LCOE Flashcards
What does WACC stands for?
The weighted average cost of capital (WACC) is the average rate that a business pays to finance its assets. It is calculated by averaging the rate of all of the company’s sources of capital (both debt and equity), weighted by the proportion of each component.
What does LCOE indicates?
The cost of energy or electricity over the lifetime of a system
In what range is, by estimate, the LCOE of wind today?
26-50$ per MWh
In what range is, by estimate, the LCOE of solar today?
30-41$ per MWh
What is an intermittent energy source?
An intermittent power resource is an energy source whose energy production depends on variable factors such as weather conditions or time of day. Examples of this include solar and wind energy. These sources cannot be used at any time, because the energy production depends on weather conditions or time of day. Due to the unpredictability of these sources, it is more difficult to adjust energy production to changing electricity demand. Additional energy sources must be used to stabilize the energy balance.
What is a drawback of the LCOE?
It assumes the value of a MWh is always equal (night/day) which is not the case (supply/demand). Difficult to compare intermittent and dispatchable sources as they have different production profiles
What does VALCOE stands for?
Value adjusted LCOE: Takes also energy, capacity and flexibility value into account as the deviation of the average
What are additional costs when integrating RES?
- Grid costs
- Balancing costs
- Cost effects of vRES on conventional powerplants = utilization effect
What is the utilization effect of vRES?
In summary, integration of vRES can lead to reduction in utilization rate of conventional power plants, which in turn can have a significant impact on their economics and reduce the revenues, as they may not be able to recover their fixed costs when running at a lower utilization rate.
The utilization effect of vRES on conventional power plants can have negative consequences, such as reduced utilization rates and revenue, it can also have positive effects such as increasing the utilization rate of conventional power plants by providing electricity during periods of high demand and reducing the need for expensive peaker plants.
What does LACE stands for?
Levelized Avoided Cost of Electricity: measure of what it would cost the grid to generate the electricity that is otherwise displaced by a new generation projects, as well as its levelized cost. Proxy measure for the annual economic value a candidate project, may be summed over its financial life and converted to a level annualized value that is divided by average annual output of the project to develop its “levelized” avoided cost of electricity (LACE).
When is a technology economical?
If the LACE > LCOE
What does WACC indicates?
The cost of company to borrow money giving the proportional amounts of debt and equity. Internally used to check if a project will be economical for the company. The higher the WACC, the less likely it is, that the company creates value.
What is a social discount rate?
The discount rate used in computing the value of funds spent on social projects.’ Discount rates are used to put a present value on costs and benefits that will occur at a later date.
