Analysis of generation cost changes during China’s energy transition

Abstract

How to cut down power generation cost is an important issue during energy system transformation. This study examines the pathway of China’s coal-fired and clean power’s unit generation cost changes during 2007–2015 and predicts the change trends of each type of power between 2016 and 2025. The results show that the cost of coal-fired power will increase to 0.50–0.73 Yuan/kWh in 2025 because of the stricter environmental regulations and the establishment of a nationwide carbon emission trading market. Conversely, the cost of clean energy power, with the exception of hydropower, shows a decreasing trend between 2007 and 2025, with the costs of nuclear power, solar power, and wind power declining from 0.40, 4.34, and 0.56 Yuan/kWh to 0.33, 0.31, and 0.49 Yuan/kWh, respectively. However, the cost of hydropower displays an increasing trend from 0.22 to 0.26 Yuan/kWh during 2007–2025 due to increases in construction costs. Considering the external cost increases applying to coal-fired power and the declining trend caused by the learning rates of renewable power, the cost of all the clean energy power will be lower than the costs of coal-fired power before 2025. The cost sharing of coal-fired power is also analyzed in this study. However, there are a number of relevant economic and policy measures that are needed to be taken by the government to fulfill this transformation.