System LCOE: What are the Costs of Variable Renewables?

Abstract

-Levelized costs of electricity (LCOE) are a common metric for comparing power generating technologies. However, there is criticism particularly towards evaluating variable renewables like wind and solar PV power based on LCOE because it ignores variability and integration costs. We propose a new metric System LCOE that accounts for integration and generation costs. For this purpose we develop a new mathematical definition of integration costs that directly relates to economic theory. As a result System LCOE allow the economic comparison of generating technologies and deriving optimal quantities in particular for VRE. To demonstrate the new concept we quantify System LCOE from a simple power system model and literature values. We find that at high wind shares integration costs can be in the same range as generation costs of wind power and conventional plants in particular due to a cost component "profile costs" captured by the new definition. Integration costs increase with growing wind shares and might become an economic barrier to deploying VRE at high shares. System LCOE help understanding and resolving the challenge of integrating VRE and can guide research and policy makers in realizing a cost-efficient transformation towards an energy system with potentially high shares of variable renewables.

Least-cost options for integrating intermittent renewables in low-carbon power systems

“…For intermittent-RES, these integration costs may be a considerable component of their total generation cost [34], so they are quantified in this study. Three types of integration costs are described in the literature: balancing, profile and grid costs [34,35]. The integration costs are expressed as a function of the driving factor: intermittent-RES penetration.…”

Solar Collectors in the Industry: Analysis of Foreign Experience of Application and Economic Assessment of Prospects of Introduction of Regional Power System

“…Другими значимыми факторами являются первоначальная стоимость самого коллектора, затраты на его инсталляцию и обслуживание и длительность жизненного цикла солнечного коллектора. Все эти факторы, а также коэффициент дисконтирования, учитываются в показателе «приведенная стоимость энергии» -LCOE (levelized cost of energy), который является наиболее распространенным при сравнительной оценке экономической эффективности различных энергетических технологий и отражает среднею стоимость единицы произведенной энергии с помощью данного генерирующего устройства за весь период эксплуатации оборудования [12][13]. Расчет приведенной стоимости энергии осуществляется по формуле: R -коэффициент дисконтирования, отражающий изменение стоимости денег во времени (для расчетов в евро, как правило, полагается равным 3%).…”

The Cost of Renewable Power: A Survey of Recent Estimates

“…The main negative externality, as pointed out and discussed at length in Joskow [13,14,26] and Ueckerdt [39], is the cost associated with grid integration, because vRES, by their very nature, require back-up energy. Since this must be weighted against what they see as the only positive externality-the cost of CO 2 emissions avoided-they conclude that there are cheaper ways to achieve that end, such as Carbon Capture and Storage (CCS) technology, based on capturing CO 2 at the point of burning fossil fuels and drilling to store it deep underground in mines and exhausted oil and gas deposits.…”