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Levelized Cost of Various Types Of Electricity Generation

Charlottesville, Virginia

August 3, 2020

Let's jump in the deep end!

LCOE (levelized cost of energy) is a useful measure to compare the lifetime cost per kilowatt-hour of various sources of electricity. There are a ton of assumptions that go into calculating the LCOE. Lazard for the past several years has published its analysis of the the LCOE's of various technology and most in the industry accept Lazard's methodology. In other words, folks accept Lazard's assumptions as being reasonable. The above analysis is excludes subsidies that a technology might receive, such as investment tax credits and production tax credits that have primarily gone to the solar and wind industries recently (although they are being phased out, subject to lobbying and Congress).

Noteworthy to me in the chart are the lines for Solar PV - Thin Film Utility Scale and for Wind in comparison to the line for Coal.

Yes, folks, solar and wind can provide low-cost electricity.

And yes, solar and wind must be part of a portfolio of electricity generating sources to assure we can turn on our lights 24/7.

We're all counting on my friend Steve to drive down the LCOE for nuclear power plants.

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3 comentarios

10 ago 2020

To answer Don, the LCOE includes both capital and operating cost. I'm a little unclear about the decommissioning cost. LCOE should include it; however, a footnote on one of the tables indicates that nuclear decommissioning cost is not included. That surprises me because nuclear decommissioning costs are well known and, unlike solar and wind producers, nuclear operators put money into a decommissioning fund as the plant is operated to ensure the cost is covered.

LCOE is interesting but acknowledged to be a very imperfect comparison of generating technologies. You could look at the graphs and say - why doesn't everyone build wind generation - look how cheap it is! And it's "renewable" which means it has no adverse environmental consequences.…

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04 ago 2020

Don - LCOE takes into account all costs - capital, financing, operating. It is an attempt to compare the all-in costs of various technologies over the lifetime of the generating asset. That being said, I cannot find that Lazard takes decommissioning costs into account. The overall impact on LCOE would probably be small given how far out (in terms of time) those costs are incurred (think time value of money).

I did find several studies that compare the cost of decommissioning on a per MW basis. This table represents a reasonable midpoint of what I found.

Nukes are not on this chart (not sure why) but estimates for their decommissioning costs seem to hover around $500k/MW (2006 $).

Also notice…

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04 ago 2020

Are those costs just the operating costs of the various forms of energy generation? For instance, does that include the cost of disposal of wind-generating equipment once they've exceeded their 20-year life? Does it count the external costs, such as the death of birds? The amount of land needed to generate the energy? (I understand that the per-acre cost of energy production/generation is astronomical for wind over gas/coal.....)

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