The levelized cost of electricity is a tool for determining asset productivity. Here's the renewables worldwide
In 2023 renewable energy sources (RENs) have made their mark. Annual capacity additions have increased by 50% compared to 2022, reaching almost 510 GW. It is also due to several reduced costs in terms of technology and projects. One of the financial metrics used to assess this trend is the Levelized Cost of Energy – LCOE for renewables 2024. So let us see in detail what this instrument is for and what values it is associated with in the field of RENs at the global and national levels.
What is the levelled cost of energy (LCOE)?
Deciding to invest in an energy production project requires a number of assessments. On feasibility in the first place but also, and above all, on profitability. The leveled cost of electricity is a tool for determining the productivity of assets, calculating not only the costs of construction, but also those of management, maintenance and dismantling and, where applicable, of fuel.
In detail, the LCOE can be defined as the average cost of operating a plant divided by the amount of electricity it is expected to generate during its lifetime. However, it also indicates the average minimum price at which the generated electricity must be sold to allow the project to balance costs.
Understood: This is not an exclusive renewable energy tool. The LCOE, including the price of the fuel (if present) in the calculation, becomes a useful parameter for comparing the competitiveness of different projects and sources: photovoltaic, wind, nuclear, gas, and coal. With separate calculations, the LCOE of the storage systems and the production of hydrogen can also be obtained.
This metric is sometimes accompanied by another: the so-called “VALCOE” or LCOE adjusted, i.e. the levelled cost of electricity adjustable to the value. It is a metric developed by the International Energy Agency (IEA) to include in calculating the value of the energy produced for the electrical system. This may include factors such as output variability, the time of generation to align with demand, and the ability to provide network auxiliary services. “Based on the LCOE – explains the IEA – energy estimates, capacity and flexibility values are incorporated to provide a more comprehensive metrics of competitiveness for energy generation technologies.”
LCOE Renewable 2024: What is the leveled cost of electric iron?
Several sectoral reports help us monitor the competitiveness of different plants year after year. Among the most famous is the one written by Lazard, a well-known financial consultancy and asset management company. His latest report confirms a long-held fact: Renewable energy sources continue to be cost-competitive with conventional generation, accelerating the abandonment of fossil fuels.
The most striking figure? Ground wind power and utility-scale photovoltaics have the lowest LCOE among all electricity generation technologies. Measuring combined-cycle gas plants as well. In detail, wind onshore has been classified as the most affordable source of electricity generation for new plants, ranging from $27/MWh to $73.
Photovoltaics on an industrial scale follow closely, with a range ranging from $29 to $92/MWh, but they highlight the most aggressive cost reduction curve of all the technologies considered. Just think that in 2009, large photovoltaic plants had an average LCOE of over $350/MWh. With the addition of storage systems, the utility-scale photovoltaic LCOE rises between $60 and $210/MWh.
And again: Offshore wind has an average LCOE between $74 and $139/MWh; commercial and industrial photovoltaic (C&I) ranges is between $54 and 191/MWh while the residential one boasts the highest range, with an LCOE ranging between $122 and 284 /MWh.
LCOS 2024, the leveled cost of accumulation
The Lazard report also offers an overview of the so-called LCOS – Levelized Cost of Storage, or the leveled cost of energy storage. In this case it ranges from a maximum of $882-1.101 per MWh for residential storage systems from 6 kW to 4 hours to a minimum of $170-296 per MWH for utility-scale storage plants from 100 MW and 4 hours.
In the middle are the C&I storage systems with 1 MW and 2 hours of capacity, with an LCOS between $373 and 518 per MWh, the large storage plants (100 MW) with 4 hours, with a range between $170 and 296 per MWH, and those with 2 hours, with an LCOS between $188 and 322 per MWh.
