Costs methodology for 2050 Calculator

Title: Costs methodology for 2050 Calculator

Content: This note sets out the methodology we are using to include costs to the 2050 Calculator.

h1 Summary

The 2050 Costs Calculator includes costs for all activities associated with greenhouse gas emissions.  This includes fossil fuel combustion, industrial processes, agriculture and waste, land use, land use change and forestry (LULUCF). International aviation and shipping emissions are also included in the 2050 Calculator for complete coverage of all sectors. [Note: international aviation and shipping emissions are currently not included in the UK's 2050 target, primarily because of the lack of an internationally agreed methodology for assigning these international emissions to individual countries.  But these emissions have been included in the 2050 Calculator to ensure complete coverage of all sectors.] 

There are 130 technologies in the 2050 Costs Calculator and *capital, operating expenditure and fuel costs* are included for each of these to 2050.

The 2050 Costs Calculator has the following cost information for each technology and fuel in 2050:

* Since there is considerable uncertainty about costs in forty years’ time the Calculator uses a *costs range* [we do not have a costs range for international aviation and shipping] designed to be sufficiently wide as to capture the views of all credible experts. In particular:
** The *lower cost* estimate for 2050 is the most optimistic assessment of future technology costs published by a credible evidence source.  It assumes both technological progress to drive costs down over time and sufficient availability of skilled staff and materials to build and operate it.
** The *upper cost* estimate for 2050 is the most pessimistic view, assuming minimal technological progress  over the next 40 years. In practice this usually means assuming that technology costs remain frozen at today’s prices.
* *Default point estimate* – this is a point within the high/low range consistent with the latest cost assumptions from MARKAL.   It assumes the DECC central fossil fuel price assumption and 7% finance costs for all technologies.

The cost estimates in the 2050 Costs Calculator are drawn from a *wide range of credible, published sources*.  Sources include economic and energy models (MARKAL and ESME), sectoral analysis (Parsons Brinckerhoff, Mott MacDonald, AEA, NERA), UK Government Departments, independent analytical bodies such as the Committee on Climate Change and wherever possible the real world cost of technologies as reported by financial bodies or the media. The 2050 Calculator includes no new evidence about costs, it simply brings together existing published assumptions. 

The total costs of specific pathways are determined by the user's choices of technology and behaviour change in each sector.  Critically, the 2050 Costs Calculator has *no inbuilt cost-optimisation* function.

The 2050 Costs Calculator is particularly well suited to answering questions such as:

* What are the capital, operating and fuel costs of pathway X relative to pathway Y?
* What are the biggest component costs of pathway X?
* How might the capital, operating and fuel costs of pathway X change when, say, renewables costs are as cheap as credible experts believe possible, and nuclear costs are expensive?

The 2050 Calculator excludes wider costs including:

* welfare costs such as inconvenience of living in buildings with less comfortable temperatures and potential inconvenience of travelling less
* wider macroeconomic costs
* R&D costs
* the cost of most existing infrastructure (e.g. the capital and finance costs associated with existing power stations)
* the policy costs associated with regulating and enforcing future policy
* opportunity cost (e.g. the opportunity cost of investing in low carbon technologies rather than, say, better schools or hospitals, is not captured)
* public safety risks (perceived or actual) associated with incumbent technologies e.g. oil extraction, nuclear, CCS
* costs associated with embedded emissions.  The 2050 Calculator does not include embedded emissions because it is designed to reflect the UK's 2050 target and embedded emissions are not included in this.  [Note: international aviation and shipping are not included in the UK's 2050 target but they are included in the 2050 Calculator until the Government makes its final decision on whether or not to include them in the 2050 target.]

