The Levelized Cost of Electricity From Existing Generation Resources
Bottom Line: There has been a fundamental shortage of studies examining the costs of replacing existing U.S. power generation resources with new ones. Ongoing low natural gas prices and growing subsidies for wind and solar are now making such analyses increasingly critical. This study concludes that building and operating new generation resources will have a higher levelized cost of electricity than using already existing resources.
This study estimates the levelized cost of electricity (LCOE) from existing generation resources and compares them to the estimated LCOE of new resources that might be built to replace them. LCOE is a useful metric to compare different electricity generating resources of similar operating characteristics, but few analyses compare LCOE-New to LCOE-Existing. The rapid shift to more natural gas and renewables demands such an undertaking.
The conclusion here is that for all major full-time-capable generation resources (coal, combined-cycle gas, and nuclear), the LCOE from new plants would be higher, on average, than the LCOE from existing resources.
In addition, wind and solar energy have become popular choices for new energy generation but they are not full replacements for required dispatchable capacity on the system, making fair levelized cost comparisons between them much more difficult.
As such, in order to facilitate appropriate comparison of wind and solar with new and existing dispatchable resources, this study defines and then calculates an estimate of “imposed costs” and allocates them to the LCOE of the wind and solar energy that create them.
The principal LCOE ranges specifically:
- The additional average LCOE from new resources of the same type ranges from 40% more for combined cycle gas (CC gas) to 75% more for coal, 90% more for hydro and over 100% more for nuclear.
- The projected LCOE of the lowest-cost full-time-capable new resource (CC gas) is 25% higher than the LCOE of existing coal, 30% higher than the LCOE of existing hydro, 40% higher than the LCOE existing CC gas and 50% higher than the LCOE for existing nuclear.
Read the full study here.
Levelized Cost Electricity, New vs. Existing Resources
Findings:
- The evolving U.S. power market demands more studies looking at potential price changes for replacing existing generation resources with new ones, namely for the levelized cost of electricity.
- Coal, gas, nuclear, and hydro are generally dispatchable systems and are not fully displaced by non-dispatchable wind and solar power.
- On average, as estimated here, natural wind and solar thereby have an “imposed” cost of $22.50 per MWh.
- New generation resources will have a higher levelized cost of electricity than existing generation resources.
Read the full study here.
