The Social Cost of Electricity

The Social Cost of Electricity

Scenarios and Policy Implications

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Anil Markandya, Andrea Bigano and Roberto Porchia

This book reports and rationalizes the state-of-the-art concerning the social costs of electricity generation. Social costs are assessed by adding to the private generation costs, the external costs associated with damages to human health, the environment, crops, materials, and those related to the consequences of climate change. The authors consider the evolution of these costs up to 2030 for major electricity generating technologies and, using these estimates, evaluate policy options for external cost internalization, providing quantitative scenarios by country and primary fuel for 2010, 2020 and 2030. While mainly focusing on European countries, the book also examines the situation in key emerging economies such as China, India, Brazil and Turkey.

Chapter 4: Social Costs of Electricity in the EU

Roberto Porchia

Subjects: economics and finance, energy economics, environmental economics, environment, environmental economics


Roberto Porchia 4.1 METHODOLOGY AND DATA DESCRIPTION This chapter provides new estimates on the social costs of electricity generation in Europe. Results are obtained by summing the external costs from impacts on human health, the environment, crops, materials, and climate change impacts to private generation costs. This exercise results in levelised and homogenous values for all EU27 countries. Data are levelised since European average values for private costs, emissions inventory and external costs of greenhouse gases and heavy metals are considered. Data are homogeneous as the same set of technologies, which include nuclear and fossil-fired power plants, renewables and combined heat and power plants, is considered for the whole analysis. Results are provided for the present (period 2005–2010), 2020 and 2030.1 Private Costs Included in Social Costs To calculate social costs, private costs calculated with the average levelised generating costs (ALLGC) methodology, as described in Chapter 3, are used. The methodology calculates the generation costs (in EuroCents/kWh) on the basis of net power supplied to the station busbar, where electricity is fed to the grid. This cost estimation methodology discounts the time series of expenditures to their present values in 2005, which is the specified base year, by applying a discount rate. According to the methodology used in the IEA study in 2005,2 the levelised lifetime cost per kWh of electricity generated is the ratio of total lifetime expenses versus total expected outputs, expressed in terms of present value equivalent. The total lifetime expenses include the value of...

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