Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making

Huseyin Murat Cekirge; Serdar Erturan

doi:doi:10.11648/j.ajme.20190501.11

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Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making

Huseyin Murat Cekirge, Serdar Erturan

Published in American Journal of Modern Energy (Volume 5, Issue 1)

Received: 26 March 2019 Accepted: 26 April 2019 Published: 23 May 2019

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Abstract

LCOE is the Levelized Cost of Electricity or Energy, which is an economic measure of the minimum price at which energy can be produced over the lifetime of the power plant. This value determines the minimum value at which energy could be sold during the lifetime of the installation, and this value is considered as the net present value of unit cost electricity. It is estimated dividing the net present value of the total expenditure by the total production. The LACE is the Levelized Avoided Cost of Electricity or Energy which is a measure of income for the unit value of electricity. Of course, the value of LCOE should be less than the LACE for considering the project, these metrics are necessary but not sufficient to start the project. For overcoming these difficulties, in this paper MLCOE (Modified Levelized Cost of Electricity or Energy) and MLACE (Modified Avoided Cost of Electricity or Energy) are introduced to the calculations for considering dominant factors of construction of a plant and these are the actual estimations of CAPEX (Capital Expenses) and OPEX (Operation Expenses) through the payback period. The methodology presented in this paper will be an important supporting tool for power plant investments of go - or - not go decision.

Published in	American Journal of Modern Energy (Volume 5, Issue 1)
DOI	10.11648/j.ajme.20190501.11
Page(s)	1-4
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Levelized Cost of Electricity, LCOE, MLOCE, Levelized Avoidable Cost of Electricity, LACE, MLACE, Discount Sensitivity, Payback Period

References

[1]	Walter Short, Daniel J. Packey, and Thomas Holt, A. "Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies," NREL/TP-462-5173, March 1995.
[2]	EIA (U. S. Energy Information Administration). Annual Energy Outlook 2018 with Projections to 2050. Washington, D. C.: U. S. Department of Energy. February 6, 2018. https://www.eia.gov/outlooks/aeo/pdf/AEO2018.pdf
[3]	U. S. Energy Information Administration, Annual Energy Outlook 2019 with projections to 2050, #AEO2019, 2019, available at https://www.eia.gov/outlooks/aeo/electricity_generation.php.
[4]	P. Bronski, "Levelized cost of energy: A limited metric," 2014, available at https://www.sparklibrary.com/9-reasons-why-lcoe-can-mislead/
[5]	A. Gilbert, Spark Library is an Energy Research Platform, "9 Reasons Why LCOE Can Mislead," 2016, available at https://www.sparklibrary.com/9-reasons-why-lcoe-can-mislead/
[6]	C. Burenstam-Linder, "Levelized Cost of Electricity (LCOE) and its limitations," available at 2017, https://heatpower.com/news/renewable-energy/levelized-cost-of-electricity-lcoe-and-its-limitations/
[7]	S. B. Darling, F. You, T. Veselka, and A. Velosa. “Assumptions and The Levelized Cost of Energy for Photovoltaics.” Energ. Environ. Sci. 4 (2011): 3133–3139.
[8]	B. Azzopardi, C. J. M. Emmott, A. Urbina, F. C. Krebs, J. Mutale, and J. Nelson. “Economic assessment of solar electricity production from organic-based photovoltaic modules in a domestic environment.” Energ. Environ. Sci. 4 (2011): 3741–3753.
[9]	Sergei Manzhos, "On the Choice of the Discount Rate and the Role of Financial Variables and Physical Parameters in Estimating the Levelized Cost of Energy," Int. J. Financ. Stud. 2013, 1 (3), 54-61; doi: 10.3390/ijfs1030054
[10]	Short, W., Packey, D., & Holt, T. (1995). “A Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies,” NREL/TP-462-5173, March1995.
[11]	Chris Namovicz. "Assessing the Economic Value of New Utility-Scale Renewable Generation Projects". EIA Energy Conference, pp. 4, 2013, at https://www.solarpowerworldonline.com/2016/05/economic-theory-can-help-maximize-profits-solar-projects/
[12]	US DOE Energy Information Administration (EIA), “Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2016,” August 2016, available at www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf
[13]	S. Tegen, M. Hand, B. Maples, E. Lantz, P. Schwabe, and A. Smith. “2010 Cost of Wind Energy Review,” NREL/TP-5000-52920, April 2012, available at http://www.nrel.gov/docs/fy12osti/52920.pdf
[14]	C. Mone, T. Stehly, B. Maples, and E. Settle, “2014 Cost of Wind Energy Review,” NREL/TP-6A20-64281, October 2015, available at http://www.nrel.gov/docs/fy16osti/64281.pdf
[15]	Short, W., Packey, D., & Holt, T. (1995). “A Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies,” NREL/TP-462-5173, March 1995.

