How to Compare the Cost to Produce Electricity by Fuel Type
- 1). Compare the capital cost -- the cost of constructing the power plant. These figures are available from the Energy Information Administration. While the report -- seen at http://www.eia.gov/oiaf/beck_plantcosts/pdf/updatedplantcosts.pdf -- may appear somewhat intimidating, the most important part for your purposes is Table I on page 7, which lists the cost-per-kilowatt for each type of plant. Generally, nuclear power plants are more expensive to build than the alternatives.
- 2). Compare the total production costs in mills per kilowatt-hour -- note that a mill is a tenth of a cent. You'll find this data at http://www.nei.org/filefolder/US_Electricity_Production_Costs_and_Components.xls. Note that fuel prices can vary substantially. The total production cost is the sum of the fuel cost and the operating and maintenance costs, which vary for different types of power plants. In general, natural gas costs more per kilowatt-hour than coal, which costs more per kilowatt-hour than uranium. Petroleum is the most expensive in terms of fuel costs -- although petroleum costs are highly volatile.
- 3). Compare the total levelized costs for each type of plant; this can found at http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html. The levelized cost takes into account the cost of construction, the cost of financing, and the production costs, so it's the simplest way to do an overall comparison. Note, however, that the levelized cost incorporates a number of "hidden" oversimplifications. Fuel costs and labor costs, for example, can vary from one part of the country to another; and the costs of financing and construction can vary depending on the site of the plant. The levelized cost is an average that serves as a general way to compare different plant types.
- 4). Balance capital costs against production costs and overall levelized costs to determine which type of power generation is the most appropriate option. A given type of power plant might have a higher levelized cost yet be a better option for a city that can't afford high capital cost of construction.
- 5). Consider externalized costs. Externalized costs or externalities are costs to third parties caused by the power plant for which its owners are not liable -- in other words, the costs of pollution. A coal power plant might be cheaper than the alternatives, for example, but if it pollutes the neighborhood it creates an external cost in terms of health or environmental damage. Externalities are difficult to calculate -- in fact, they remain an ongoing subject of debate among economists -- but they're important to assessing the overall impact of a given project.