Historical Costs of Coal-Fired Electricity and Implications for the Future

TL;DR

This study analyzes the historical costs of coal-fired electricity in the US from 1882 to 2006, highlighting the dominant influence of coal prices and construction costs on overall costs and discussing implications for future energy planning.

Contribution

It provides a long-term decomposition of electricity costs, emphasizing the fluctuating impact of coal prices and the importance of using comprehensive cost analysis over time.

Findings

Coal prices fluctuate randomly and set a cost floor.

Construction costs decreased then increased, stabilizing since 1990.

Future costs will be primarily influenced by coal price fluctuations.

Abstract

We study the costs of coal-fired electricity in the United States between 1882 and 2006 by decomposing it in terms of the price of coal, transportation costs, energy density, thermal efficiency, plant construction cost, interest rate, capacity factor, and operations and maintenance cost. The dominant determinants of costs have been the price of coal and plant construction cost. The price of coal appears to fluctuate more or less randomly while the construction cost follows long-term trends, decreasing from 1902 - 1970, increasing from 1970 - 1990, and leveling off since then. Our analysis emphasizes the importance of using long time series and comparing electricity generation technologies using decomposed total costs, rather than costs of single components like capital. By taking this approach we find that the history of coal-fired electricity costs suggests there is a fluctuating floor to its future costs, which is determined by coal prices. Even if construction costs resumed a decreasing trend, the cost of coal-based electricity would drop for a while but eventually be determined by the price of coal, which fluctuates while showing no long-term trend.