Levelized cost of energy (LCOE)

The average total cost to build, operate and maintain an electricity-generating asset over its lifetime divided by the total energy it produces. The LCOE provides a means of comparing different plants through a common denominator of the minimum price a unit of electricity must be sold at in order for the plant to break even.

There have been many studies of LCOE, which attempt to compare different energy systems, while accounting for the variance in assumptions and other factors, such as integrating external costs, marginal cosgts for added capacity as opposed to average costs, intermittency and demand response factors.

Lazard (Nov 2018): utility-scale solar and wind are cheaper than fossil fuels in soime scenarios, and particularly for marginal costs for added generating capacity. Lazard found for the US market the low end levelized cost of onshore wind-generated energy to be $29/MWh, and a marginal cost of $36/MWh for coal. Pre-subsidised solar currently lies at the level of coal.

Bloomberg (2018): global onshore wind LCOE = $55 /MWh (down by 18% over first 6 months of 2017). Solar without tracking = $70 /MWh (down 18% over 2017). In India, benchmark LCOEs for onshore wind = $39 /MWh (down 46%), PV solar = $41 (down 45%), while coal LCOE remains fixed at $68, and CHP (combine-cycle gas) at $93.

IRENA (2018): The International Renewable Energy Agency report of January 2018 predicts the price of electricity form utility scale renewable energy to be cheaper than electricity from conventional sources by 2020.

European Bank for Reconstruction and Development EBRD (2018): Renewable energy under competitive auctions will lead to a large fall in electicity prices and increased investment, making renewables now cheapest energy source.

World Bank (Oct 2018): renewables are now the lowest cost option.