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

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.