SLCOE – system-based LCOE for comparing energy technologies in different systems

Levelized cost of electricity and Levelized cost of energy (LCOE) have been used to identify how different energy technologies compare in terms of cost, where LCOE identifies the cost of the production of one unit of electricity or energy. This includes investment costs, operation and maintenance costs, fuel costs, non-subsidized emission costs, etc. However, LCOE represents a simplistic comparison that does not capture the innate differences between production technologies. Renewable energy sources depend on weather patterns; steam turbines based on nuclear, coal or biomass have certain flexibility constraints, and gas turbines offer less constrained flexibility. In this study, we introduce a system-based LCOE - referred to as SLCOE. While the LCOE is only a function of the respective technology, the SLCOE is a function of both the technology and the energy system context in which it operates. We show how the SLCOE of wind power and solar photovoltaics can be much lower in the integrated energy systems of a future climate neutral society than in the existing electricity system. We illustrate how the SLCOE of combinations of wind power and solar photovoltaics can be much lower than the SLCOE of the individual technologies. Moreover, we compare renewable energy sources with nuclear power and find that with the current as well as expected future costs of these technologies, the SLCOE of nuclear power is substantially higher than for renewable energy.