The changing costs of technology and the optimal investment timing in the power sector

Authors: Clara F. Heuberger, Dr Iain Staffell, Professor Nilay Shah and Dr Niall Mac Dowell

This briefing paper looks at how the costs of technology change as we gain experience from using them. As a result, investing earlier in promising technologies will make long-term decarbonisation easier and more cost-effective.

Headlines

• The value of a power technology depends on the system it is operating within and on the services it can provide such as capacity, flexibility, carbon mitigation, etc.
• The right policies can bring down the cost of individual technologies and contribute significantly to a reduction in the overall system cost.
• Existing metrics for assessing the value of power generation technology, such as the levelised cost of electricity (LCOE), are insufficient for the 21st-century power system.
• New metrics must take account of whole system integration and the dynamics of this system.
• Starting investment in promising technologies earlier will make long-term decarbonisation easier and more cost-effective.

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