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Power generation: costsWhy the cost matters to you.

Natural gas. The clear energy choice.

Natural gas – lowest cost and reliable Natural gas is the lowest total cost, cleanest, and most efficient thermal baseload power generation technology1. Advances in technology have unlocked vast reserves within North America, and we now have over a 100 year supply of natural gas at current usage rates2. The U.S. Energy Information Administration (U.S. EIA) recognizes the significant new supplies of natural gas, forecasting growing demand for natural gas and sustained lower prices far into the future3.

Sources1. Energy Information Administration, 2011 Annual Energy Outlook,

http://205.254.135.24/oiaf/aeo/electricity_generation.html Hydroelectric power generation has been omitted from this comparison given its limited availability and growth potential in many geographical areas.

2. ANGA, www.anga.us

3. Energy Information Administration, Statistics Canada, CANSIM, www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm

4. NYMEX Central Appalachian Coal Settlement Price History, http://www.eia.gov/coal/nymex/html/nymex_historical.html

5. The Brattle Group, www.brattle.com/_documents/UploadLibrary/Upload898.pdf

6. Based off 2010 U.S. Energy Information Administration estimates

7. IHS Global Standards, www.ihs.com/products/Global-Insight/industry-economic-report.aspx?ID=106595757

8. Barclays Capital, North American Natural Gas and Power, August 2011, www.barcap.com

9. Association of Electricity Producers, www.aepuk.com/further-information/faqs

Power generation: costs

FA

CT

THE DEPARTMENT OF ENERGY

IDENTIFIED NATURAL GAS GENERATION

AS THE LOWEST COST SOLUTION FOR NEW

POWER GENERATION1

2011 electricity generation Natural gas accounts for 22 percent of Canada and U.S. electricity generation3 (Percentages may not total 100% due to independent rounding)

0%

10%

20%

30%

40%

50%

60%

1997 2011

Coal 39%

Natural gas 22%Nuclear 19%Hydro 15%

Renewables 4%

1% annual decline

1% annual increase

Natural gas is the fastest growing power generation fuel3(Percentages may not total 100% due to independent rounding)

Coal – shrinking market shareU.S. coal prices increased 76 percent from 2004 to 2011, according to the Department of Energy (DOE)4. Coal’s market share in Canada and the U.S. has decreased 10.6 percent from 1997 to 2011 bringing coal’s share of the power market down to 39 percent (its lowest level in decades)3. In addition to rising coal extraction and transportation costs, compliance with environmental regulations is projected to dramatically increase costs. The Brattle Group estimates compliance costs for some coal plants to be as high as an additional 4.6 cents per kilowatt-hour (kWh), leading to a significant increase in the cost of coal-fired power generation5. As a result of cost pressure, Barclays Capital estimates 42 Gigawatts (GW)* of antiquated underutilized coal-power plants to be shutdown by 20158.

Nuclear – reliable but expensive Nuclear power generation is a reliable baseload energy source without greenhouse-gas emissions; however, the cost to construct a new nuclear plant exceeds nearly all other generation types. A nuclear power plant can cost over five times the cost of constructing a natural gas plant6. A long-term solution has not yet been developed to address safety concerns stemming from the safe handling and disposal of radioactive waste7. Although a few units are expected to come on line in the next decade, cost and safety considerations have stopped nuclear plant construction in North America for the past 15 years.

Wind – subsidy dependent and intermittent The largest challenge with wind is its intermittent nature, making it unreliable for baseload service without being backed-up by an existing power source such as natural gas or hydro-electricity. U.S. taxpayers have funded subsidies to develop wind energy systems costing approximately $5 billion in 2010. Barclays Capital estimates the cost of wind generation can be up to 60 percent greater without subsidies8.

* One GW plant could supply power to roughly 990,000 average homes9

0.00

0.05

0.10

0.15

Advan

ced n

uclea

r

Wind

– ons

hore

Conven

tiona

l coal

Natural

gas b

aseload

Levelized capital cost

Transmission investment

Fixed Operational & Maintenance (O&M)

Variable O&M (including fuel)

Coal 39%

Natural gas 22%

Hydro 15% Renewable and other 4%

Nuclear 19%

Levelized cost of new power generation120

08 U

.S.$

/kW

h

Average levelized power costs for plants entering service in 2016

Canada and U.S. percentages

5678

5

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