The 2050 Calculator also excludes important benefits associated with the move to a low carbon economy, in particular:

* avoided damage costs associated with climate change.  The Stern Review (2006) calculated these at up to 20% of global GDP annually
* energy security benefits
* wider resource efficiency savings.  [Stern et al point out the wider benefits not captured by economic models such as MARKAL and the 2050 Calculator.  See: Stern et al (2011) The Basic Economics of Low-Carbon Growth in the UK, policy brief, Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy.  http://www2.lse.ac.uk/GranthamInstitute/publications/Policy/docs/PB_economics-low-carbon-growth_Jun11.pdf.]

h2 Caveats

There are a number of important caveats to bear in mind when interpreting results from the 2050 Costs Calculator:-

# *Not impact on energy bills*. Results from the 2050 Costs Calculator are presented as £/person/year, but this should not be interpreted as the effect on energy bills.  The impact on energy bills of, say, building more wind turbines will depend on how policy is designed and implemented (e.g. via tax, subsidy, regulation, etc).  Taxes and subsidies are not captured in the 2050 Costs Calculator so we cannot use the tool to examine these effects.  The Government uses other, more sophisticated models to examine the effect of specific policy interventions on electricity and energy prices.

# *Pathway costs should be understood relative to other pathways*.  The total cost of pathways is presented in the 2050 Costs Calculator but for these to be meaningful they should be compared to the costs of another pathway.  This is because there is no “zero cost” option (unless the UK were to stop using energy altogether).  

# *The costs presented exclude energy security impacts, costs arising from the damaging impacts of climate change, welfare costs and wider macroeconomic impacts.*  The damage costs of climate change could be particularly significant – up to 20% of GDP per year. Other welfare costs excluded from the analysis include costs associated with living in cooler buildings, travelling less, changes to landscape, air and noise pollution.  The Calculator does not take into account taxes or subsidies, R&D costs, administrative costs associated with delivering policies, or wider macroeconomic costs. 

# *Long term, not short term analysis.*  The Calculator is best suited to long term analysis of the energy system in 2050 rather than policy implications over the 2010s and 2020s.  

# *User driven model, not market based.*  The 2050 Costs Calculator costs the combination of technologies chosen by the user . Consequently it does not take into account price interactions between supply and demand.  For example, if the cost of, say, electricity generation increases then the Calculator does not capture any elasticity of demand response from the electricity user.  Cost optimising models better handle such price responses. 

# *Costs are exogenous.*  Technology costs do not vary depending on the level of technology roll out.  However if the user has beliefs about how they would expect the unit costs of particular technologies to change in their pathway, they can sensitivity test the effect of varying these assumptions.

# *International aviation and shipping emissions are not currently included in the UK’s 2050 target* because of the lack of an internationally agreed methodology for assigning these international emissions to individual countries. They have been included in the Calculator to enable the user to consider emissions across all sectors. The Government will take a decision on whether international aviation and shipping emissions should be included in the 2050 target next year (2012).

h1 Contents

This paper sets out the methodology used to calculate capital, operating costs and fuel costs in the 2050 Calculator.

h1 Background

The 2050 Costs Calculator released today builds on the original 2050 Calculator first released in July 2010.  This tool enabled the public to join in an informed debate on the future of the UK’s energy system, and to support policymakers in making the best choices for the long-term. 

h1 Scope: Technology and fuel costs only

The Calculator will capture the technology and fuel costs associated with supplying and using energy and producing emissions between 2010 and 2050.  Specifically:-

* On the energy supply side, this includes power stations, primary energy sources (fossil fuels, uranium and biomass) and transmission networks.
* On the energy demand side, this includes energy users (heating systems, cars and industrial plants) and demand reducing equipment such as insulation.

As set out above, for each of the c. 130 technologies in the 2050 Calculator, we include capital, operating costs and fuel costs.

h1 Default costs

h1 Costs expressed as a range

In the "test assumptions" page in the web tool, the user is able to explore the effect of making more optimistic or pessimistic assumptions about future costs.

