ElectricityGenerationCosts2023FirstpublishedAugust2023;updatedNovember2023©Crowncopyright2023ThispublicationislicensedunderthetermsoftheOpenGovernmentLicencev3.0exceptwhereotherwisestated.Toviewthislicence,visitnationalarchives.gov.uk/doc/open-government-licence/version/3orwritetotheInformationPolicyTeam,TheNationalArchives,Kew,LondonTW94DU,oremail:psi@nationalarchives.gsi.gov.uk.Wherewehaveidentifiedanythird-partycopyrightinformationyouwillneedtoobtainpermissionfromthecopyrightholdersconcerned.Anyenquiriesregardingthispublicationshouldbesenttousat:generationcosts@energysecurity.gov.uk2ElectricityGenerationCostsReport2023ContentsAcronymglossary___________________________________________________________5Introduction_______________________________________________________________7Section1:Howlevelisedcostsarecalculated____________________________________10Section2:Changestogenerationcostassumptions_______________________________12Renewabletechnologies___________________________________________________12Onshorewind&solarPV________________________________________________12Offshorewind_________________________________________________________14TheCrownEstateLeasingRound4________________________________________14FloatingOffshoreWindandTidalStreamresearch.____________________________15Non-renewabletechnologies_______________________________________________17Hydrogen-firedCCGTs__________________________________________________17EnergyfromWaste&AdvancedConversionTechnologies______________________18PowerCCUSandpowerBECCS__________________________________________18Nucleartechnologies___________________________________________________18Cross-cuttingassumptions_________________________________________________19Fuelcosts&gatefees___________________________________________________19Carbonprices_________________________________________________________19BalancingServicesUseofSystem(BSUoS)charges__________________________19Deflatorassumptions___________________________________________________20Fuelemissionsfactors__________________________________________________20Heatrevenues_________________________________________________________20Section3:Howthedepartmentusesgenerationcostdatainmodelling________________21Levelisedcostsaresensitivetotheassumptionsused___________________________21Levelisedcostsarenotstrikeprices__________________________________________22Section4:Generationcostestimates___________________________________________24Projectscommissioningin2025_____________________________________________24Projectscommissioningin2030_____________________________________________26Projectscommissioningin2035_____________________________________________28Projectscommissioningin2040_____________________________________________30Comparisonbetweentechnologiesovertime___________________________________333ElectricityGenerationCostsReport2023Comparisontopreviouslevelisedcostestimates________________________________33Section5:Peakingtechnologies______________________________________________364ElectricityGenerationCostsReport2023AcronymglossaryACTAdvancedConversionTechnologiesADAnaerobicDigestionASPAdministrativeStrikePriceBECCSBioenergywithCarbonCaptureandStorageBEISDepartmentforBusiness,EnergyandIndustrialStrategyBSUoSBalancingServicesUseofSystemCCGTCombinedCycleGasTurbineCCUSCarbonCaptureUsageandStorageCfDContractforDifferenceCHPCombinedHeatandPowerCPFCarbonPriceFloorCPSCarbonPriceSupportDSRDemand-SideResponseEEPEnergyandEmissionsProjectionsEfWEnergyfromWasteEUETSEuropeanUnionEmissionsTradingSystemFiTFeed-inTariffFOAKFirstofaKindHHVHigherHeatingValuekWKilowattkWhKilowatt-hourLCOELevelisedCostofElectricityLHVLowerHeatingValue5ElectricityGenerationCostsReport2023MWMegawattMWhMegawatt-hourNOAKNthofaKindNPVNetPresentValueOCGTOpenCycleGasTurbineO&MOperationsandMaintenancePPAPowerPurchaseAgreementPVPhotovoltaicWRAPWasteandResourcesActionProgramme6ElectricityGenerationCostsReport2023IntroductionElectricitygenerationcostsareafundamentalpartofenergymarketanalysis,andagoodunderstandingofthesecostsisimportantwhenanalysinganddesigningpolicytomakeprogresstowardsnetzero.Thisreport,producedbytheDepartmentforEnergySecurityandNetZeropresentsestimatesofthecostsandtechnicalspecificationsfordifferentgenerationtechnologiesbasedinGreatBritain.Sincethedepartment’slastreport,BEISElectricityGenerationCosts(2020)1,wehaveupdatedkeyassumptionsthatunderlieouranalysis.Thedepartmenthas:•Commissionedanexternalproviderin2020toreviewassumptionsforonshorewindandlarge-scalesolarphotovoltaic(PV).•Commissionedanexternalproviderin2020toreviewassumptionsforEnergyfromWaste(EfW)andAdvancedConversionTechnologies(ACT),includingwithCombinedHeatandPower(CHP).•Commissionedanexternalproviderin2023toreviewassumptionsforFloatingOffshoreWind(FOW)andTidalStreamEnergy(TSE).•Collectedevidenceoncostsforhydrogen-firedcombinedcyclegasturbines(H2CCGT).