Incorporating externalities into a full cost approach to electric power generation life-cycle costing

This study presents a full cost approach to determine the levelized cost of energy (LCOE) of 14 electricity generation technologies. It encompasses costs incurred at all stages of the fuel cycle, including those that are traditionally omitted from economic evaluations of generation technologies. Incorporating these "externalities" increases the likelihood of developing the most economical and sustainable power resource from a societal perspective. The following externalities are included in this analysis: damage from air pollution, energy security, transmission and distribution costs, and other environmental impacts. Incorporating externalities has a large impact on the LCOE and the relative attractiveness of electricity generation options. Results indicate that clean and efficient generation technologies are the most attractive when all options are examined using a full cost, levelized approach. (C) 2004 Elsevier Ltd. All rights reserved.