Future fuel and technology costs are highly uncertain.  The following are just a few factors which could cause future technology costs to be lower or higher:

* The climate change policy of other countries. Lots of long term, predictable climate initiatives internationally could have a big effect on RDD&D expenditure globally which could bring down technology costs.
* Success of scientists and engineers in discovering better, cheaper low carbon technology solutions.
* Technology roll out in other countries.  This could push prices up (e.g. if it results in a shortage of, say, CCS engineers), or push prices down (if learning by doing reduces unit costs).  The UK is not a very large market and so could be a price taker for many technologies.
* Technology roll out in the UK.  For example, the marginal cost of land used for wind turbines will increase as the roll out of wind increases.  Alternatively, marginal cost of installing charging points for electric vehicles may decline as the number of electric vehicles in circulation increases through learning by doing / economies of scale.

Our cost range is a simple way of attempting to capture all the above factors.

h2 The high and low ranges

* The cost range for 2050 represents the highest / lowest that credible experts can foresee costs being*.  Specifically:
* high: pessisimistic assessment of future costs, typically assuming that 2050 costs remain frozen at today’s prices
* low: optimistic assessment of future costs, such that 2050 costs are the lowest that credible studies suggest they could be.

Figure 1 illustrates what the high/low costs range and default costs could look like.

We have not used a point estimate for 2010; this reflects the reality that the same technology is currently sold in the market for a range of prices.

Where there is evidence to suggest it, the 2050 "high" cost estimate is higher than costs today.  For example, the 2050 high cost for nuclear is £4.5bn/GW (compared to a typical rate today of £2.1bn/GW).

Insert figure 1

h1 Costs are exogenous

The high/low costs we use for each technology will be the same regardless of which pathway the user selects.  In other words, costs are treated as exogenous to the model, not endogenous.

We will do this for two reasons:

# To keep the simplicity of the Calculator. If we made the Calculator capable of modelling learning rates then it would be a less transparent, simple and accessible tool.  
# The UK is likely to be a price taker in many technologies. It would arguably be spurious accuracy because levels of technology R&D and roll out in other countries will arguably have more of an impact on the UK than our own choices (i.e. the UK is a price taker). 

Although costs are exogenous, we do make a provision for minimal technological improvement over time.  For most technologies, we assume incremental improvements in energy efficiency over time.  So although the high, low cost estimates appear constant over time, on a like for like comparison prices are actually falling slightly.

h1 Defining the counterfactual

Given that the costs in the Calculator will be total costs, rather than incremental costs, we need a counterfactual to compare the costs of any pathway against. Even if we will give users the option to pick a preferred counterfactual, we need to decide what option we will give them by default.

The simplest, easiest to understand counterfactual is to assume minimal effort across all sectors.  This is generated by selecting effort level 1 (minimum) for all sectors in the Calculator.  However we should bear in mind the following about this "All Level 1s" pathway:

* It does not necessarily reflect the effect of existing or planned policy.
* It does not achieve an 80% reduction in emissions on 1990 levels by 2050.
* It makes unrealistic assumptions about energy imports. The pathway would have a strong dependence on natural gas, comprising nearly 2/3rds of primary energy demand in 2050 with the majority imported (90% including oil).
* It is not least cost - for example, there is no use of behavioural change to reduce energy demand and emissions. 

All level 1s will form our best guess counter-factual, however for the webtool we intend that users will have to choose a counterfactual to compare costs with.

h1 Discounting

Click here for details of: discount rate methodology.

h1 Financing

Click here for: finance costs methodology. 

h1 What this analysis should/not be used for

The Calculator indicates:

* How costs and cost uncertainty varies by sector, technology and pathway
* How costs are split by capital, operating and fuel costs by technology and sector

Beyond the scope of the model:

