Why we must move beyond LCOE for renewable energy design

• DOI: 10.1016/j.adapen.2022.100112
• Publication Date: 2022-11-04T04:38:23Z
• Authors: Eric Loth; Chris Qin; Juliet G. Simpson; Katherine Dykes
• Keywords: Grid parity; Cove

The inherent intermittency of wind and solar energy challenges the relevance Levelized Cost Energy (LCOE) for their future design since LCOE neglects time-varying price electricity. Valued (COVE) is an improved valuation metric that takes into account time-dependent electricity prices. In particular, it integrates short-term (e.g., hourly) “generation devaluation”, whereby high and/or generation can lead to low, even negative, prices grids with renewable penetration. These aspects are demonstrated quantified examples two large shares using three approaches model hourly price: (1) residual demand, (2) generation, (3) statistical price-generation correlation. All indicate significant devaluation. demand approach provides most accurate information while correlations show devaluation pronounced Variable Renewable (VRE) dominates market share California Germany). some cases, cost valued relative levelized be 43% higher (CAISO) 129% (ERCOT). This indicates COVE a much more relevant than in such markets. because based on annualized system costs spot revenue, thus considers economic effects vs. revenue as well those supply demand. As such, (instead LCOE) recommended value next-generation systems, including storage integration tradeoffs. However, work needed develop models projected markets better classify grid characteristics we head carbon-neutral future.