The levelized cost of energy and modifications for use in electricity generation planning

Abstract

The Levelized Costs of Energy/Electricity (LCOE) is widely used to compare different power generation technologies by considering the various fixed and variable costs as a single cost metric. The levelized cost of electricity (LCOE) measures the average net present cost of generating electric power over the power plants entire life. As a metric, the levelized cost of energy does not capture all costs that affect the cost of electricity like the system costs. For accuracy of cost analysis, the LCOE is modified to account for other costs e.g., system levelized cost which considers externalities. The value-adjusted levelized cost of electricity (VALCOE) is a metric developed by the International Energy Agency (IEA) that captures the cost and value to the electricity system since the same amount of power may be less or more valuable during peak demand. The levelized cost of storage (LCOS) is another metric applied in comparing alternative energy storage systems for specific energy scenarios i.e. long-term, short-term, and medium-term storage. Another related metric is the Levelized avoided cost of energy (LACE) which n captures information about how the grid operates without the new power plant or storage facility entering service making it more complex than LCOE or LCOS, but more insightful. The value-adjusted levelized cost of electricity (VALCOE) captures both cost and value to the electricity system. Another metric, the Levelized Full System Costs of Electricity (LFSCOE), metric is used to analyze the costs incurred to supply the entire energy market with one power source plus storage presented as one value just like the levelized cost of energy (LCOE). Therefore, the levelized cost of energy (LCOE) metric is universally accepted as a tool for preliminary cost evaluations of generation technologies, but for accurate and reliable assessment, various modifications of the levelized cost of energy/electricity must be applied.