (LCOE) of 14 electricity generation technologies. It encompasses costs incurred at all stages of the fuel cycle, including those that are traditionally omitted from economic evaluations of generation technologies. Incorporating these “externalities” increases the likelihood of developing the most economical and sustainable power resource from a societal perspective. The following externalities are included in this analysis: damage from air pollution, energy security, transmission and distribution costs, and other environmental impacts. Incorporating externalities has a large impact on the LCOE and the relative attractiveness of electricity generation options. Results indicate that clean and efficient generation technologies are the most attractive when all options are examined using a full cost, levelized approach.

Suggested Citation

  • Roth, Ian F. & Ambs, Lawrence L., 2004. "Incorporating externalities into a full cost approach to electric power generation life-cycle costing," Energy, Elsevier, vol. 29(12), pages 2125-2144.
  • Handle: RePEc:eee:energy:v:29:y:2004:i:12:p:2125-2144
    DOI: 10.1016/j.energy.2004.03.016
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    1. Rowe, Robert D. & Lang, Carolyn M. & Chestnut, Lauraine G., 1996. "Critical factors in computing externalities for electricity resources," Resource and Energy Economics, Elsevier, vol. 18(4), pages 363-394, December.
    2. Mirasgedis, S. & Diakoulaki, D., 1997. "Multicriteria analysis vs. externalities assessment for the comparative evaluation of electricity generation systems," European Journal of Operational Research, Elsevier, vol. 102(2), pages 364-379, October.
    3. Vollebergh, Herman, 1997. "Environmental externalities and social optimality in biomass markets: waste-to-energy in The Netherlands and biofuels in France," Energy Policy, Elsevier, vol. 25(6), pages 605-621, May.
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