Social cost of electricity generation: a quantification and comparison between energy sources within PJM interconnection

Sheridan, Blaise
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University of Delaware
In order to engage in an honest policy discussion about a ‘level playing field’ where different electricity generation technologies compete in the open market, it is necessary to recognize not only the private costs of electricity, but also the government subsidies and environmental externalities. While the literature is well developed in each of the individual cost analyses, there lacks a recent analysis of the combined private and external costs of electricity generation and a subsequent discussion of practically policy options to internalize external costs. This thesis quantifies the total or ‘social’ cost of various electricity generation technologies for new and existing plants found within the PJM Interconnection service territory. In order to evaluate how the social costs of electricity generation technologies compare, the private costs, external costs, and government subsidies are assessed from the peer-reviewed literature, then the methodologies are analyzed and discussed, and finally the results combined to compute the social cost. The findings are displayed in several summary measures, including the median of analyzed studies, the social cost best estimate and the high and low cost of carbon. The social cost summary measure results depend on the analyses included from the peer-reviewed literature as well as the assumed cost of carbon. In the best estimate summary measure, assuming a cost of carbon of $30/tCO2-eq, the electricity generation technology with the lowest social cost is existing nuclear generation (6.65 ¢2010/kWh), closely followed by existing natural gas generation (6.71 ¢2010/kWh). Combined cycle natural gas is the least expensive new generation at 8.21 ¢2010/kWh, followed by hydropower (9.25 ¢2010/kWh) and onshore wind generation (9.98 ¢2010/kWh), as well as SCGT (13.08 ¢2010/kWh), new coal (14.02 ¢2010/kWh) and new nuclear (14.21 ¢2010/kWh). Existing coal generation has a social cost of 21.33 ¢2010/kWh, due to high external cost. Solar PV and offshore wind have the highest social costs at 22.36 ¢2010/kWh and 24.95 ¢2010/kWh, respectively, due to high private costs. These results are not intended to serve as justification for any specific policy action, but the methodology could be used to perform more in depth and targeted analyses to better understand the social cost of electricity. An important conclusion is that by even including the lowest estimates of external costs and subsidies, the order of technologies in a least social cost comparison changes. Analyzing the costs of electricity without including the government subsidies and external costs does not tell the full story.