Actual cost of electricity: An economic index to overcome levelized cost of electricity limits

Abstract

Summary: The selection of renewable energy technologies is widely based on the economic index levelized cost of electricity (LCOE). However, the LCOE ignores the potential temporal mismatch between electricity generation and actual grid demand: this aspect is accounted for in the new index named actual cost of electricity (ACOE), here proposed. This index provides a more accurate economic assessment of renewable energy, minimizing the number of assumptions to be made and outlining the benefits of including a storage. The proposed index is tested across ten cases encompassing three renewable technologies: wind, photovoltaic, and concentrated solar power. The outcomes show that the actual renewable electricity generation of a plant can be reduced by 40%–50% when accounting for the actual electricity demand, resulting in an ACOE exceeding the LCOE by up to 100/150 $/MWh. In addition, the ACOE enables the identification of breakthrough conditions that make storage adoption economically feasible.

Keywords

• Energy policy
• Electrical system
• Social sciences
• Economics