Hi, this is a tough read loaded with data and will take me a day or two to work through. Your hard work is appreciated.
In the chart "LCOE: Existing Thermal Power Plants vs New Renewable Facilities" I note that solar and wind have no capital cost. Well I suppose that taxpayers' money is free, but...
Hi Mike! That’s a good catch. We used to roll the capital om and other costs like that into a general generation cost metric before we started breaking it out individually
Even though it is a bit too long, thank you for doing this.
In my extensive experience in the energy business, it always seemed to me that LCOE was a calculation designed by (and for) lobbyists to support their favorite renewable.
It is in the same category that the absurd "All of the Above" marketing nonsense falls.
LCOE is a parameter that the financial house Lazard initiated many tears ago, which is simplistic and misleading and has evolved into a propaganda tool of renewable power advocates.
All energy sources, including wind and solar, should be evaluated using a full-system cost framework. Energy planning must account not only for generation costs but also reliability, flexibility, storage, transmission, backup capacity, and the Value of Lost Load (VoLL), as highlighted by the economic impact of Spain's recent blackout.
Progress indeed, Bad Boys, but be careful with the “Mission Accomplished” signs. For example, when everyone knows an average night lasts 12 hours, how can Lazard settle on just 4 hours of “firming” for solar? It’s a joke. Keep up the good fight!
i’ve been reading and listening to you guys for seven or eight years and really enjoyed your work. i am trying to explain the LCOE concept to my wife but her eyes glaze over. do you have an LCOE for Dummies article for non-engineers? She and her friends all seem to love renewables and quote how cheap they are, regurgitating talking points they hear on NPR. They have been indoctrinated for over a decade with these misinformation campaigns and I would like a compelling resource for them to become more informed about the truth.
I like to use the analogy of running a convenience store. Suppose there are two kinds of workers that you can hire. One kind shows up on time and works a full shift 98% of the time. The other kind shows up and leaves whenever they feel like it. Are they both worth the same hourly wage? No, not even close.
LCOE is just the price a developer has to be promised to be paid (whether the output is needed or not) to justify a project. Any use beyond that is speculative.
Progress when battling a dishonest narrative that has decades of history is a really important accomplishment, congratulations! Risk is one of the “funist “ board games we played on snow days where I grew up in Northern Michigan, can’t wait to see this roll out! 👊
Congratulations on your contribution to turning the tide on the use of LCOE although celebrations may be premature due to the persistent abuse of the metric by our Government.
Over the last few years I have seen so many papers rubbishing LCOE that I stopped reading them long ago althougy I like the presentation by Schernikau and Smith that makes some telling points in the wider context of the attack on intermittent energy.
So much money spent to get more expensive and less reliable power!
Thanks for the DETAILED dive into the way cost metrics have evolved over the years! Its going to take me a few hours/days to absorb all the nuggets in this post.
Great article addressing a key misperception about energy costs. I continue to see articles and podcasts advocating that "firmed" renewables are cost competitive with dispatchable fossil resources. As the article points out, it really doesn't matter what the cost such as LCOE is as utilities' mission is not simply generate and deliver the lowest cost energy. Utilities' mission is to meet customer load in the most cost-effective, reliable, and safe manner.
In researching recent statements from the biggest climate NGOs and their donors for my Enemies of Energy report I noticed that it was a lot harder to find recent LCOE claims. I didn't attempt to quantify the decline/trend, but the trend you speak of is definitely there as well.
Outstanding. It should be, but of course, but won’t be, widely read by policy makers and those advocating for the use of ever more part time 11th century energy sources.
Great piece. The debate seems to be moving from "What is the cheapest energy?" toward "What is the cheapest reliable system?"
Perhaps the next evolution is, I'm claiming this one, LCOR Levelized Cost of Reliability. LCOE measures energy. LCOR measures the cost of delivering certainty...8,760 hours per year.
Hi, this is a tough read loaded with data and will take me a day or two to work through. Your hard work is appreciated.
In the chart "LCOE: Existing Thermal Power Plants vs New Renewable Facilities" I note that solar and wind have no capital cost. Well I suppose that taxpayers' money is free, but...
Hi Mike! That’s a good catch. We used to roll the capital om and other costs like that into a general generation cost metric before we started breaking it out individually
Even though it is a bit too long, thank you for doing this.
In my extensive experience in the energy business, it always seemed to me that LCOE was a calculation designed by (and for) lobbyists to support their favorite renewable.
It is in the same category that the absurd "All of the Above" marketing nonsense falls.