* Testing out different policy or global scenarios.  For example:
** Effect of high roll out of nuclear globally on nuclear costs in the UK
** Effect of high levels of R&D globally
** Effect of different levels of technology roll out in the UK on costs.  e.g. Effect of "big bang" roll out of electric vehicles compared to a gradual scale up.
* Analysis of the drivers of technology costs and the effects on price
* Household bill impacts or any analysis of who pays
* Appraisal of policy options.

h1 Questions for stakeholders

# *Finance costs*: as a default, we hve assumed finance costs are 7% for all technologies; is it too simplistic to use the same interest rate for all technologies?  See finance costs methodology.  Do you have any evidence for what interest rates and loan periods are used to finance technology capital costs today? 
# *Discount rate*: we currently use a discount rate of 3.5% for the first 30 years and 3% for the remainder of the appraisal period (in line with HMG Green Book guidance).  However, we could use a Stern-adjusted lower discount rate.  See: discount rate methodology.  What do you think?

part of the 3.5% reflects catastrophe risk and pure time preference.  There is a debate to be had on whether we should discount for these elements; excluding them would reduce the discount rate.

# *Upper end of costs range*: our upper estimate of technology costs in 2050 is technology prices today.  We judge that this is the highest that credible experts can foresee the costs being in 2050.  Do you have any views on whether this is a sensible definition of the upper estimate for all technologies? 
# *Lower end of costs range*: for simplicity, for each technology we have assumed the low cost estimate is constant between 2007 and 2050 (see graph 2).  But it would be more realistic to make this cost decline over time (see graph 3).  Views on how to do this would be helpful.
# *Incremental costs*: there are three possible ways of working out the total cost of one pathway over and above another pathway, as set out in the incremental costs page.  We propose to use a method that compares the best case for a scenario against the worst case of the counterfactual.  Your views on whether this is sensible would be helpful.
# *Data on lumpy costs in CCS, international geosequestration, nuclear decommissioning and waste and industry.*  Wherever possible, we seek to record capital costs as lumpy investments.  But for the above named technologies we have not been able to do this because the costs data has been expressed as a function of energy output.  Any data to correct this would be appreciated.

h1 General comments

Please add any general comments or responses to above questions in here:

Mike Childs of Friends of the Earth has some general issues around methodology .

Mike Knowles (Knowlesmichael2 ), member of IMech, has some comments around the impact of recent government policies on investment costs for renewables. See page: Mike Knowles' comments on investment and government involvement in renewable power generation .



User: Sophie Hartfield

Picture updated at: 

Signed off by: Sophie Hartfield

Signed off at: 2011-08-10 10:58:10 UTC

Title: Costs methodology for 2050 Calculator

Content: This note sets out the methodology we are using to include costs to the 2050 Calculator.

h1 Summary

The 2050 Costs Calculator includes costs for all activities associated with greenhouse gas emissions.  This includes fossil fuel combustion, industrial processes, agriculture and waste, land use, land use change and forestry (LULUCF). International aviation and shipping emissions are also included in the 2050 Calculator for complete coverage of all sectors. [Note: international aviation and shipping emissions are currently not included in the UK's 2050 target, primarily because of the lack of an internationally agreed methodology for assigning these international emissions to individual countries.  But these emissions have been included in the 2050 Calculator to ensure complete coverage of all sectors.] 

There are 130 technologies in the 2050 Costs Calculator and *capital, operating expenditure and fuel costs* are included for each of these to 2050.

The 2050 Costs Calculator has the following cost information for each technology and fuel in 2050:

* Since there is considerable uncertainty about costs in forty years’ time the Calculator uses a *costs range* [we do not have a costs range for international aviation and shipping] designed to be sufficiently wide as to capture the views of all credible experts. In particular:
** The *lower cost* estimate for 2050 is the most optimistic assessment of future technology costs published by a credible evidence source.  It assumes both technological progress to drive costs down over time and sufficient availability of skilled staff and materials to build and operate it.
** The *upper cost* estimate for 2050 is the most pessimistic view, assuming minimal technological progress  over the next 40 years. In practice this usually means assuming that technology costs remain frozen at today’s prices.
* *Default point estimate* – this is a point within the high/low range consistent with the latest cost assumptions from MARKAL.   It assumes the DECC central fossil fuel price assumption and 7% finance costs for all technologies.

