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System LCOE: What are the costs of variable renewables?

  • Levelized costs of electricity (LCOE) are a common metric for comparing power generating technologies. However, there is criticism particularly towards evaluating variable renewables like wind and solar PV power based on LCOE because it ignores variability and integration costs. We propose a new metric System LCOE that accounts for integration and generation costs. For this purpose we develop a new mathematical definition of integration costs that directly relates to economic theory. As a result System LCOE allow the economic comparison of generating technologies and deriving optimal quantities in particular for VRE. To demonstrate the new concept we quantify System LCOE from a simple power system model and literature values. We find that at high wind shares integration costs can be in the same range as generation costs of wind power and conventional plants in particular due to a cost component “profile costs” captured by the new definition. Integration costs increase with growing wind shares and might become an economic barrier to deploying VRE at high shares. System LCOE help understanding and resolving the challenge of integrating VRE and can guide research and policy makers in realizing a cost-efficient transformation towards an energy system with potentially high shares of variable renewables.

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Metadaten
Document Type:Article
Language:English
Author(s):Falko Ueckerdt, Lion HirthORCiD, Gunnar Luderer, Ottmar EdenhoferORCiD
Parent Title (English):Energy
ISSN:0360-5442
Publisher:Elsevier Ltd
Publication year:2013
Publishing Institution:Hertie School
First Page:61
Last Page:75
DOI:https://doi.org/10.1016/j.energy.2013.10.072
Release Date:2017/07/24
Tag:Integration costs; Levelized costs of electricity (LCOE); Market integration; Power generation economics; Renewable energy
Volume:63
Hertie School Research:Centre for Sustainability
Licence of document (German):Metadaten (öffentlich), post-print
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