FYI, I wrote this commentary about the numerous unacknowledged costs of wind energy <https://criticallythinking.substack.com/p/the-true-cost-of-wind-energy-updated>.
LCOE is a parameter that the financial house Lazard initiated many tears ago, which is simplistic and misleading and has evolved into a propaganda tool of renewable power advocates.
All energy sources, including wind and solar, should be evaluated using a full-system cost framework. Energy planning must account not only for generation costs but also reliability, flexibility, storage, transmission, backup capacity, and the Value of Lost Load (VoLL), as highlighted by the economic impact of Spain's recent blackout.
Progress indeed, Bad Boys, but be careful with the “Mission Accomplished” signs. For example, when everyone knows an average night lasts 12 hours, how can Lazard settle on just 4 hours of “firming” for solar? It’s a joke. Keep up the good fight!
Absolutely. That’s why we said winning instead of won. More work to do but progress is appreciated!
i’ve been reading and listening to you guys for seven or eight years and really enjoyed your work. i am trying to explain the LCOE concept to my wife but her eyes glaze over. do you have an LCOE for Dummies article for non-engineers? She and her friends all seem to love renewables and quote how cheap they are, regurgitating talking points they hear on NPR. They have been indoctrinated for over a decade with these misinformation campaigns and I would like a compelling resource for them to become more informed about the truth.
Hi Ed! I’d start here for that! https://www.americanexperiment.org/your-guide-to-lazards-lcoe-analysis-part-1-what-is-the-levelized-cost-of-energy/
I like to use the analogy of running a convenience store. Suppose there are two kinds of workers that you can hire. One kind shows up on time and works a full shift 98% of the time. The other kind shows up and leaves whenever they feel like it. Are they both worth the same hourly wage? No, not even close.
LCoE for dummies:
Where is the cheapest place to get ice for the drinks cooler for your midsummer outdoor party?
Answer for those in the northern hemisphere: the South Pole.
The ice is plentiful and free there.
The cost and risk of getting that ice to your party is blissfully ignored by the calculation of ice cost.
That’s the Levelized Cost of Summer Ice.
LCOE is just the price a developer has to be promised to be paid (whether the output is needed or not) to justify a project. Any use beyond that is speculative.
Progress when battling a dishonest narrative that has decades of history is a really important accomplishment, congratulations! Risk is one of the “funist “ board games we played on snow days where I grew up in Northern Michigan, can’t wait to see this roll out! 👊
Congratulations on your contribution to turning the tide on the use of LCOE although celebrations may be premature due to the persistent abuse of the metric by our Government.
Over the last few years I have seen so many papers rubbishing LCOE that I stopped reading them long ago althougy I like the presentation by Schernikau and Smith that makes some telling points in the wider context of the attack on intermittent energy.
So much money spent to get more expensive and less reliable power!
https://rafechampion.substack.com/p/wind-and-solar-are-parasites-on-the
"It has been said that figures will not lie. It is equally true that liars will figure", Carroll D. Wright 1899.
So good to hear that LCOE is on its heels and congratulations on your part of the process. keep it up
Thanks for the DETAILED dive into the way cost metrics have evolved over the years! Its going to take me a few hours/days to absorb all the nuggets in this post.
Great article addressing a key misperception about energy costs. I continue to see articles and podcasts advocating that "firmed" renewables are cost competitive with dispatchable fossil resources. As the article points out, it really doesn't matter what the cost such as LCOE is as utilities' mission is not simply generate and deliver the lowest cost energy. Utilities' mission is to meet customer load in the most cost-effective, reliable, and safe manner.
In researching recent statements from the biggest climate NGOs and their donors for my Enemies of Energy report I noticed that it was a lot harder to find recent LCOE claims. I didn't attempt to quantify the decline/trend, but the trend you speak of is definitely there as well.
The Interruption Cost Estimate calculator developed by Lawrence Berkeley National Laboratory is unfortunately named.
Because now we have a second case where leftists will make calls to abolish ICE…
Outstanding. It should be, but of course, but won’t be, widely read by policy makers and those advocating for the use of ever more part time 11th century energy sources.
To paraphrase Mark Twain, "there are lies, damn lies, statistics, and LOCE."
Great piece. The debate seems to be moving from "What is the cheapest energy?" toward "What is the cheapest reliable system?"
Perhaps the next evolution is, I'm claiming this one, LCOR Levelized Cost of Reliability. LCOE measures energy. LCOR measures the cost of delivering certainty...8,760 hours per year.