IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v238y2022ipbs0360544221020247.html
   My bibliography  Save this article

Assessment of the levelized cost of energy using a stochastic model

Author

Listed:
  • Tazi, Nacef
  • Safaei, Fatemeh
  • Hnaien, Faicel

Abstract

The levelized cost of energy (LCOE) is a widespread metric that doesn't disfavor any power generation or saving technology. In this paper, a stochastic model of the LCOE is provided. The proposed model includes all main parameters to be applied on renewable, non-renewable and energy saving systems. These parameters were modeled through non-homogeneous Poisson process as well as Weibull functions. Besides, a continuous optimization model is proposed to calculate the optimal LCOE under the constraints of main Capex/Opex expenditures. Under such conditions, the optimal value of the levelized cost of energy is obtained, which captures parameters' influence on this metric. Afterwards, these parameters' influences on the LCOE were assessed through a sensitivity analysis.

Suggested Citation

  • Tazi, Nacef & Safaei, Fatemeh & Hnaien, Faicel, 2022. "Assessment of the levelized cost of energy using a stochastic model," Energy, Elsevier, vol. 238(PB).
    • Handle: RePEc:eee:energy:v:238:y:2022:i:pb:s0360544221020247
    DOI: 10.1016/j.energy.2021.121776
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544221020247
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2021.121776?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Walraven, Daniël & Laenen, Ben & D’haeseleer, William, 2015. "Minimizing the levelized cost of electricity production from low-temperature geothermal heat sources with ORCs: Water or air cooled?," Applied Energy, Elsevier, vol. 142(C), pages 144-153.
    2. Chiang, Amy C. & Keoleian, Gregory A. & Moore, Michael R. & Kelly, Jarod C., 2016. "Investment cost and view damage cost of siting an offshore wind farm: A spatial analysis of Lake Michigan," Renewable Energy, Elsevier, vol. 96(PA), pages 966-976.
    3. Parrado, C. & Girard, A. & Simon, F. & Fuentealba, E., 2016. "2050 LCOE (Levelized Cost of Energy) projection for a hybrid PV (photovoltaic)-CSP (concentrated solar power) plant in the Atacama Desert, Chile," Energy, Elsevier, vol. 94(C), pages 422-430.
    4. Belderbos, Andreas & Delarue, Erik & Kessels, Kris & D'haeseleer, William, 2017. "Levelized cost of storage — Introducing novel metrics," Energy Economics, Elsevier, vol. 67(C), pages 287-299.
    5. Carlo Mari, 2020. "Stochastic NPV Based vs Stochastic LCOE Based Power Portfolio Selection Under Uncertainty," Energies, MDPI, vol. 13(14), pages 1-18, July.
    6. Behrens, Sam & Hayward, Jennifer & Hemer, Mark & Osman, Peter, 2012. "Assessing the wave energy converter potential for Australian coastal regions," Renewable Energy, Elsevier, vol. 43(C), pages 210-217.
    7. Federica Cucchiella & Idiano D’Adamo & Massimo Gastaldi, 2017. "Economic Analysis of a Photovoltaic System: A Resource for Residential Households," Energies, MDPI, vol. 10(6), pages 1-15, June.
    8. Aly, Ahmed & Bernardos, Ana & Fernandez-Peruchena, Carlos M. & Jensen, Steen Solvang & Pedersen, Anders Branth, 2019. "Is Concentrated Solar Power (CSP) a feasible option for Sub-Saharan Africa?: Investigating the techno-economic feasibility of CSP in Tanzania," Renewable Energy, Elsevier, vol. 135(C), pages 1224-1240.
    9. Bhave, Amit & Taylor, Richard H.S. & Fennell, Paul & Livingston, William R. & Shah, Nilay & Dowell, Niall Mac & Dennis, John & Kraft, Markus & Pourkashanian, Mohammed & Insa, Mathieu & Jones, Jenny & , 2017. "Screening and techno-economic assessment of biomass-based power generation with CCS technologies to meet 2050 CO2 targets," Applied Energy, Elsevier, vol. 190(C), pages 481-489.
    10. Zhao, Changhong & Zhang, Weirong & Wang, Yang & Liu, Qilin & Guo, Jingsheng & Xiong, Minpeng & Yuan, Jiahai, 2017. "The economics of coal power generation in China," Energy Policy, Elsevier, vol. 105(C), pages 1-9.
