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

16 Pages Posted: 19 Dec 2009

See all articles by James McNerney

James McNerney

Massachusetts Institute of Technology (MIT)

Jessika E. Trancik

Massachusetts Institute of Technology; Santa Fe Institute

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Santa Fe Institute

Date Written: December 16, 2009

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, and capacity factor. The dominant determinants of costs at present are 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 or decreasing a little since then.This leads us to forecast that even without carbon capture and storage, and even under an optimistic scenario in which construction costs resume their previously decreasing trending behavior, the cost of coal-based electricity will drop for a while but eventually be determined by the price of coal, which varies stochastically but shows no long term decreasing trends. Our analysis emphasizes the importance of using long time series and comparing different electricity generation technologies using total costs, rather than costs of single components like capital.

Suggested Citation

McNerney, James and Trancik, Jessika E. and Farmer, J. Doyne, Historical Costs of Coal-Fired Electricity and Implications for the Future (December 16, 2009). Available at SSRN: https://ssrn.com/abstract=1524434 or http://dx.doi.org/10.2139/ssrn.1524434

James McNerney (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

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Jessika E. Trancik

Massachusetts Institute of Technology ( email )

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Cambridge, MA 02139-4307
United States

Santa Fe Institute

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J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

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Santa Fe Institute ( email )

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