The average cost of each unit of electricity a plant produces over its lifetime, spreading construction, fuel, operation and financing across total output. It is the standard yardstick for comparing generation technologies, and the collapse of solar and wind LCOE through the 2010s is the number most often cited for the economics of the energy transition, though it deliberately omits the system costs of variability.
Facts
Concept Domain Connections
Associated With
Grid parity is defined directly in terms of levelized cost of electricity.
EIA publishes annual levelized cost of electricity and levelized avoided cost estimates in its Annual Energy Outlook.
Sources
1. International Renewable Energy Agency Official Site
Dissenting Readings (1 dissenting reading)
Description
LCOE alone is not a sufficient basis for comparing dispatchable generation against intermittent renewables. The EIA's own methodology notes that LCOE, together with the levelized cost of storage (LCOS) and the levelized avoided cost of electricity (LACE), should be used together as a value-cost ratio to give a reasonable comparison of first-order economic competitiveness among a wider variety of technologies than LCOE alone allows; used by itself, a falling solar or wind LCOE headline figure omits the grid-integration and storage costs needed to make that generation dispatchable, so the plain LCOE comparison the popular press reports is a simplification the source agencies themselves warn against.
A dissenting reading, from US Energy Information AdministrationWikipedia, Wikimedia Foundation
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