Levelized Energy Cost: Honest Pricetags Minus Ideological Bias Levelized Energy Cost: Honest Pricetags Minus Ideological Bias

Levelized Energy Cost: Honest Pricetags Minus Ideological Bias

by Ben Jervey

March 4, 2013

When I have the opportunity to talk to very smart people in the energy field (which, fortunately, is pretty often), I like to ask them about what energy concepts those of us who aren’t quite as smart should be more aware of. Almost without fail, they get all worked up and agitated and start talking about the levelized cost of electricity (or, sometimes, the levelized cost of energy). 

The graphic compares the levelized costs of new energy generation technologies. This doesn’t include coal or gas plants or wind farms or anything else that is already built.

So when we talk about what we need to build to replace all the aging nuclear plants that are soon to be decommissioned, or the decades-old, horribly-polluting coal plants or creaky old wind farms, these are the economics that we should be looking at. The costs are listed as ranges (which can be somewhat unsatisfying), because there can be some pretty enormous variability between geographical regions and in fuel costs. Take solar, for example, which has the largest ranges—it’s a whole lot cheaper per megawatt hour in the sunny Southwest than it is in, say, Oregon.

The baseline data in this infographic (the light blue bars) comes directly from the Energy Information Agency’s Annual Energy Outlook, 2012. That data is super useful, but we thought it would be enlightening to consider how the various costs of power would be affected by a couple of policy changes that are entirely reasonable (if politically difficult). So you can compare energy costs if major tax credits and federal loan guarantees were removed (in green), or if there was a cost on carbon (in orange). The pink bars estimate how much a megawatt would cost if the tax credits and loan guarantees were gone and there was a carbon pricing. (Allow me a quick moment to thank researcher-extraordinaire Taylor Curtis for her incredible number-crunching efforts this past summer as a Focus the Nation intern.)

While we’re inclined to let the infographic speak for itself, there are a couple of obvious takeaways worth spotlighting.

First, it’s still far cheaper to reduce energy use through efficiency measures than it is to build out new plants. Efficiency first.

Second, even with it’s incredibly capacity factor and reliability, nuclear has a hard time competing with the low-end ranges of pretty much every other electricity source.

Third, for all the promise of concentrated solar power (and trust me, I’m a huge evangelist of CSP), the costs have got to come down even in the most productive regions of the country before we’ll see a lot of solar towers built.

And, one last one: there’s a good economic reason why combined cycle natural gas plants are all the rage these days. Utilities love the reliability, and consumers love the cheap electricity.

So take some time and wrestle with this graphic. And next time your dinner conversation turns to the deployment of wind or solar or the natural gas boom, you can wow your friends and colleagues by dropping LCOE into the discussion. And, you know, you can better understand the tricky economics of our transition to clean, renewable energy.

image (cc) flickr user danxoneil 

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Levelized Energy Cost: Honest Pricetags Minus Ideological Bias