Limitations of using LCOE as economic indicator for solar power plants

Abstract

With the increasing penetration of renewable energy, the importance of power plant dispatchability has become more relevant; an aspect that is not accounted in the Levelized Cost of Electricity (LCOE) parameter. This paper presents a mathematical model to optimize solar plant design based on optimized dispatching strategies considering real grid demand and prices. To demonstrate that the LCOE is not the correct optimization parameter of Photovoltaic and Concentrated Solar Power technologies, the application of the new approach is performed considering their installation in South Australia and Southern California. Sixteen different cases are proposed to assess the importance of the boundary conditions (location with corresponding electricity load curve, cost of the technology and possibility to purchase electricity from the grid) on the plant design.Results show that the optimal plant design significantly differs when considering the actual prices with respect to the common LCOE approach. The LCOE approach does not lead to any storage installation in PV plants and operates CSP plant around the clock. The optimized design based on the grid needs generates the electricity when the prices are high by introducing the storage in the PV and reducing the solar field area as well as the thermal storage size. Overall, the Net Present Value and the IRR can be increased by 10 times and 70 %, respectively, by adopting optimized design with respect to the one achieved with the typical LCOE approach.