Junex inc.

For an Objective Analysis of the Facts

Scientific Studies and Reports

13 February 2004

The Cost of Generating

The objective of this study is to provide decision makers with simple, soundly based indicators of the cost performance for alternative electricity generation technologies. The scope required a certain amount of simplification and approximation of issues that would be of at most importance to a commercial organisation making an investment decision in the electricity generation market. These include treatment of risk and uncertainty, security of supply of fuel and project financial structures as well as market and regulation issues. The Academy believes that a more comprehensive treatment would be of value to policy makers.

The complexities of the UK electricity market also mean that there are a large number of non-trivial, variable costs that are not specific to the technologies used to generate electricity. These all have a bearing on the price that the consumer eventually pays, but as these costs are often spread across the whole market as system operating costs, they were therefo­re excluded from this study. Further examination of these system costs, especially the impact of transmission costs, could also prove valuable.

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