NEA System Cost Analysis for Integrated Low-Carbon Electricity Systems: A Guide for Stakeholders and Policymakers

The imperative to reduce carbon emissions is profoundly transforming the electricity and energy systems of OECD and NEA countries. This sets in motion a number of interrelated developments that challenge traditional understandings of the way energy systems work. These changes also require a reappraisal of established notions of costs at the level of the integrated electricity system. Different technologies with comparable costs at the level of the individual plant can thus have very different effects on the total costs of a system. This impacts the strategic decision-making of energy policymakers with regard to the energy mix. It relates, in particular, to optimising the trade-offs between dispatchable low carbon sources of electricity, such as nuclear energy or hydroelectricity, and variable sources, such as wind and solar photovoltaic (PV), that will be the backbone of future low-carbon electricity systems.

The present guide aims at providing a succinct synthesis of what is NEA system cost analysis and how it can help energy experts and policymakers to gain additional insights about the cost implications of different strategic choices when designing future electricity and energy systems operating under stringent carbon constraints. The purpose of this guide is to provide a first overview of what kind of results system cost analysis can provide and which questions may be asked in order to develop or test certain policy proposal of relevance.