Re-Defining System LCOE: Costs and Values of Power Sources

Yuhji Matsuo ()
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Yuhji Matsuo: College of Asia Pacific Studies, Ritsumeikan Asia Pacific University, Oita 874-8577, Japan

Energies, 2022, vol. 15, issue 18, 1-39

Abstract: The mass introduction of variable renewable energies, including wind and solar photovoltaic, leads to additional costs caused by the intermittency. Many recent studies have addressed these “integration costs,” and proposed novel metrics that replace the traditional metric known as the levelized cost of electricity (LCOE). However, the policy relevance of those metrics remains unclear. In this study, the author investigates and re-defines the concept of system LCOE, referring to prior studies, and proposes concrete methods to estimate them. Average system LCOE allocates the integration cost to each power source, dividing that by the adjusted power output. Marginal system LCOE revises the concept of system LCOE and value-adjusted LCOE proposed by prior studies, to be clearer and more policy-relevant. These metrics are also applied to Japan’s power sector in 2050, suggesting the necessity of aiming for a “well-balanced energy mix” in future power systems with decarbonised power sources.

Keywords: levelized cost of electricity; system LCOE; variable renewable energy; power generation cost; wind power; solar power (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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