A Power Generation Primer
Keep this by your bed for reference
You flick a switch, and there’s light.
Few of us in the developed world remember a time before electricity was ubiquitous. It just works. But beneath this surface of reliability, there’s been a quiet revolution. Half a century ago, coal was king. Even 20 years ago, it dominated electricity generation in the US, China, Germany, and the UK.
Now? Coal is on the run.
You could blame environmentalists. Or regulation. Or Greta. But the truth is more interesting—and more brutal. Coal isn’t losing because of politics. It’s losing because it’s expensive.
Let’s rewind.
Baseload vs Peaking Power: The Old World
Back in the day—say, 1995—electricity planning was simple. You figured out how much power people needed at 3am on a mild spring night (your "baseload"), and built inflexible but cheap-to-run plants—usually coal or nuclear—to supply it.
Then you looked at peak demand—say, 6pm on a summer’s day when everyone flips on the A/C—and built flexible, fast-ramping plants to cover the difference. These were your “peaking” plants—more expensive per unit of electricity, but necessary.
So why didn’t we just build more baseload? Simple: because baseload isn’t cheap anymore.
Understanding the Real Costs
When people compare the price of electricity sources, they often look solely at fuel costs. That’s a mistake. The true cost includes:
Capital costs – how much it costs to build the plant.
Operating costs – ongoing maintenance, staff, upkeep.
Marginal costs – fuel, and where applicable, carbon credits.
Let’s break that down by technology.
Coal: Old, and Expensive
Coal used to be cheap. It still is, per ton. But running a coal plant? Not so much.
Capital costs: Medium. Not hideously expensive to build, but they’re huge, complex facilities with lots of conveyors and storage.
Operating costs: Also medium. Constant maintenance. You’ve got to clean out ash, manage fuel temperatures, and ensure consistent burn rates.
Efficiency: Terrible. Only 35% of coal’s energy makes it to your plug socket.
Marginal costs: Low-ish fuel costs… but the fuel itself is bulky and you might need to transport it a long way to get to the power station.
Verdict: Meh.
Nuclear: The Always-Late, Always-Over-Budget Option
Nuclear looks good on paper. Low fuel costs, no CO₂ emissions. In practice?
Capital costs: Stratospheric. And always rising.
Operating costs: High. Skilled staff. Constant (often unplanned) maintenance.
Efficiency: Fine. But uptime can be surprisingly poor, worse than offshore wind in some cases.
Subsidies: Required.
Example: The UK’s Hinkley Point C is only getting built because the government promised to pay £92.50 per megawatt hour, when the going rate was £50. Thanks to index linking, we’re now at about £120, and it’s possible EDF (and friends) will demand even more subsidies if we’re ever to see a kilowatt generated.
Verdict: Great for sci-fi. Less great for your wallet.
Gas: Cheap, Clean(ish), and Flexible
Combined Cycle Gas Turbines (CCGTs) are the unsung heroes of the power world.
Capital costs: Low-ish. Buy one off the shelf from Siemens or GE. No giant coal heaps required.
Operating costs: Low. Automated, clean, low-maintenance.
Fuel costs: Historically high, now medium-to-low. And clean-burning.
Efficiency: Excellent. Most plants hit 55%+. Some exceed 60%.
Oh, and they can be turned on and off easily. That flexibility is gold in a grid increasingly powered by intermittent renewables.
The only problem: the price of natural gas has been all over the place thanks to Russia’s invasion of Ukraine and the subsequent disruption to world energy supplies.
Verdict: The quiet winner.
Renewables: Intermittent, but Inevitable
Historically expensive, now not so much.
Wind: High capital costs, zero fuel costs, low maintenance.
Solar: (Historically) very high capital costs, but close to zero ongoing costs.
The key concept here is Levelized Cost of Electricity (LCOE)—a measure of total cost over a plant’s lifetime per unit of energy produced. In 2020, the US Energy Information Administration ranked natural gas and wind as the cheapest large-scale sources. Solar is worse (or at least was then), but that difference is a little misleading.
You see, solar is increasingly distributed. It gets used where it’s generated. So it competes not with cheap wholesale power, but with expensive retail electricity. Plus: that saving on your bill is tax-free. If you’re paying 50% tax, then something that cuts your power bill by £1,000 per year is like earning £2,000 per year in dividends or rent.
And the price of solar? Still falling. That’s why every rooftop in sunny places is going to have panels within a few years. It’s not ideological. It’s just… maths.
“But Germany Has High Power Prices!”
Yes, they do. But that’s because Germany paid for everyone else’s learning curve.
In 2005, Germany guaranteed rooftop solar owners 50 euro cents per kilowatt hour for 20 years. That was 10x market prices. Madness? Certainly, the beneficiaries were mostly not in Germany. But it sparked a boom that drove global solar costs down for everybody.
The Future Is Local
So what does the home of the future look like?
Solar panels on the roof.
A battery in the garage.
And maybe… your very own micro gas turbine.
Yes, really. Small home-scale units can generate electricity and heat water at the same time. Efficiency shoots up because the “waste” heat is no longer wasted. These units make the most sense in apartment blocks and cold climates—where hot showers are as valuable as kilowatts.
Every one of these reduces the demand for big, centralised power stations.
The Subsidy Flip
Once upon a time, it was green energy that begged for subsidies.
Now? It's coal and nuclear asking for help. CEOs of coal companies have been lobbying the new administration for laws that force utilities to burn coal. Politicians are listening. But utilities? Not so much. They know what power actually costs.
And the more you raise the cost of grid electricity with regulation, the more attractive rooftop solar looks. It's a self-reinforcing loop.
Final Thought
You may have noticed I haven’t said much about global warming, coal miners’ lung disease, or environmental externalities. That’s deliberate.
Coal isn’t losing because it’s dirty. It’s losing because it’s expensive.
Economics beats politics nine times out of ten. And on this issue, the scoreboard isn't even close.