Implications of uncertainty in technology cost projections for least-cost decarbonized electricity systems

Abstract

Plans for decarbonized electricity systems rely on projections of highly uncertain future technology costs. We use a stylized model to investigate the influence of future cost uncertainty, as represented by different projections in the National Renewable Energy Laboratory 2021 Annual Technology Baseline dataset, on technology mixes comprising least-cost decarbonized electricity systems. Our analysis shows that given the level of future cost uncertainty as represented by these projections, it is not possible to predict with confidence which technologies will play a dominant role in future least-cost carbon emission-free energy systems. Successful efforts to reduce costs of individual technologies may or may not lead to system cost reductions and widespread deployments, depending on the success of cost-reduction efforts for competing and complementary technologies. These results suggest a portfolio approach to reducing technology costs. Reliance on uncertain cost breakthroughs risks costly outcomes. Iterative decision-making with learning can help mitigate these risks.