There are a number of methods that can be used to calculate the cost of energy. One example would be the levelized cost of energy, which can be calculated using a couple of factors. First, there is the average total cost needed to build as well as keep an energy-generating asset running over the course of its expected lifespan. Second, there is the total energy that interested individuals can expect that same energy-generating asset to put out over the course of its expected lifespan. Levelized cost of energy sees the first being divided by the second, thus providing interested individuals with a “fair” method for determining which kinds of energy are more expensive than others. Based on Lazard’s report from 2018, here are the five most expensive kinds of energy:
Perhaps unsurprisingly, the cost of energy can see enormous variation based on a number of factors. For example, solar tends to be cheaper in sunnier regions. However, it is important to remember that these labels can encompass a number of energy-generating methods, which can see significant differences from one another. In the case of solar, the Lazard report provides no fewer than six separate listings, which run from rooftop solar PV systems on residential buildings to solar thermal towers with storage. Each of these options have their own costs, which are very high in some cases but much lower in others. For example, rooftop solar PV systems are the single most expensive option at $160 to $267, which is perhaps unsurprising considering its scale. In contrast, crystalline utility-scale solar is $40 to $46 depending on how the system has been designed.
Coal is another kind of energy-generating asset that sees a lot of range in its cost. In short, the Lazard’s report lists its cost as ranging from $60 to $143, meaning that on the higher end, it is one of the more expensive options included.
For those who are unfamiliar with the concept, a fuel cell is an electrochemical cell that turns the chemical energy stored in a fuel as well as an oxidizing agent into electricity via chemical reactions. Generally speaking, hydrogen is the most popular choice for fuel, but there are other fuel cells out there that run on other cells. In any case, the report lists its cost as ranging from $103 to $152.
Nuclear was one of the more expensive options included on the list as well. In its case, its cost is listed as a range of $112 to $189. On top of this, it should be mentioned that this price range doesn’t include any decommissioning costs that might prove necessary, which refer to the prices paid to reverse the changes made to the relevant landscape once the plant’s usefulness has come to an end.
Peaking power plants that use gas are very expensive at a range of $152 to $206. In short, peaking power plants are the power plants that are run when there is high demand for electricity, meaning that they aren’t used on their own but instead in combination with base-load power plants that provide a more consistent supply of electricity for the relevant parties. Regardless, this difference in use makes for a lot of differences in how these power plants are designed. For example, less effort is put into making peaking power plants efficient because they are used for shorter periods of time as well as much more unpredictable periods of time. Likewise, peaking power plants and their base-load counterparts tend to use different equipment because they face different kinds of strain. As such, it is perhaps unsurprising that peak power plants that run on gas would have a higher range of prices.
On the whole, it is interesting that alternative sources of energy that become cheaper over time. For the time being, a lot of those technologies are still in the process of evolution, meaning that more changes can be expected in the times to come. However, it will be very interesting to see how the mature versions compare with their counterparts in traditional energy production.