•Updatedothercross-cuttingassumptions,suchasfuelcosts,gatefeesandcarbonprices.Allotherassumptionsremainthesameasinthe2020reportunlessotherwisestated.Inthisreportweconsiderthecostsofplanning,construction,operation,andcarbonemissions,reflectingthecostofbuilding,operatinganddecommissioningagenericplantforeachtechnology.Potentialrevenuestreamsarenotconsidered,exceptforheatrevenuesforCHPplants(seesection3).Mostcostsinthisreportarepresentedaslevelisedcosts,whichisameasureoftheaveragecostperMWhgeneratedoverthefulllifetimeofaplant.Allestimatesarein2021realvaluesunlessotherwisestated.Levelisedcostsprovideastraightforwardwayofconsistentlycomparingthecostsofdifferentgeneratingtechnologieswithdifferentcharacteristics,focusingonthecostsincurredbythegeneratoroverthelifetimeoftheplant.However,thesimplicityofthemeasuremeansthattherearefactorswhicharenotconsidered,includingatechnology’simpactonthewidersystemgiventhetiming,location,andothercharacteristicsofitsgeneration.Forexample,aplantbuiltalongdistancefromcentresofhighdemandwillincreasetransmissionnetwork1BEISElectricityGenerationCosts(2020)https://www.gov.uk/government/publications/beis-electricity-generation-costs-20207ElectricityGenerationCostsReport2023costs,whilea‘dispatchable’plant(onewhichcanincreaseordecreasegenerationrapidly)willreducethecostsassociatedwithgridbalancingbyprovidingextrapowerattimesofpeakdemand.Ananalysisoftheimpactofthesewider‘enhancedlevelisedcosts’werepresentedinour2020report.Generationcostsareusedasinputstothedepartment’sanalysis,includingthesettingofAdministrativeStrikePricesettingforContractsforDifferenceallocationrounds.Theseassumptionsarereviewedateachallocationround.However,itisimportanttonotethatlevelisedcostsarenotthesameasstrikeprices.Strikepricesincludeadditionalconsiderations,suchasmarketconditions,revenuesforgenerators,andpolicyfactors,whicharenotconsideredinlevelisedcosts.Todate,theyhavealsotypicallybeenexpressedin2012prices,whereasthelevelisedcostsreportedherearein2021prices.Forfurtherdetailsonthedifferencesbetweenstrikepricesandlevelisedcosts,pleaseseeSection3.Thisreportisstructuredasfollows:•Section1providesanoverviewofhowlevelisedcostsarecalculated,aswellassomeoftheuncertaintiesaroundprojectingthecostsoffuturegeneration.•Section2outlinesthechangestocostassumptionsthatwehavemadeinourmostrecentreview.•Section3outlineshowthedepartmentusesgenerationcostdatainitsmodelling,includingthelinksbetweengenerationcostsandstrikeprices.•Section4presentsselectedlevelisedcostestimatesgeneratedusingthedepartment’sLevelisedCostModelandtechnology-specifichurdlerates.•Section5discussespeakingtechnologies,presentinganalternativemetrictolevelisedcostsona£/kWbasis.FurtherdetailonthedataandassumptionsusedcanbefoundintheKeyDataandAssumptionsspreadsheetpublishedalongsidethisreportinAnnexA.AnnexAalsocontainslevelisedcostestimatesforarangeoftechnologiesfor2025,2030,2035and2040.UncertaintyAswithanyprojection,thereisinherentuncertaintywhenestimatingcurrentandfuturecostsofelectricitygeneration.Whilethedepartmentconsidersthattherangesoflevelisedcostestimatespresentedinthisreportarerobustforthedepartment’sanalysis,theseestimatesshouldalsobeusedwithcaregivenuncertaintiesaroundthefuturecostofgeneration.Theseuncertaintiesincludethepotentialforunanticipatedcostreductionsinlessmaturetechnologies,greateruncertaintyfortechnologieswherethedepartmenthaveaccesstolessdetailedevidence,uncertaintyaroundfuturenetworkcosts,anduncertaintyaroundfossilfuelpricesandcarbonvalues.Theassumptionsinallgenerationcostparametersarenotprojectspecific.Instead,theyareintendedtoprovideabroadorderofmagnitudetocomparetechnologies.Toillustratethepotentialeffectsoftheseuncertainties,thereportpresentsrangesandsensitivityanalysisontheeffectsofchangesinparameters.8ElectricityGenerationCostsReport2023Thisreportdoesnotaccountforsomeofthepotentialeffectsofshort-termincreasesincommoditypricesandmacroeconomiccircumstancesonprojectcosts.However,thenumberspublishedareinrealprices(GDPdeflator)andthereforedoaccountforgeneralpriceinflation.ThepurposeoftheDepartment’sgenerationcostmodellingistolookatthelonger-termoutlookforgenerationcostestimatesoverthelifetimeofaplant.Thereissignificantuncertaintyabouthowlongcommoditypriceincreasesandthecurrenteconomicpressureswillpersistandthereforethisisnotfactoredintoourmodellingatthisstage.Wecontinuetohaveconfidenceinourassessment.Wewillmonitortheseassumptionsgoingforwardtoensurethatitisstillaccurate.Thedepartmentcontinuouslycommissionsresearchtoupdateassumptionswherethedepartmentfeelsnecessary.Asaresult,updatesinthisreporthavebeenmadetoimproveassumptionsfromearlierthanBEIS’s2020publication,reflectingalonger-termdevelopmentincostassumptionsthanjustsince2020.Wewouldwelcomeviewsonwhatanglesfutureresearchshouldtake.9ElectricityGenerationCostsReport2023Section1:HowlevelisedcostsarecalculatedTheLevelisedCostofElectricity(LCOE)isthediscountedlifetimecostofbuildingandoperatingagenerationasset,expressedasacostperunitofelectricitygenerated(£/MWh).Itcoversallrelevantcostsfacedbythegenerator,includingpre-development,capital,operating,fuel,andfinancingcosts.Thisissometimescalledalife-cyclecost,whichemphasisesthe“cradletograve”aspectofthedefinition.Thelevelisedcostofagenerationtechnologyistheratioofthetotalcostsofagenericplanttothetotalamountofelectricityexpectedtobegeneratedovertheplant’slifetime.Bothareexpressedinnetpresentvalueterms.Thismeansthatfuturecostsandoutputsarediscounted,whencomparedtocostsandoutputstoday.Becausethefinancingcostisappliedasthediscountrate,thismeansitisnotpossibletoexpressitasanexplicitpartofthelevelisedcostsin£/MWh.Themainintentionofalevelisedcostmetricistoprovideasimple“ruleofthumb”comparisonbetweendifferenttypesofgeneratingtechnologies.However,thesimplicityofthismetricmeanssomerelevantissuesarenotconsidered.FurtherdetailsontheconsiderationsincludedandexcludedfromlevelisedcostscanbefoundinSection3.Figure1demonstratesatahighlevelhowLevelisedCostsarecalculatedandwhatisincluded.Forfurtherinformationonhowlevelisedcostsarecalculated,detailsonthecategories,andthedepartment’sLevelisedCostModel,pleaserefertosection4.2ofMottMacDonald(2010).2AnnexB,containssampleLCOEcalculationsforanunabatedgasCCGTandanoffshorewindfarm,toillustratehowthedepartmentcalculateslevelisedcostsinmoredetail.2https://www.gov.uk/government/publications/uk-electricity-generation-costs-mott-macdonald-update-201010ElectricityGenerationCostsReport2023Figure1-Overviewoflevelisedcostcalculation3Step1:GatherplantdataandassumptionsCapitalexpenditure(CAPEX)costsPre-developmentcostsConstructioncostsInfrastructurecostsadjustedforlearningovertimeOperatingexpenditure(OPEX)FixedoperatingcostscostsVariableoperatingcostsInsuranceConnectioncostsCarbontransportandstoragecostsDecommissioningcostsHeatrevenuesFuelpricesCarboncostsadjustedforlearningovertimeExpectedgenerationdataCapacityofplantExpectedavailabilityExpectedefficiencyExpectedloadfactorStep2:Sumthenetpresentvalueofthetotalexpectedcostsandnetgenerationforeachyeartotalcapexandopexcostsnn=timeperiodNPVofTotalCosts=Σn(1+discountrate)nn=timeperiodNPVofElectricityGeneration=Σnetelectricitygenerationn(1+discountrate)nStep3:DividetotalcostsbynetgenerationNPVofTotalCostsLevelisedCostofElectricityGenerationEstimate=NPVofElectricityGeneration3Notethatinthistable,netelectricitygenerationreferstogrossgenerationminusanyinternalplantlosses/usebeforeelectricityisexportedtotheelectricitynetwork.11ElectricityGenerationCostsReport2023Section2:ChangestogenerationcostassumptionsWhereassumptionsandtechnologieshavenotbeenmentioned,pleaseassumethattherehavebeennochangessincethepreviousreport.RenewabletechnologiesOnshorewind&solarPVThedepartmentcommissionedareportbyWSP4toreviewthecurrentestimatesforonshorewindandsolarPV.Thishasbeensupplementedwithinternalmodellingandresearch.Asaresult,thisnewinformationhasbeenusedtoupdatethefollowingforonshorewind:•Capitalcostslearningrate.•Loadfactors.Capitalcostslearningratesandloadfactorincreasesarenowbothlinkedtoturbinesizegrowth,reflectingWSP’srecommendationsandfollowingthesamemethodasusedoroffshorewind.However,thedepartmenthasalteredthesuggestedturbinetrajectoryfromWSP,insteadlimitingmaximumturbinesizeat6MW.Thedepartmentalsousedinternalupdatestomodelonshoreloadfactors5.Table1-TurbineassumptionsforonshorewindCommissioningProjectedturbineProjectedloadfactor5yearsizeMW(netofavailability)2023545%2030648%2035+648%Loadfactors,definedasexpectedannualgenerationasapercentageoftheoreticalmaximumgeneration,aremodelledtoincreasewithturbinesize.Largerturbinesareexpectedtoproducehigherloadfactorsforseveralreasons,mostimportantlythatlargerturbinescanaccesshigherwindsduetotheirincreasedheight,andthatawindfarmwithfewer,largerturbineshas4Onshorewindandsolarcostreviewhttps://www.gov.uk/government/publications/review-of-power-generation-costs-for-technologies-eligible-for-contracts-for-difference5Thefirstversionofthisreport(published4thAugust2023)hadaloweronshorewindloadfactorthatwasupdatedinthisversion(publishedOctober2023)toreflectinternalmodellingusedwithinthedepartment.ThisreducestheLCOE.12ElectricityGenerationCostsReport2023increasedefficiency.DetaileddiscussionoftheserelationshipscanbefoundinareportforthedepartmentbyDNVGLEnergy6.Futureloadfactorswerecalculatedbycombiningatheoreticalturbinepowercurve(poweroutputasafunctionofwindspeed,modelledusingturbinespecificationsprovidedbymanufacturers)withhourlywindspeeddatafromexistingoffshorewindsites.Thepre-developmentandconstructioncostsarethetotalcostofconstruction.Table2-Maincostassumptionsforonshorewind2025203020352040TotalPre-development(£m)6666TotalConstruction(£m)56545454FixedO&M(£/MW/year)25,40025,50025,70025,900VariableO&M(£/MWh)6666Loadfactor5(netofavailability)45%48%48%48%Operatingperiod(years)25252525ForsolarPV,thefollowingassumptionshavebeenupdated,reflectingWSP’srecommendations:•Plantcapacity.•Constructiontimings.•Constructionandinfrastructurecosts.•Pre-licensing,technicalanddesigncosts.