Levelized Cost of Energy - A Misleading Metric

 

Levelized Cost of Energy - A Misleading Metric

Arguments for renewables tend to rely quite heavily on the Levelized Cost of Energy, a metric which supposedly accounts for all the costs associated with a particular energy type, from development and construction all the way to decommissioning.

However, Fergus Cullen believes that LCOE is incredibly misleading as it fails to account for the integration costs of switching to renewables.

“This is like quoting someone the cost of the flight and leaving out the pilot and half the fuel”

There are three main costs that aren’t included in LCOE:

  1. 1) The infrastructure required to handle the fluctuating power levels associated with renewables. Even the infrastructures of the most developed countries aren’t up to the task, with Fergus citing the US energy grid which is already well past its life expectancy, with it being graded D+ by the American Society of Civil Engineers.
  2. 2) The need for back-up power stations to handle the unpredictability of renewable energy. Either new power plants will need to be constructed or existing stations will need to be upgraded to react to supply fluctuations, instead of providing a constant base level.
  3. 3) For Fergus the main issue with LCOE is storage, which is wholly unaccounted for, and without storage renewables cannot compete with conventional energy sources.

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