LCOE and beyond

It is not hard to find claims that the LCOE (levelized cost of energy) such as solar and wind are lower than, say, natural gas. However, that assessment depends upon what is included and what is left out.

However the following article notes that:
“The most widely cited source of energy LCOE comparison is Lazard who published a new comparison in April. That analysis finds the unsubsidized cost of new natural gas power is virtually identical to new commercial wind and solar over its lifetime, adjusting for expected future inflation. Taxpayers and ratepayers will pay about the same, on average, using either source of energy. If the cost of natural gas declines in the future or doesn’t increase as quickly as expected, it could end up costing less.”

However, the Lazard data doesn’t include the cost of backup and other costs for renewable energy. These costs fall into four categories: backup costs, balancing costs, grid connection costs and grid reinforcement/extension costs.

A number of years ago the OECD put some number to these costs for six countries (France, Finland, Kores, US, UK and Germany). The cost for battery backup has decreased since then, but the backup cost can be decreased by 90% to compensate.

Here are the US numbers for 30% penetration levels:

        Total grid-level system costs
Nuclear           1.67
Coal              1.03
Nat gas           0.51
Onshore wind     14.31
Offshore wind    22.10
Solar            18.87

               Backup    Balancing     Grid     Grid reinforcement
               costs      costs     connection    & extension
Nuclear         0.00       0.10        1.56         0.00
Coal            0.01       0.00        1.03         0.00
Nat gas         0.00       0.00        0.51         0.00
Onshore wind    0.61       2.00        6.50         2.20
Offshore wind   0.68       2.00       15.24         1.18
Solar           1.04       2.00       10.05         2.77



The report date was 2012. In addition to the backup cost decreasing by 90%, utility scale solar cost has decreased by something like 75%.

A couple of thoughts…
– The Lazard report is from 2023
– Don’t think that affects the balancing/connection/extension costs, and I would guess they have increased.