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Lazard reports updated data on levelised cost of energy (LCOE) generation, incl. geothermal

Levelized Cost of Energy, LCOE, unsubsidized (source: Lazard)
Alexander Richter 9 Nov 2018

The recently published report on Levelized Cost of Energy by finance advisory Lazard, provides a great overview on an ever dropping cost for renewable energy fueled electricity generation, while also highlighting the need for taking baseload/ dispatchability into consideration in the evaluation of price.

U.S.-headquartered global financial advisory and asset management company has been releasing a great overview document on levelized cost of energy analysis for some years now.

The company has now released version 12.0 with updated data on technologies and their levelized cost of energy generation.

Lazard has conducted this analysis comparing the LCOE for various conventional and Alternative Energy generation technologies in order to understand which Alternative Energy generation technologies may be cost-competitive with conventional generation technologies, either now or in the future, and under various operating assumptions, as well as to understand which technologies are best suited for various applications based on locational requirements, dispatch characteristics and other factors.

The company finds that Alternative Energy technologies are complementary to conventional generation technologies, and believes that their use will be increasingly prevalent for a variety of reasons, including environmental and social consequences of various conventional generation technologies, RPS requirements, carbon regulations, continually improving economics as underlying technologies improve and production volumes increase and government subsidies in certain regions.

We assume the data to refer to the United States, but nevertheless provide a great overview.

The report provides an increasingly competitive picture for the renewable energy technologies, namely solar and wind which have dropped extensively in price in the past years. But – as Lazard says – “direct comparisons against “competing” Alternative Energy generation technologies must take into account issues such as dispatch characteristics (e.g., baseload and/or dispatchable intermediate load vs. peaking or intermittent technologies).”

This is shown clearly in the electricity generation data shared by Italian energy firm ENEL, which shows the impact baseload capacity has in electricity generation and results for a company, see here.

Clearly that refers to geothermal energy in the alternative energy segment of the analysis.

The report provides a levelized cost of energy comparison, unsubsidized and subsidized, its sensitivity to fuel prices, cost of capital etc.

Key message is for geothermal energy is that the market is more competitive and while storage and electricity from storage is not presented, it creates a challenging picture for geothermal energy – particularly if baseload capacity and its dispatchability are not being valued in the market.

Key highlights for geothermal energy:

  • LCOE (unsubsidized): range of $71 to $11 per MWh produced
  • LCOE (sensitivity to U.S. Federal Tax Subsidies): range of $67 to $110 per MWh produced
  • LCOE (sensitivity to fuel prices): none
  • LCOE (sensitivity to cost of capital): $101 (midpoint of unsubsidized LCOE)
  • LCOE (historical mean unsubsidized values): $91 per MWh produced (21% decrease in average LCOE since first Lazard LCOE analysis, v. 3.0)
  • Capital Cost: $4,000 to $6,400 per installed kW
  • LCOE by cost element (low end): $46 for capital cost, $25 for variable O&M at a total of $71 (per MWh)
  • LCOE by cost element (high end): $76 for capital cost, $35 for variable O&M at a total of $111 (per MWh)

For the complete document and overview, the document can be downloaded on the page linked below.

Source: Lazard