On the levelised cost of energy of solar photovoltaics

Abstract

The Levelised Cost of Energy is frequently used for assessing the economic competitiveness across different technologies. Unfortunately, there are caveats and a significant problem is that opportunity costs are ignored. This paper therefore addresses how to calculate the Levelised Cost of Energy for Solar Photovoltaics more correctly than today starting from the premise that an energy source has to guarantee an output at a system level. Thus, energy storage systems are required. Furthermore, uncertainty must be handled, and Monte Carlo methods are used here. The lowest Levelised Cost of Energy occurs when the system is designed for continuous operation, as opposed to peak shaving, with 80% of its solution space found between 203 USD/MWh to 252 USD/MWh and an expected value of 226 USD/MWh. This is almost 3 times higher than a narrowly defined Levelised Cost of Energy, which ignores opportunity costs. Hence, it is clear that Solar Photovoltaics can guarantee output within economically feasible limits, albeit currently expensive.

Keywords

• battery energy storage system (bess)
• life-span
• duck curve
• uncertainty
• monte carlo methods
• opportunity cost