Presenting the future: An assessment of future cost estimation methodologies in the electricity sector
R Gross, P Heptonstall, P Greenacre, C Candelise, F Jones, A Castillo Castillo
An assessment of future costs estimation methodologies in the electricity generation sector REF UKERC/RR/TPA/2013/001 www.ukerc.ac.uk The Meeting Place -hosting events for the whole of the UK research communitywww.ukerc.ac.uk/support/TheMeetingPlace National Energy Research Network -a weekly newsletter containing news, jobs, events, opportunities and developments across the energy field -www.ukerc.ac.uk/support/NERN Research Atlas -the definitive information resource for current and past UK
... gy research and development activity -http://ukerc.rl.ac.uk/ This report was produced by the UK Energy Research Centre's (UKERC) Technology and Policy Assessment (TPA) function. The TPA was set up to inform decision-making processes and address key controversies in the energy field. It aims to provide authoritative and accessible reports that set very high standards for rigour and transparency. The subject of this report was chosen after extensive consultation with energy sector stakeholders and upon the recommendation of the TPA Advisory Group, which is comprised of independent experts from government, academia and the private sector. The primary objective of the TPA, reflected in this report, is to provide a thorough review of the current state of knowledge. New research, such as modelling or primary data gathering may be carried out when essential. It also aims to explain its findings in a way that is accessible to non-technical readers and is useful to policymakers. The TPA uses protocols based upon best practice in evidence-based policy, and UKERC undertook systematic and targeted searches for reports and papers related to this report's key question. Experts and stakeholders were invited to comment and contribute through an expert group. The project scoping note and related materials are available from the UKERC website, together with more details about the TPA and UKERC. About UKERC The UK Energy Research Centre is the focal point for UK research on sustainable energy. It takes a whole systems approach to energy research, drawing on engineering, economics and the physical, environmental and social sciences. The Centre's role is to promote cohesion within the overall UK energy research effort. It acts as a bridge between the UK energy research community and the wider world, including business, policymakers and the international energy research community and is the centrepiece of the Research Councils Energy Programme. www.ukerc.ac.uk Preface Presenting the Future: An assessment of future costs estimation methodologies in the electricity generation sector 1 Executive Summary Overall, this review reveals a large dataset on technology costs (past, present and future) and a rich and complex literature that discusses the factors that affect cost trends over time. Our understanding of cost reduction forecasting is undoubtedly improving with time, in part through learning from recent significant failures to anticipate changes to cost trends. We know with confidence that costs can fall, and that given the right conditions 'learning' can make this happen. The role of policy in driving cost reduction is very apparent in several of the case studies. However, it is less straightforward to be confident about the extent to which costs will fall in a particular period in time, and policy can have multiple impacts, for example regulatory complexity can also militate against cost reduction. Cost reduction projections are difficult and challenging and often proved wrong. Perhaps the key challenge is in representing and communicating uncertainty -what is known, not known and unsure in an uncertain world -to decision-makers seeking certainty.