The cost estimates in the 2050 Costs Calculator are drawn from a *wide range of credible, published sources*.  Sources include economic and energy models (MARKAL and ESME), sectoral analysis (Parsons Brinckerhoff, Mott MacDonald, AEA, NERA), UK Government Departments, independent analytical bodies such as the Committee on Climate Change and wherever possible the real world cost of technologies as reported by financial bodies or the media. The 2050 Calculator includes no new evidence about costs, it simply brings together existing published assumptions. 

The total costs of specific pathways are determined by the user's choices of technology and behaviour change in each sector.  Critically, the 2050 Costs Calculator has *no inbuilt cost-optimisation* function.

The 2050 Costs Calculator is particularly well suited to answering questions such as:

* What are the capital, operating and fuel costs of pathway X relative to pathway Y?
* What are the biggest component costs of pathway X?
* How might the capital, operating and fuel costs of pathway X change when, say, renewables costs are as cheap as credible experts believe possible, and nuclear costs are expensive?

The 2050 Calculator excludes wider costs including:

* welfare costs such as inconvenience of living in buildings with less comfortable temperatures and potential inconvenience of travelling less
* wider macroeconomic costs
* R&D costs
* the cost of most existing infrastructure (e.g. the capital and finance costs associated with existing power stations)
* the policy costs associated with regulating and enforcing future policy
* opportunity cost (e.g. the opportunity cost of investing in low carbon technologies rather than, say, better schools or hospitals, is not captured)
* public safety risks (perceived or actual) associated with incumbent technologies e.g. oil extraction, nuclear, CCS
* costs associated with embedded emissions.  The 2050 Calculator does not include embedded emissions because it is designed to reflect the UK's 2050 target and embedded emissions are not included in this.  [Note: international aviation and shipping are not included in the UK's 2050 target but they are included in the 2050 Calculator until the Government makes its final decision on whether or not to include them in the 2050 target.]

The 2050 Calculator also excludes important benefits associated with the move to a low carbon economy, in particular:

* avoided damage costs associated with climate change.  The Stern Review (2006) calculated these at up to 20% of global GDP annually
* energy security benefits
* wider resource efficiency savings.  [Stern et al point out the wider benefits not captured by economic models such as MARKAL and the 2050 Calculator.  See: Stern et al (2011) The Basic Economics of Low-Carbon Growth in the UK, policy brief, Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy.  http://www2.lse.ac.uk/GranthamInstitute/publications/Policy/docs/PB_economics-low-carbon-growth_Jun11.pdf.]

h2 Caveats

There are a number of important caveats to bear in mind when interpreting results from the 2050 Costs Calculator:-

# *Not impact on energy bills*. Results from the 2050 Costs Calculator are presented as £/person/year, but this should not be interpreted as the effect on energy bills.  The impact on energy bills of, say, building more wind turbines will depend on how policy is designed and implemented (e.g. via tax, subsidy, regulation, etc).  Taxes and subsidies are not captured in the 2050 Costs Calculator so we cannot use the tool to examine these effects.  The Government uses other, more sophisticated models to examine the effect of specific policy interventions on electricity and energy prices.

# *Pathway costs should be understood relative to other pathways*.  The total cost of pathways is presented in the 2050 Costs Calculator but for these to be meaningful they should be compared to the costs of another pathway.  This is because there is no “zero cost” option (unless the UK were to stop using energy altogether).  

# *The costs presented exclude energy security impacts, costs arising from the damaging impacts of climate change, welfare costs and wider macroeconomic impacts.*  The damage costs of climate change could be particularly significant – up to 20% of GDP per year. Other welfare costs excluded from the analysis include costs associated with living in cooler buildings, travelling less, changes to landscape, air and noise pollution.  The Calculator does not take into account taxes or subsidies, R&D costs, administrative costs associated with delivering policies, or wider macroeconomic costs. 