    11. Malheiro, André & Castro, Pedro M. & Lima, Ricardo M. & Estanqueiro, Ana, 2015. "Integrated sizing and scheduling of wind/PV/diesel/battery isolated systems," Renewable Energy, Elsevier, vol. 83(C), pages 646-657.
    12. Ghaem Sigarchian, Sara & Paleta, Rita & Malmquist, Anders & Pina, André, 2015. "Feasibility study of using a biogas engine as backup in a decentralized hybrid (PV/wind/battery) power generation system – Case study Kenya," Energy, Elsevier, vol. 90(P2), pages 1830-1841.
    13. Thomas Poulsen & Charlotte Bay Hasager & Christian Munk Jensen, 2017. "The Role of Logistics in Practical Levelized Cost of Energy Reduction Implementation and Government Sponsored Cost Reduction Studies: Day and Night in Offshore Wind Operations and Maintenance Logistic," Energies, MDPI, vol. 10(4), pages 1-28, April.
    14. Cirés, E. & Marcos, J. & de la Parra, I. & García, M. & Marroyo, L., 2019. "The potential of forecasting in reducing the LCOE in PV plants under ramp-rate restrictions," Energy, Elsevier, vol. 188(C).
    15. Hdidouan, Daniel & Staffell, Iain, 2017. "The impact of climate change on the levelised cost of wind energy," Renewable Energy, Elsevier, vol. 101(C), pages 575-592.
    16. Roth, Ian F. & Ambs, Lawrence L., 2004. "Incorporating externalities into a full cost approach to electric power generation life-cycle costing," Energy, Elsevier, vol. 29(12), pages 2125-2144.
    17. Succar, Samir & Denkenberger, David C. & Williams, Robert H., 2012. "Optimization of specific rating for wind turbine arrays coupled to compressed air energy storage," Applied Energy, Elsevier, vol. 96(C), pages 222-234.
    18. Ma, Yuegeng & Zhang, Xuwei & Liu, Ming & Yan, Junjie & Liu, Jiping, 2018. "Proposal and assessment of a novel supercritical CO2 Brayton cycle integrated with LiBr absorption chiller for concentrated solar power applications," Energy, Elsevier, vol. 148(C), pages 839-854.
    19. Shapiro, Arnold F., 2013. "Modeling future lifetime as a fuzzy random variable," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 864-870.
    20. Ueckerdt, Falko & Hirth, Lion & Luderer, Gunnar & Edenhofer, Ottmar, 2013. "System LCOE: What are the costs of variable renewables?," Energy, Elsevier, vol. 63(C), pages 61-75.
    21. Aven, Terje & Castro, I.T., 2008. "A minimal repair replacement model with two types of failure and a safety constraint," European Journal of Operational Research, Elsevier, vol. 188(2), pages 506-515, July.
    22. Onipe Adabenege Yahaya & Iorsue Awen, Benjamin, 2020. "Bank-Specific Attributes and Operational Efficiency: Evidence from Efficient-Structure Hypothesis," Journal of Business and Social Review in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 6(3), pages 1087-1098, September.
    23. Schindele, Stephan & Trommsdorff, Maximilian & Schlaak, Albert & Obergfell, Tabea & Bopp, Georg & Reise, Christian & Braun, Christian & Weselek, Axel & Bauerle, Andrea & Högy, Petra & Goetzberger, Ado, 2020. "Implementation of agrophotovoltaics: Techno-economic analysis of the price-performance ratio and its policy implications," Applied Energy, Elsevier, vol. 265(C).
    24. Le, Van Long & Kheiri, Abdelhamid & Feidt, Michel & Pelloux-Prayer, Sandrine, 2014. "Thermodynamic and economic optimizations of a waste heat to power plant driven by a subcritical ORC (Organic Rankine Cycle) using pure or zeotropic working fluid," Energy, Elsevier, vol. 78(C), pages 622-638.
    25. Daniilidis, Alexandros & Herber, Rien & Vermaas, David A., 2014. "Upscale potential and financial feasibility of a reverse electrodialysis power plant," Applied Energy, Elsevier, vol. 119(C), pages 257-265.
    26. Watts, David & Valdés, Marcelo F. & Jara, Danilo & Watson, Andrea, 2015. "Potential residential PV development in Chile: The effect of Net Metering and Net Billing schemes for grid-connected PV systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1037-1051.