•Variableoperatingcosts.Table3-MaincostassumptionsforsolarPV2025203020352040TotalPre-development(£m)1111TotalConstruction(£m)7654FixedO&M(£/MW/year)6,0005,6005,3004,900VariableO&M(£/MWh)----6https://www.gov.uk/government/publications/potential-to-improve-load-factor-of-offshore-wind-farms-in-the-uk-to-203513ElectricityGenerationCostsReport2023Loadfactor(netofavailability)11%11%11%11%Operatingperiod(years)35353535OffshorewindThedepartmenthasanalysedrecentchangesinoffshoretechnologyandupdatedturbineassumptionsandloadfactorsforoffshorewind,increasingboththeexpectedloadfactorsandturbinesizesincomparisontothepreviousElectricityGenerationCostsReportpublication.Aswithonshorewindmodelling,capitalcostslearningratesandloadfactorincreasesarebothlinkedtoturbinesizegrowth.Wehaveassumedthatthe£/MWcapitalcostsdecreaseovertimewiththesizeoftheturbineduetoeconomiesofscale.Table4-TurbineassumptionsforoffshorewindCommissioningProjectedturbineProjectedloadfactoryearsize(netofavailability)202514MW61%203017MW65%2035+20MW69%Table5-Maincostassumptionsforoffshorewind2025203020352040460TotalPre-development(£m)1304104601,30042,400TotalConstruction(£m)1,5001,4001,300169%FixedO&M(£/MW/year)43,30042,10042,20030VariableO&M(£/MWh)111Loadfactor(netofavailability)61%65%69%Operatingperiod(years)303030TheCrownEstateLeasingRound4InFebruary2021,theCrownEstateclosedtheirLeasingRound4(LR4),inwhichdevelopersbidintoacompetitiveauctionforan‘option’todevelopaprojectontheirchosensiteinthe14ElectricityGenerationCostsReport2023future.Thisresultedin8GWofcapacitybeingawardedleasingrightsacrosssixprojectsandfourdevelopers.Theoptionfeesresultingfromthisauctionarepaidannuallyinthepre-developmentphaseoftheproject,foraminimumof3andamaximumof10years,fromdeveloperstotheCrownEstate.Onceconstructionbegins,constructionrentispaidinplaceofoptionfees.Theseoptionfeesweresignificantlyhigherthanthedepartment’spreviousestimatesofpre-developmentcosts.Inaddition,projectsduetocomeonlinethroughLR4madeupasignificantportionoftheoffshorewindpipeline.Therefore,thedepartmenthasadjustedpre-developmentcosts.Thismeansthatthereisasharpincreaseinpre-developmentcostsasLR4-relatedprojectscomeonlineintheearly2030sandbecomemorerepresentativeof‘typical’projectcosts.Itisuncertainatthispointwhetherthehighoptionfeesareindicativeoffutureseabedleasingroundstocome.Asfurtherseabedleasingoccurs,thedepartmentwillcontinuetomonitorthesecostsandupdateestimatesasnecessary.FloatingOffshoreWindandTidalStreamresearch.FloatingOffshoreWind(FOW)andTidalStreamEnergy(TSE)technologieshavebeenupdated7toalignwithtwoDESNZ-commissionedresearchreviewsbyFrazer-NashConsultancy(FNC)89.FOWprojectsarecategorizedintodemonstration(Demo),FOAKandNOAKcategories8above8.TSEprojectsaresimilarlycategorisedwithadditionalsub-categories9withmediumDemoandmediumFOAKselectedasmostrepresentativehere.ForFOW,dataisadjustedfromtheFOAKcategoryapplyingthecentrallearningrateassumptionintheFNCreviewacrosscapitalandoperationalcostcomponentstoresultinassumedNOAKcosts8.ForTSE,dataisadjustedfromthelargeFOAKcategoryapplyinglearningratesbasedontheprofiledlearningratepresentedintheFNCreport9.TheassumedlearningratesarebasedonglobalNationalRenewableEnergyLaboratory(NREL)assumptions10.Demostatusisassumedforprojectscommissioningpre-2030,FOAKin2030andNOAKfor2040onwards.ForFOWloadfactorassumptionsusedareinlinewithinternalmodelling,consistentwithmodellingusedforOFWandONW.ForDemoprojects,a12MWturbinesizeisassumed,smallerthanforOFW,butastheindustrydevelopsturbinesizesareassumedtoalignwiththeprojectedtrajectoryforOFW.ThehurdlerateassumedisaspertheEuropeanEconomic2018report11asabaseline,withsubsequentanalysistoproduceanaverage12.ForTSEthecosts7ThisreflectsaNovember2023updatetotheoriginalpublicationalongsidepublishingtheFrazer-NashConsultancyreviewsofcostandtechnicalassumptionsforFloatingOffshoreWindandTidalStreamEnergy8FloatingOffshoreWind.https://www.gov.uk/government/publications/review-of-power-generation-costs-for-floating-offshore-wind-and-tidal-stream-energy-technologies9TidalStreamEnergy.https://www.gov.uk/government/publications/review-of-power-generation-costs-for-floating-offshore-wind-and-tidal-stream-energy-technologies10ASystematicFrameworkforProjectingtheFutureCostsofOffshoreWindEnergy.(2022).NationalRenewableEnergyLaboratory(NREL).https://www.nrel.gov/docs/fy23osti/81819.pdf11CostofCapitalUpdateforElectricityGeneration,StorageandDemandSideResponseTechnologies:https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/910814/Cost_of_Capital_Update_for_Electricity_Generation_Storage_and_Demand_Side_Response_Technologies.pdf12ContractforDifferenceAdministrativeStrikePriceMethodologyNotehttps://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-6-administrative-strike-prices-methodology-note15ElectricityGenerationCostsReport2023presentedarealignedwithFNCsupplieddata9.ThehurdlerateassumedisaspertheEuropeanEconomic2018report11.Thereissignificantuncertaintyintheseassumptionsgiventhenascentnatureofthesetechnologies,andthatcostassumptionswerebasedonalimitednumberofdatapoints.Theuncertaintyincreasesovertime.TheDepartmentwillreviewassumptionsasthetechnologiesdevelop.Furtherdiscussionofthemethodologycanbefoundinthecovernoteandunderlyingresearchreviews99.Forbothtechnologies,giventheuncertaintiesinthecostassumptions,theLCOEspresentedshouldberegardedasillustrative.Table6-Maincostassumptionsforfloatingoffshorewind2025203020352040(Demo)(FOAK)(NOAK)(NOAK)TotalPre-development(£m)50170160140TotalConstruction(£m)5703,0002,7002,500FixedO&M(£/MW/year)112,700108,20098,20089,000VariableO&M(£/MWh)----Loadfactor(netofavailability)56%AsperoffshorewindOperatingperiod(years)24282828Table7-Maincostassumptionsfortidalstreamenergy2025203020352040(Demo)(FOAK)(NOAK)(NOAK)2TotalPre-development(£m)4425047,300TotalConstruction(£m)607060-33%FixedO&M(£/MW/year)240,400107,50060,40025VariableO&M(£/MWh)---Loadfactor(netofavailability)38%37%33%Operatingperiod(years)25252516ElectricityGenerationCostsReport2023Non-renewabletechnologiesHydrogen-firedCCGTsFor100%hydrogen-firedCCGTtechnologies,werelyoninternaldepartmentalanalysistoestimatethecapitalandoperationalcostofhydrogen-firedCCGTs.Thedepartmenthasalsocarriedoutinternalanalysistoarriveatasetofillustrativepriceseriesunderdifferentscenarios,basedonmethodologyexplainedintheHydrogenProductionCostsReport202113.Hydrogenpricesarehighlyuncertainanddependentonthedevelopmentofthehydrogeneconomyandmarket,sotheLCOEofhydrogenCCGTsisalsohighlyuncertain.Thisisthefirsttimehydrogen-firedCCGTshavebeenintroducedintotheGenerationCostReport.Thedepartmentwillcontinuetocommissionfurtherresearchtoobtainmorecertaintyinthedatasinceitisanascenttechnology.Thisaimstoincluderetrofittedhydrogenturbines.Inthisreport,hydrogenCCGTsarepresentedasbothbaseloadplant(AnnexA)andapeakingplant(Section6:Peakingtechnologies)toillustratebothmodesofoperation.Theroleofhydrogeninthepowersystemisstilluncertainandweareresearchingfurtherintothisarea.Thereremainssomeuncertaintyaroundexactdeploymenttimeframes,andthetechnologyremainsatthefirstofakind(FOAK)stageofdevelopment.ThedepartmentconsidershydrogenCCGTscommissioningbefore2040tobeFOAK.WethereforepresentFOAKcostsfor2025,2030and2035inthisreport,andNthofakind(NOAK)costsfor2040.Table8-Maincostassumptionsfor100%hydrogen-firedCCGTs2025203020352040TotalPre-development(£m)20202020TotalConstruction(£m)830830830740FixedO&M(£/MW/year)15,50015,50015,50014,000VariableO&M(£/MWh)2222Loadfactor(netofavailability)93%93%93%93%Operatingperiod2525252513https://www.gov.uk/government/publications/hydrogen-production-costs-202117ElectricityGenerationCostsReport2023EnergyfromWaste&AdvancedConversionTechnologiesThedepartmentcommissionedareportbyNNFCC14toreviewthetechnicalandcostassumptionsforthefollowingtechnologies:•EfWwithCHP.•ACT.•ACTwithCHP.Asaresultoftherecommendationsinthereport,thefollowingtechnicalandcostassumptionshavebeenupdatedforEnergyfromWaste:•Constructionperiod.•Plantoperatingperiod.•Netefficiency.•Availability.•Capitalcosts.ForACT,thefollowingtechnicalandcostassumptionshavebeenupdated:•Plantoperatingperiod.•Netpower.•Netefficiency.•Capitalcosts.FurtherdetailsonhowthesecostswerereachedcanbefoundintheNNFCCreport.PowerCCUSandpowerBECCSWehavenotupdatedcostestimatesforpowergenerationwithcarboncapture,usage,andstorage(powerCCUS)andpowergenerationfrombioenergywithcarboncaptureandstorage(powerBECCS).CostsforfirstdeploymentofbothtechnologiesintheUKareexpectedtoberevealedthroughbilateralnegotiationswhichrelatetospecificprojects,informedbyproject-specificanalysis.Theinformationandanalysisusedforthispurposeiscommerciallyconfidential.Therefore,itisnotavailableforgenericcostassumptions.NucleartechnologiesFornuclear,wecontinuetouseassumptionsfromthe2016GenerationCostsReportandfrompubliclyavailabledatafromtheHinkleyPointCproject-theonlynuclearpowerplantcurrentlyunderconstructioninGB.Currentlyourassumptionsonlyrefertolarge-scalenuclearplants.However,thedepartmentisintheprocessofupdatingassumptionsforlarge-scalenuclear14ReviewofBEISassumptionsunderlyingpowergenerationcostsforACTandEfWwithCHPwww.gov.uk/government/publications/review-of-power-generation-costs-for-technologies-eligible-for-contracts-for-difference18ElectricityGenerationCostsReport2023plants,aswellasobtaininggenerationcostestimatesforadvancednucleartechnologies,includingSmallModularReactors(SMRs)andAdvancedModularReactors(AMRs).Nuclearcostsarerevealedthroughbilateralnegotiationswhichrelatetospecificprojects.Project-specificanalysisisusedtoinformtheGovernment’sapproachtothesenegotiations.Becausetheinformationandanalysisusedforthispurposeiscommerciallyconfidential,itisnotavailabletobeusedtoupdateourgenericcostassumptions.Cross-cuttingassumptionsFuelcosts&gatefeesFossilfuelpriceassumptionshavebeenupdatedinlinewiththefiguresusedinthe2019FossilFuelPriceProjections15andupdatedtofitourinternalassumptions.AspartoftheEfWandACTreviewperformedbyNNFCC,gatefeeshavealsobeenupdated.OurnewassumptionsarelistedintheTable9.Table6-Gatefeeassumptions,2021prices.TechnologyGatefee,currentGatefee,2020report(£/MWh)report(£/MWh)EfW-35-34ACT-18-14CarbonpricesForfossilfuelplants,thetotalcarbonpriceinitiallyusespublishedUKETSprices16asabasebutthentrackstowardsthecarbonappraisalprice17,notingthatthisrepresentsamodellingassumptionratherthanagovernmentprojection.Carbonpricesaresignificantlyhigherthanassumedintheprevious2020report,whichhasresultedinanincreaseinLCOEforfossilfuelplants.BalancingServicesUseofSystem(BSUoS)chargesInApril2022,OfgempublishedtheirdecisionCMP30818,whichmovesBSUoSchargesawayfromgenerationanddemandtoFinalDemandonly.ThischangeisduetotakeeffectfromApril2023onwards.15https://www.gov.uk/government/publications/fossil-fuel-price-assumptions-201916https://www.gov.uk/government/publications/determinations-of-the-uk-ets-carbon-price17https://www.gov.uk/government/publications/valuing-greenhouse-gas-emissions-in-policy-appraisal/valuation-of-greenhouse-gas-emissions-for-policy-appraisal-and-evaluation18https://www.ofgem.gov.uk/publications/cmp308-removal-bsuos-charges-generation19ElectricityGenerationCostsReport2023Therefore,thesecostsarenolongerincurredbythegeneratorandarenolongerpartofthelevelisedcostframework.Theyarenolongerpresentedaspartoftheestimatesinthisreport.Previouslythiscostfellunderthevariableoperatingcosts.DeflatorassumptionsThepricespresentedinthisreportareallin2021pricesunlessstated.Wherenecessary,priceshavebeenconvertedfromotheryears’pricebasesusingtheGDPdeflatorseriesaspublishedbyHMTreasury.Forthisreport,theMarch2022QuarterlyNationalAccountsserieshavebeenused19.FuelemissionsfactorsFuelemissionsfactors(massofCO2releasedperrelevantquantityoffuelburned)wereupdatedfromtheUKGreenhouseGasEmissionsInventory20.HeatrevenuesAsimplifiedmethodbasedontheavoidedboilercostapproachhasbeenusedtoestimatetheheatrevenueperMWhofelectricitygenerated.Thisapproachestimatesthecostthatwouldhavebeenincurredbytheheatoff-taker(thebuyerofheatproducedbytheCHPplant)iftheyweretoproducethesameamountofheatusingaboiler.Thisassumesthat100%oftheheatispurchased.Thiswouldincurfuelcostsattheretailgasprice,whichareavoidedbybuyingheatfromtheCHPplant.19https://www.gov.uk/government/statistics/gdp-deflators-at-market-prices-and-money-gdp-march-2022-quarterly-national-accounts20https://naei.beis.gov.uk/20ElectricityGenerationCostsReport2023Section3:HowthedepartmentusesgenerationcostdatainmodellingTheestimatesoutlinedinthisreportprovideahigh-levelviewonthecostsofdifferentgeneratingtechnologies.Becauselevelisedcostsareasimplifiedmetric,thismeansthatnotallrelevantissuesareconsidered.Inpractice,thedepartment’selectricitymarketmodelling,includingtheDynamicDispatchModel(DDM),doesnotuselevelisedcostestimatesdirectly.Instead,itmodelsprivateinvestmentdecisionsusingthesamecapitalexpenditure(capex)andoperatingexpenditure(opex)assumptionsincorporatedinthelevelisedcostestimatesreportedhere.TheDDMalsoincludesassumptionsoninvestors’expectationsoverfossilfuel,carbon,andwholesaleelectricitypricesthatareCB6compliantassumptions,aswellasthefinancialincentivesfrompoliciessuchasContractsforDifference(CfDs)andtheCapacityMarket.TheDDMmodelstheinvestmentdecisionbycomparingtheinternalrateofreturnwithatechnologyspecifichurdlerate.Levelisedcostestimatesdonotconsiderrevenuestreamsavailabletogenerators(e.g.fromsaleofelectricityorrevenuesfromothersources).OneexceptiontothisisheatrevenuesforCombinedHeatandPower(CHP)plants.AsthecostoftheowningandoperatingtheCHPtechnologyisincludedinthecapitalandoperatingcostsoftheplant,heatrevenuesarealsoincludedsothattheestimatesreflectthenetcostofelectricitygenerationonly.Levelisedcostsdonotcoverwidercoststotheelectricitysystemastheyonlyrelatetothosecostsaccruingtotheowner/operatorofthegenerationasset.FurtheranalysisonWiderSystemImpacts,includingillustrativescenarios,canbefoundinSection7ofthe2020ElectricityGenerationCostsReport.LevelisedcostsarelesssuitableforpeakingtechnologieswherethemostrelevantconsiderationisthecostofcapacityratherthanthecostperMWh.A£/kWmeasurecoveringfixedcostsforpeakingtechnologiesispresentedinSection5.LevelisedcostsaresensitivetotheassumptionsusedLevelisedcostestimatesarehighlysensitivetothedataandassumptionsused.Withinthis,differenttechnologiesaresensitivetodifferentinputassumptions.Thisreportcapturessomeoftheseuncertaintiesthroughrangespresentedaroundkeyestimates.Arangeofcostsispresentedforcapexandfuel,dependingontheestimates.However,notalluncertaintiesarecapturedintheserangesandestimatesshouldbeviewedinthiscontext.Itisoftenmoreappropriatetoconsiderarangeofcostsratherthanpointestimates.21ElectricityGenerationCostsReport2023Levelisedcostsaregeneric,ratherthansite-specific.Landcostsaretypicallynotincluded,anduseofsystemchargesarecalculatedonanaverageratherthanasite-specificbasis.Levelisedcostestimatescanbereportedfordifferentmilestonesassociatedwithaprojectincludingtheprojectstart,thefinancialcloseandthecommissioningyear.Inthispublication,thedepartmentreportslevelisedcostestimatesforprojectscommissioninginthesameyear.Pre-developmentandconstructiondurationswillvarybytechnologyandthereforeestimatesreportedfor‘projectstart’or‘financialclose’fordifferenttechnologiesmaynotbecommissioninginthesameyearaseachother.Centralestimatesforpre-developmentandconstructiontimingsarepresentedforkeytechnologiesintheaccompanyingspreadsheettothispublication.LevelisedcostsarenotstrikepricesThelevelisedcostestimatesinthisreportdonotprovideanindicationofpotentialfutureAdministrativeStrikePrices(ASPs)fortechnologiesunderContractsforDifference(CfDs)allocationrounds.Generationcostassumptions,suchasthatsummarisedhereintheformoflevelisedcosts,areonesetofinputsintosettingadministrativestrikeprices–themaximumstrikepriceapplicabletoatechnologyinaContractsforDifference(CfD)allocationround.Otherinputs,includingmarketconditionsandpolicyconsiderations,mayinclude:•Revenueassumptions•Othercostsnotincludedinourdefinitionoflevelisedcost(forexamplethegenerator’sshareoftransmissionlosses,routetomarketcostsreflectedinPowerPurchaseAgreement(PPA)discounts,andtechnology-specificestimatesfordecommissioningcostsandscrappagevalues)•CfDcontracttermsincludinglength,riskallocation,andeligibilityrequirementswithintechnologies•Otherrelevantinformationsuchasstudiesordatapublishedbyindustry•Developmentswithinindustry•WiderpolicyconsiderationsThegenerationcostsdatausedheremaybedifferentfromthatusedaspartoftheadministrativestrikeprice-settingprocess.Thisisparticularlytruewhereinformationrelevanttopotentialbiddersinaparticularallocationroundisusedtoinformcostassumptionsforpipelineprojects.Further,ASPsarenormallysetsoastobringforwardthemostcost-effectiveprojects,whichmaynotbethesameastheestimatesoftypicalprojectcostsestimatedinthisreport.22ElectricityGenerationCostsReport2023Forallthesereasons,thelevelisedcostspresentedheremaybesignificantlydifferentfromtheadministrativestrikepricesthataresetforCfDsandthereforeshouldnotbeseenasaguidetopotentialfutureadministrativestrikeprices.23ElectricityGenerationCostsReport2023Section4:GenerationcostestimatesThissectionsummarisestheanalysisofthelevelisedcostofelectricitygenerationattechnology-specifichurdlerateforaselectionoftechnologies.Allvaluespresentedarein2021realprices21.Projectscommissioningin2025Figure2–LCOEestimatesforprojectscommissioningin2025,inreal2021pricesTable10-LCOEestimatesforprojectscommissioningin2025,£/MWh,inreal2021pricesCCGTHClassOffshoreWindLarge-scaleSolarOnshoreWind5Pre-developmentcosts<1233Constructioncosts7232228FixedO&Mcosts217810VariableO&Mcosts216021Pleasenotethattheseestimatesshouldbeviewedinthecontextofthesensitivitiesanduncertaintieshighlightedinthetextofthisreport.24ElectricityGenerationCostsReport2023FuelcostsCCGTHClassOffshoreWindOnshoreWind5Large-scaleSolarCarboncosts0CO2Transportand43000Storage6000Decommissioning00andwaste0000Total11441104438Figure3-LCOEsensitivitiesforprojectscommissioningin2025,inreal2021pricesBoxesrepresentcapitalexpenditurevariation,andwhiskersrepresentfuelexpenditurevariation.25ElectricityGenerationCostsReport2023Table7-LCOEsensitivitiesforprojectscommissioningin2025,£/MWh,inreal2021pricesCCGTHClassOffshoreWindOnshoreWind5Large-scaleSolarHighcapex116494348Central114443841Lowcapex113403337Highcapex,highfuel133n/an/an/aLowcapex,lowfuel99n/an/an/aProjectscommissioningin2030Figure4-LCOEestimatesforprojectscommissioningin2030,inreal2021prices26ElectricityGenerationCostsReport2023Table128-LCOEestimatesforprojectscommissioningin2030,£/MWh,inreal2021pricesCCGTHOffshoreWindOnshoreWind5Large-scaleClassSolarPre-developmentcosts<1233Constructioncosts7202024FixedO&Mcosts21679VariableO&Mcosts2160Fuelcosts44000Carboncosts83000CO2TransportandStorage0000Decommissioningandwaste0100Total139393637Figure4-LCOEsensitivitiesforprojectscommissioningin2030,inreal2021pricesBoxesrepresentcapitalexpenditurevariation,andwhiskersrepresentfuelexpenditurevariation.27ElectricityGenerationCostsReport2023Table13-LCOEsensitivitiesforprojectscommissioningin2030,£/MWh,inreal2021pricesCCGTHClassOffshoreWindOnshoreWind5Large-scaleSolarHighcapex141434043Central139393637Lowcapex138353132Highcapex,highfuel157n/an/an/aLowcapex,lowfuel124n/an/an/aProjectscommissioningin2035Figure6-LCOEestimatesforprojectscommissioningin2035,inreal2021prices28ElectricityGenerationCostsReport2023Table149-LCOEestimatesforprojectscommissioningin2035,£/MWh,inreal2021pricesCCGTHClassOffshoreWindOnshoreWind5Large-scaleSolarPre-developmentcosts<1933Constructioncosts7172020FixedO&Mcosts21579VariableO&Mcosts2160Fuelcosts45000Carboncosts108000CO2TransportandStorage0000Decommissioningandwaste0100Total165433632Figure5-LCOEsensitivitiesforprojectscommissioningin2035,inreal2021pricesBoxesrepresentcapitalexpenditurevariation,andwhiskersrepresentfuelexpenditurevariation.29ElectricityGenerationCostsReport2023Table1510-LCOEsensitivitiesforprojectscommissioningin2035,£/MWh,inreal2021pricesCCGTHOffshoreWindOnshoreWind5Large-scaleClassSolarHighcapex167514038Central165433632Lowcapex164323128Highcapex,highfuel183n/an/an/aLowcapex,lowfuel149n/an/an/aProjectscommissioningin2040Figure8-LCOEestimatesforprojectscommissioningin2040,inreal2021prices30ElectricityGenerationCostsReport2023Table1611-LCOEestimatesforprojectscommissioningin2040,£/MWh,inreal2021pricesCCGTHOffshoreWindOnshoreWind5Large-scaleSolarClassPre-developmentcosts<1733Constructioncosts7172018FixedO&Mcosts21578VariableO&Mcosts2160Fuelcosts45000Carboncosts123000CO2TransportandStorage0000Decommissioningandwaste0100Total179413630Figure6-LCOEsensitivitiesforprojectscommissioningin2040,inreal2021pricesBoxesrepresentcapitalexpenditurevariation,andwhiskersrepresentfuelexpenditurevariation.31ElectricityGenerationCostsReport2023Table127-LCOEsensitivitiesforprojectscommissioningin2040,£/MWh,inreal2021pricesCCGTHOffshoreOnshoreWind5Large-scaleClassWindSolarHighcapex181514036Central179413630Lowcapex178323126Highcapex,highfuel197n/an/an/aLowcapex,lowfuel163n/an/an/a32ElectricityGenerationCostsReport2023ComparisonbetweentechnologiesovertimeTable138-LevelisedCostEstimatesforProjectsCommissioningin2025,2030,2035and2040,£/MWh,highsandlowsreflecthighandlowcapitalandpre-developmentcostestimates,inreal2021pricesCommissioning2025203020352040116141167181CCGTHHigh114139165179ClassCentral11313816417849435151Low4439434140353232OffshoreHigh43404040WindCentral3836363633313131Low4843383641373230OnshoreHigh37322826Wind5CentralLowLarge-ScaleHighSolarCentralLowComparisontopreviouslevelisedcostestimatesThebelowtablesummarisesthechangesmadetothepreviousdepartmentalestimates(BEIS2020)22withtherevisedestimatesinthisreportfor2025,2030,2035and2040commissioning.Allvaluesbelowarein2021prices.ThereductionandthenincreaseinOffshorewindcostscomesfromthepre-developmentcostsbecauseoftheAR4leasingroundandresultingprojectscomingonline.Renewablescostshaveseenfurtherdeclinesduetoincreaseddeployment,anddecreasedcostsastheyprogressfurtheralongthelearningcurve.FurtherimprovementsinturbinetechnologyforoffshoreandonshorewindhavedrivendownperMWcapitalcosts,aswellasincreasingannualenergygeneration.Forsolartechnologies,decreasesincapitalcostsandincreasesinplantcapacity,asinformedbyresearch,hasalsodrivendowntheLCOE.LCOEestimateshavereducedforalltransmissionnetworkconnectedtechnologiesastheynolongerhavetopayBSUoScharges,whichreducestheirvariableoperating&maintenancefees.22https://www.gov.uk/government/publications/beis-electricity-generation-costs-202033ElectricityGenerationCostsReport2023CCGThasseenincreasesaligningtotheincreaseingasprices.Table19-ChangeinLevelisedCostEstimatesforProjectsCommissioningin2025and2030,£/MWh,highsandlowsreflecthighandlowcapitalandpre-developmentcostestimates.Allinreal2021prices.Commissioning20252030BEISBEISCCGTHHigh2020This2020ThisClassCentral93report109reportLow91116(+23)107141(+32)OffshoreHigh90114(+23)105139(+32)WindCentral68113(+23)56138(+33)Low6149(-19)5143(-13)OnshoreHigh5544(-17)4639(-12)Wind5Central5540(-15)5535(-11)Low4943(-12)4840(-15)Large-High4238(-11)4236(-12)ScaleSolarCentral5533(-9)4931(-11)Low4748(-7)4243(-6)4241(-6)3737(-5)37(-5)32(-5)34ElectricityGenerationCostsReport2023Table20-ChangeinLevelisedCostEstimatesforProjectsCommissioningin2035and2040,£/MWh,highsandlowsreflecthighandlowcapitalandpre-developmentcostestimates.Allinreal2021prices.Commissioning20352040BEISBEISCCGTHHigh2020This2020ThisClassCentral125report137reportLow123167(+42)135181(+44)OffshoreHigh122165(+42)133179(+44)WindCentral52164(+42)48178(+45)Low4751(-1)4351(+3)OnshoreHigh4243(-4)3941(-2)Wind5Central5432(-10)5332(-7)Low4840(-14)4740(-13)Large-High4136(-12)4136(-11)ScaleSolarCentral4531(-10)4231(-10)Low3838(-7)3536(-6)3432(-6)3030(-5)28(-6)26(-4)35ElectricityGenerationCostsReport2023Section5:PeakingtechnologiesThissectionpresentsa£/kWmeasureforpeakingtechnologies(OCGT,reciprocatingengines,H2CCGT),aswellasanunabatedgasCCGTHClassforcomparison.Thismeasuresthecostofcapacityratherthanthecostofgeneration–itthereforeignoresfuelcosts,carboncostsandothervariablecosts.Thismeasureismoresuitableforcomparingtechnologieswheregenerationvarieswithdemand.Figure6representstheannualcashflowsrequiredtofinancethepre-development,construction,andfixedcostsforagenericplant.Thesecashflowsareassumedtobepaidovertheoperatinglifetimeoftheplant.Therangeofcostsiscreatedbyvaryingcapitalexpendituretothehighandlowvalues.Alltechnologiesareassumedtorunforafixed500hoursperyear,exceptunabatednaturalgasCCGT,whichisassumedtorunatbaseload.Thismetricisnotmeanttoillustratelikelycapacitymarketoutcomes,whichreflectarangeofotherfactors,includingdifferentcontractlengths,loadfactorandwholesalepriceexpectationsandothersourcesofrevenue.Figure10-Peakingtechnologies(reciprocatingdieselandgas,OCGTandHydrogenCCGT1000MWat500hoursperyear)andunabatedgasCCGT(atnormalloadfactors).£/kWperannumpresentedforconstructionandfixedoperatingcosts,withtechnology-specificdiscountrates.2025commissioningdates.36Thispublicationisavailablefrom:www.gov.uk/government/publications/electricity-generation-costs-2023Ifyouneedaversionofthisdocumentinamoreaccessibleformat,pleaseemailalt.formats@energysecurity.gov.uk.Pleasetelluswhatformatyouneed.Itwillhelpusifyousaywhatassistivetechnologyyouuse.
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