# *Long term, not short term analysis.*  The Calculator is best suited to long term analysis of the energy system in 2050 rather than policy implications over the 2010s and 2020s.  

# *User driven model, not market based.*  The 2050 Costs Calculator costs the combination of technologies chosen by the user . Consequently it does not take into account price interactions between supply and demand.  For example, if the cost of, say, electricity generation increases then the Calculator does not capture any elasticity of demand response from the electricity user.  Cost optimising models better handle such price responses. 

# *Costs are exogenous.*  Technology costs do not vary depending on the level of technology roll out.  However if the user has beliefs about how they would expect the unit costs of particular technologies to change in their pathway, they can sensitivity test the effect of varying these assumptions.

# *International aviation and shipping emissions are not currently included in the UK’s 2050 target* because of the lack of an internationally agreed methodology for assigning these international emissions to individual countries. They have been included in the Calculator to enable the user to consider emissions across all sectors. The Government will take a decision on whether international aviation and shipping emissions should be included in the 2050 target next year (2012).

h1 Contents

This paper sets out the methodology used to calculate capital, operating costs and fuel costs in the 2050 Calculator.

h1 Background

The 2050 Costs Calculator released today builds on the original 2050 Calculator first released in July 2010.  This tool enabled the public to join in an informed debate on the future of the UK’s energy system, and to support policymakers in making the best choices for the long-term. 

h1 Scope: Technology and fuel costs only

The Calculator will capture the technology and fuel costs associated with supplying and using energy and producing emissions between 2010 and 2050.  Specifically:-

* On the energy supply side, this includes power stations, primary energy sources (fossil fuels, uranium and biomass) and transmission networks.
* On the energy demand side, this includes energy users (heating systems, cars and industrial plants) and demand reducing equipment such as insulation.

As set out above, for each of the c. 130 technologies in the 2050 Calculator, we include capital, operating costs and fuel costs.

h1 Default costs

h1 Costs expressed as a range

In the "test assumptions" page in the web tool, the user is able to explore the effect of making more optimistic or pessimistic assumptions about future costs.

Future fuel and technology costs are highly uncertain.  The following are just a few factors which could cause future technology costs to be lower or higher:

* The climate change policy of other countries. Lots of long term, predictable climate initiatives internationally could have a big effect on RDD&D expenditure globally which could bring down technology costs.
* Success of scientists and engineers in discovering better, cheaper low carbon technology solutions.
* Technology roll out in other countries.  This could push prices up (e.g. if it results in a shortage of, say, CCS engineers), or push prices down (if learning by doing reduces unit costs).  The UK is not a very large market and so could be a price taker for many technologies.
* Technology roll out in the UK.  For example, the marginal cost of land used for wind turbines will increase as the roll out of wind increases.  Alternatively, marginal cost of installing charging points for electric vehicles may decline as the number of electric vehicles in circulation increases through learning by doing / economies of scale.

Our cost range is a simple way of attempting to capture all the above factors.

h2 The high and low ranges

* The cost range for 2050 represents the highest / lowest that credible experts can foresee costs being*.  Specifically:
* high: pessisimistic assessment of future costs, typically assuming that 2050 costs remain frozen at today’s prices
* low: optimistic assessment of future costs, such that 2050 costs are the lowest that credible studies suggest they could be.

Figure 1 illustrates what the high/low costs range and default costs could look like.

We have not used a point estimate for 2010; this reflects the reality that the same technology is currently sold in the market for a range of prices.

Where there is evidence to suggest it, the 2050 "high" cost estimate is higher than costs today.  For example, the 2050 high cost for nuclear is £4.5bn/GW (compared to a typical rate today of £2.1bn/GW).