    27. Lucheroni, Carlo & Mari, Carlo, 2017. "CO2 volatility impact on energy portfolio choice: A fully stochastic LCOE theory analysis," Applied Energy, Elsevier, vol. 190(C), pages 278-290.
    28. Pettinau, Alberto & Ferrara, Francesca & Tola, Vittorio & Cau, Giorgio, 2017. "Techno-economic comparison between different technologies for CO2-free power generation from coal," Applied Energy, Elsevier, vol. 193(C), pages 426-439.
    29. Geissmann, Thomas, 2017. "A probabilistic approach to the computation of the levelized cost of electricity," Energy, Elsevier, vol. 124(C), pages 372-381.
    30. Sung-Hyun Hwang & Mun-Kyeom Kim & Ho-Sung Ryu, 2019. "Real Levelized Cost of Energy with Indirect Costs and Market Value of Variable Renewables: A Study of the Korean Power Market," Energies, MDPI, vol. 12(13), pages 1-18, June.
    31. Wagner, Sharon J. & Rubin, Edward S., 2014. "Economic implications of thermal energy storage for concentrated solar thermal power," Renewable Energy, Elsevier, vol. 61(C), pages 81-95.
    32. Lo Zupone, Giacomo & Amelio, Mario & Barbarelli, Silvio & Florio, Gaetano & Scornaienchi, Nino Michele & Cutrupi, Antonino, 2017. "Lcoe evaluation for a tidal kinetic self balancing turbine: Case study and comparison," Applied Energy, Elsevier, vol. 185(P2), pages 1292-1302.
    33. De Roo, Guillaume & Parsons, John E., 2011. "A methodology for calculating the levelized cost of electricity in nuclear power systems with fuel recycling," Energy Economics, Elsevier, vol. 33(5), pages 826-839, September.
    34. Dowling, Alexander W. & Zheng, Tian & Zavala, Victor M., 2017. "Economic assessment of concentrated solar power technologies: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 1019-1032.
    35. Staffell, Iain & Green, Richard, 2014. "How does wind farm performance decline with age?," Renewable Energy, Elsevier, vol. 66(C), pages 775-786.
    36. Pihl, Erik & Heyne, Stefan & Thunman, Henrik & Johnsson, Filip, 2010. "Highly efficient electricity generation from biomass by integration and hybridization with combined cycle gas turbine (CCGT) plants for natural gas," Energy, Elsevier, vol. 35(10), pages 4042-4052.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chenglong Guo & Wanan Sheng & Dakshina G. De Silva & George Aggidis, 2023. "A Review of the Levelized Cost of Wave Energy Based on a Techno-Economic Model," Energies, MDPI, vol. 16(5), pages 1-30, February.
    2. Oh, Jinwoo & Han, Ukmin & Jung, Yujun & Kang, Yong Tae & Lee, Hoseong, 2024. "Advancing waste heat potential assessment for net-zero emissions: A review of demand-based thermal energy systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 202(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shen, Wei & Chen, Xi & Qiu, Jing & Hayward, Jennifier A & Sayeef, Saad & Osman, Peter & Meng, Ke & Dong, Zhao Yang, 2020. "A comprehensive review of variable renewable energy levelized cost of electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    2. Aquila, Giancarlo & Coelho, Eden de Oliveira Pinto & Bonatto, Benedito Donizeti & Pamplona, Edson de Oliveira & Nakamura, Wilson Toshiro, 2021. "Perspective of uncertainty and risk from the CVaR-LCOE approach: An analysis of the case of PV microgeneration in Minas Gerais, Brazil," Energy, Elsevier, vol. 226(C).
    3. Pérez Odeh, Rodrigo & Watts, David & Flores, Yarela, 2018. "Planning in a changing environment: Applications of portfolio optimisation to deal with risk in the electricity sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 3808-3823.
    4. Michael Papapetrou & George Kosmadakis & Francesco Giacalone & Bartolomé Ortega-Delgado & Andrea Cipollina & Alessandro Tamburini & Giorgio Micale, 2019. "Evaluation of the Economic and Environmental Performance of Low-Temperature Heat to Power Conversion using a Reverse Electrodialysis – Multi-Effect Distillation System," Energies, MDPI, vol. 12(17), pages 1-26, August.
