The LCOE is an important measurement for comparing the unit costs of different electricity technologies to guide discussion and decision-making [10]. The LCOE are the total costs of power generating technology per unit of electricity (MWh). The total costs of power station include:

・ Pre-development

・ Construction

・ Infrastructure

・ Fixed O&M (operations and maintenance)

・ Variable O&M

・ Insurance

・ Connection and Use of System

・ Fuel

・ Carbon

The LCOE represents the present value of the unit cost of electricity over the lifetime of the powerstation. To account for the time-value of money, the whole costs and benefits are adjusted for inflation and discounted rate. A relatively low LCOE means that electricity is being produced at a low cost. There is a gap between the LCOE and the financial costs in real electricity market due to some specific uncertainties such as fuel and carbon price.

The LCOE equation is an evaluation of the life-cycle energy cost and life-cycle energy production [11]. To evaluate the total cost of electricity, the streams of costs are converted to a net present value using the time value of money by discounted cash flow model. The LCOE calculation begins with Equation (1), expressing the equality between the present value of the sum of revenues on the left-hand side and the present value of the sum of costs on the right-hand side. Equation (2) is the LCOE formula, the average lifetime LCOE are the total cost of electricity technology over its total electricity production. It is not the MWhs that are discounted but instead it is the revenue from those MWh that is being discounted, as today’s revenue has more value to the investor than revenue tomorrow [12].

Discounted rate, also known as the hurdle rate, is the minimum Internal Rate of Return (IRR) that a company expects to earn when investing in a project. It denotes the level of risk to invest a project, riskier projects generally have higher hurdle rate [13].

P_MWh = The lifetime remuneration to the supplier for electricity;

MWh = The amount of electricity produced in MWh;

(1 + r)^−t = The discount factor for year t;

O & M_t = Operation and maintenance costs in year t;

Fuel & Carbon_t = Fuel and carbon costs in year t;

r = Discount rate;

All data and assumptions are from independent consultants which are commissioned by the UK’s Department of Energy & Climate Change (DECC) [14]. Arup and Leigh [Fisher [16] [17] provide cost and technical assumptions for the renewable technologies and non-renewable technologies individually; NERA Economic Consulting [18] provide a report on hurdle rates for projects starting development from 2015. The estimate of fuel price from 2015 to 2040 is on the basis of DECC [19] 2015 fossil fuel price assumptions report. According to the UK’s Department for Business, Energy and Industrial Strategy (BEIS) update, the carbon price is £18/tCO₂ from 2016/17 to 2019/20, and then rising to around £35/tCO₂ in 2030 and £200/tCO₂ in 2050 (in 2013 price) [15].

Figure 1 shows the LCOE of CCGT H class, onshore (>5 MW), offshore wind round 3 and large scale PV projects which begin the pre-development from 2018 to 2025. LCOE of Wind and solar PV technologies is decreasing due to the reduction of construction cost and increment of average load factor. Besides, the main reason that causes LCOE of CCGT continuous rise is the increasing growth of carbon price. According to Figure 1., The LCOE of onshore technology is the lowest; the LCOE of large-scale PV will below the CCGT technology when projects start in or after 2019; And the LCOE of offshore technology is decreasing from £114/MWh to £92/MWh from 2018 to 2025, which is close to the CCGT technology of £90/MWh in 2025.

Table 1 represents the LCOE of CCGT with and without CCS technology project starting in 2030, 2035 and 2040 respectively. Post and pre-combustion technology could capture 90% and 93% carbon dioxide respectively. And the rest of greenhouse gases need to be paid the carbon cost, so the increasing carbon price leads to the increase of LCOE. The LCOE of pre-combustion technology is the highest among 2030, 2035 and 2040 respectively. On the contrary, post-

combustion technology is the lowest. Moreover, oxyfuel combustion technology has the trend to be the cheapest CCS technology.

According to the estimated results, CCGT with CCS is used as the main low- carbon fossil fuel power generation technology would serve as the peaking or backup power plant in the UK’s electricity market. And renewable energy would make a huge contribution to the low-carbon economy. The most interesting thing is the LCOE of CCGT without CCS is lower than that of CCGT using CCS, even though it includes the carbon cost to release emissions directly into the atmosphere. Currently, the LCOE of CCGT with CCS is not competitive enough with wind and solar PV technology. But, the CCS technology has much potential to reduce its LCOE, such as investing in large CO₂ storage clusters with shared pipelines to decrease the operation cost; re-use of existing oil and gas infrastructure to reduce the construction cost; developing a subsidiary supply business to increase the revenue of power plant. If the LCOE of CCGT with CCS could be reduced to an appropriate price level, the UK government could use CCS technology to maintain secure and low carbon electricity as more intermittent renewables and inflexible nuclear come onto the grid, and does not worry about the suddenly increased household electricity bills.