Insert figure 1

h1 Costs are exogenous

The high/low costs we use for each technology will be the same regardless of which pathway the user selects.  In other words, costs are treated as exogenous to the model, not endogenous.

We will do this for two reasons:

# To keep the simplicity of the Calculator. If we made the Calculator capable of modelling learning rates then it would be a less transparent, simple and accessible tool.  
# The UK is likely to be a price taker in many technologies. It would arguably be spurious accuracy because levels of technology R&D and roll out in other countries will arguably have more of an impact on the UK than our own choices (i.e. the UK is a price taker). 

Although costs are exogenous, we do make a provision for minimal technological improvement over time.  For most technologies, we assume incremental improvements in energy efficiency over time.  So although the high, low cost estimates appear constant over time, on a like for like comparison prices are actually falling slightly.

h1 Defining the counterfactual

Given that the costs in the Calculator will be total costs, rather than incremental costs, we need a counterfactual to compare the costs of any pathway against. Even if we will give users the option to pick a preferred counterfactual, we need to decide what option we will give them by default.

The simplest, easiest to understand counterfactual is to assume minimal effort across all sectors.  This is generated by selecting effort level 1 (minimum) for all sectors in the Calculator.  However we should bear in mind the following about this "All Level 1s" pathway:

* It does not necessarily reflect the effect of existing or planned policy.
* It does not achieve an 80% reduction in emissions on 1990 levels by 2050.
* It makes unrealistic assumptions about energy imports. The pathway would have a strong dependence on natural gas, comprising nearly 2/3rds of primary energy demand in 2050 with the majority imported (90% including oil).
* It is not least cost - for example, there is no use of behavioural change to reduce energy demand and emissions. 

All level 1s will form our best guess counter-factual, however for the webtool we intend that users will have to choose a counterfactual to compare costs with.

h1 Discounting

Click here for details of: discount rate methodology.

h1 Financing

Click here for: finance costs methodology. 

h1 What this analysis should/not be used for

The Calculator indicates:

* How costs and cost uncertainty varies by sector, technology and pathway
* How costs are split by capital, operating and fuel costs by technology and sector

Beyond the scope of the model:

* Testing out different policy or global scenarios.  For example:
** Effect of high roll out of nuclear globally on nuclear costs in the UK
** Effect of high levels of R&D globally
** Effect of different levels of technology roll out in the UK on costs.  e.g. Effect of "big bang" roll out of electric vehicles compared to a gradual scale up.
* Analysis of the drivers of technology costs and the effects on price
* Household bill impacts or any analysis of who pays
* Appraisal of policy options.

h1 Questions for stakeholders

# *Finance costs*: as a default, we hve assumed finance costs are 7% for all technologies; is it too simplistic to use the same interest rate for all technologies?  See finance costs methodology.  Do you have any evidence for what interest rates and loan periods are used to finance technology capital costs today? 
# *Discount rate*: we currently use a discount rate of 3.5% for the first 30 years and 3% for the remainder of the appraisal period (in line with HMG Green Book guidance).  However, we could use a Stern-adjusted lower discount rate.  See: discount rate methodology.  What do you think?
# *Upper end of costs range*: our upper estimate of technology costs in 2050 is technology prices today.  We judge that this is the highest that credible experts can foresee the costs being in 2050.  Do you have any views on whether this is a sensible definition of the upper estimate for all technologies? 

h1 General comments

Please add any general comments or responses to above questions in here:

Mike Childs of Friends of the Earth has some general issues around methodology .

Mike Knowles (Knowlesmichael2 ), member of IMech, has some comments around the impact of recent government policies on investment costs for renewables. See page: Mike Knowles' comments on investment and government involvement in renewable power generation .



User: Sophie Hartfield

Picture updated at: 

Signed off by: Sophie Hartfield

Signed off at: 2011-08-10 10:58:10 UTC