    5. Cibelle Pereira Trama & Amaro Olímpio Pereira Júnior & Ana Paula Cardoso Guimarães & André Luiz Diniz & Leonardo dos Santos Reis Vieira, 2021. "Cost–Benefit Analysis of Solar Thermal Plants with Storage in a Hydrothermal System," Energies, MDPI, vol. 14(18), pages 1-27, September.
    6. Gutiérrez-Alvarez, R. & Guerra, K. & Haro, P., 2023. "Market profitability of CSP-biomass hybrid power plants: Towards a firm supply of renewable energy," Applied Energy, Elsevier, vol. 335(C).
    7. Maria del Carmen Gomez-Rios & Dora Carmen Galvez-Cruz, 2021. "Simulation of Levelized Costs of Electricity Considering Externalities," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(4), pages 1-23, Octubre -.
    8. Jäger, Tobias & McKenna, Russell & Fichtner, Wolf, 2015. "Onshore wind energy in Baden-Württemberg: a bottom-up economic assessment of the socio-technical potential," Working Paper Series in Production and Energy 7, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    9. Chen, Hao & Gao, Xin-Ya & Liu, Jian-Yu & Zhang, Qian & Yu, Shiwei & Kang, Jia-Ning & Yan, Rui & Wei, Yi-Ming, 2020. "The grid parity analysis of onshore wind power in China: A system cost perspective," Renewable Energy, Elsevier, vol. 148(C), pages 22-30.
    10. Adrián Caraballo & Santos Galán-Casado & Ángel Caballero & Sara Serena, 2021. "Molten Salts for Sensible Thermal Energy Storage: A Review and an Energy Performance Analysis," Energies, MDPI, vol. 14(4), pages 1-15, February.
    11. Stocker Klaus, 2020. "Financial and Economic Assessment of Tidal Stream Energy—A Case Study," IJFS, MDPI, vol. 8(3), pages 1-20, August.
    12. Laha, Priyanka & Chakraborty, Basab, 2021. "Low carbon electricity system for India in 2030 based on multi-objective multi-criteria assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    13. Prakash, Vrishab & Ghosh, Sajal & Kanjilal, Kakali, 2020. "Costs of avoided carbon emission from thermal and renewable sources of power in India and policy implications," Energy, Elsevier, vol. 200(C).
    14. Nissen, Ulrich & Harfst, Nathanael, 2019. "Shortcomings of the traditional “levelized cost of energy” [LCOE] for the determination of grid parity," Energy, Elsevier, vol. 171(C), pages 1009-1016.
    15. Yi, Zhitong & Luo, Xianglong & Chen, Jianyong & Chen, Ying, 2017. "Mathematical modelling and optimization of a liquid separation condenser-based organic Rankine cycle used in waste heat utilization," Energy, Elsevier, vol. 139(C), pages 916-934.
    16. Coria, Gustavo & Penizzotto, Franco & Pringles, Rolando, 2019. "Economic analysis of photovoltaic projects: The Argentinian renewable generation policy for residential sectors," Renewable Energy, Elsevier, vol. 133(C), pages 1167-1177.
    17. Wilhelm Kuckshinrichs, 2021. "LCOE: A Useful and Valid Indicator—Replica to James Loewen and Adam Szymanski," Energies, MDPI, vol. 14(2), pages 1-8, January.
    18. Wang, Yunfei & Li, Jinke & O'Leary, Nigel & Shao, Jing, 2024. "Banding: A game changer in the Renewables Obligation scheme in the United Kingdom," Energy Economics, Elsevier, vol. 130(C).
    19. Philipp Beiter & Aubryn Cooperman & Eric Lantz & Tyler Stehly & Matt Shields & Ryan Wiser & Thomas Telsnig & Lena Kitzing & Volker Berkhout & Yuka Kikuchi, 2021. "Wind power costs driven by innovation and experience with further reductions on the horizon," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 10(5), September.
    20. San Miguel, G. & Corona, B., 2018. "Economic viability of concentrated solar power under different regulatory frameworks in Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 205-218.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:238:y:2022:i:pb:s0360544221020247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.