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APA Style

Huseyin Murat Cekirge, Serdar Erturan. (2019). Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. American Journal of Modern Energy, 5(1), 1-4. https://doi.org/10.11648/j.ajme.20190501.11

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ACS Style

Huseyin Murat Cekirge; Serdar Erturan. Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. Am. J. Mod. Energy 2019, 5(1), 1-4. doi: 10.11648/j.ajme.20190501.11

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AMA Style

Huseyin Murat Cekirge, Serdar Erturan. Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. Am J Mod Energy. 2019;5(1):1-4. doi: 10.11648/j.ajme.20190501.11

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@article{10.11648/j.ajme.20190501.11,
  author = {Huseyin Murat Cekirge and Serdar Erturan},
  title = {Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making},
  journal = {American Journal of Modern Energy},
  volume = {5},
  number = {1},
  pages = {1-4},
  doi = {10.11648/j.ajme.20190501.11},
  url = {https://doi.org/10.11648/j.ajme.20190501.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajme.20190501.11},
  abstract = {LCOE is the Levelized Cost of Electricity or Energy, which is an economic measure of the minimum price at which energy can be produced over the lifetime of the power plant. This value determines the minimum value at which energy could be sold during the lifetime of the installation, and this value is considered as the net present value of unit cost electricity. It is estimated dividing the net present value of the total expenditure by the total production. The LACE is the Levelized Avoided Cost of Electricity or Energy which is a measure of income for the unit value of electricity. Of course, the value of LCOE should be less than the LACE for considering the project, these metrics are necessary but not sufficient to start the project. For overcoming these difficulties, in this paper MLCOE (Modified Levelized Cost of Electricity or Energy) and MLACE (Modified Avoided Cost of Electricity or Energy) are introduced to the calculations for considering dominant factors of construction of a plant and these are the actual estimations of CAPEX (Capital Expenses) and OPEX (Operation Expenses) through the payback period. The methodology presented in this paper will be an important supporting tool for power plant investments of go - or - not go decision.},
 year = {2019}
}

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TY  - JOUR
T1  - Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making
AU  - Huseyin Murat Cekirge
AU  - Serdar Erturan
Y1  - 2019/05/23
PY  - 2019
N1  - https://doi.org/10.11648/j.ajme.20190501.11
DO  - 10.11648/j.ajme.20190501.11
T2  - American Journal of Modern Energy
JF  - American Journal of Modern Energy
JO  - American Journal of Modern Energy
SP  - 1
EP  - 4
PB  - Science Publishing Group
SN  - 2575-3797
UR  - https://doi.org/10.11648/j.ajme.20190501.11
AB  - LCOE is the Levelized Cost of Electricity or Energy, which is an economic measure of the minimum price at which energy can be produced over the lifetime of the power plant. This value determines the minimum value at which energy could be sold during the lifetime of the installation, and this value is considered as the net present value of unit cost electricity. It is estimated dividing the net present value of the total expenditure by the total production. The LACE is the Levelized Avoided Cost of Electricity or Energy which is a measure of income for the unit value of electricity. Of course, the value of LCOE should be less than the LACE for considering the project, these metrics are necessary but not sufficient to start the project. For overcoming these difficulties, in this paper MLCOE (Modified Levelized Cost of Electricity or Energy) and MLACE (Modified Avoided Cost of Electricity or Energy) are introduced to the calculations for considering dominant factors of construction of a plant and these are the actual estimations of CAPEX (Capital Expenses) and OPEX (Operation Expenses) through the payback period. The methodology presented in this paper will be an important supporting tool for power plant investments of go - or - not go decision.
VL  - 5
IS  - 1
ER  -

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Author Information

Huseyin Murat Cekirge

Department of Mechanical Engineering, New York University, New York, USA; Department of Mechanical Engineering, City College of New York, New York, USA
Serdar Erturan

Department of Mechanical Engineering, City College of New York, New York, USA

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APA Style

Huseyin Murat Cekirge, Serdar Erturan. (2019). Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. American Journal of Modern Energy, 5(1), 1-4. https://doi.org/10.11648/j.ajme.20190501.11

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ACS Style

Huseyin Murat Cekirge; Serdar Erturan. Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. Am. J. Mod. Energy 2019, 5(1), 1-4. doi: 10.11648/j.ajme.20190501.11

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AMA Style

Huseyin Murat Cekirge, Serdar Erturan. Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making. Am J Mod Energy. 2019;5(1):1-4. doi: 10.11648/j.ajme.20190501.11

Copy | Download

@article{10.11648/j.ajme.20190501.11,
  author = {Huseyin Murat Cekirge and Serdar Erturan},
  title = {Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making},
  journal = {American Journal of Modern Energy},
  volume = {5},
  number = {1},
  pages = {1-4},
  doi = {10.11648/j.ajme.20190501.11},
  url = {https://doi.org/10.11648/j.ajme.20190501.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajme.20190501.11},
  abstract = {LCOE is the Levelized Cost of Electricity or Energy, which is an economic measure of the minimum price at which energy can be produced over the lifetime of the power plant. This value determines the minimum value at which energy could be sold during the lifetime of the installation, and this value is considered as the net present value of unit cost electricity. It is estimated dividing the net present value of the total expenditure by the total production. The LACE is the Levelized Avoided Cost of Electricity or Energy which is a measure of income for the unit value of electricity. Of course, the value of LCOE should be less than the LACE for considering the project, these metrics are necessary but not sufficient to start the project. For overcoming these difficulties, in this paper MLCOE (Modified Levelized Cost of Electricity or Energy) and MLACE (Modified Avoided Cost of Electricity or Energy) are introduced to the calculations for considering dominant factors of construction of a plant and these are the actual estimations of CAPEX (Capital Expenses) and OPEX (Operation Expenses) through the payback period. The methodology presented in this paper will be an important supporting tool for power plant investments of go - or - not go decision.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Modified Levelized Cost of Electricity or Energy, MLOCE and Modified Levelized Avoidable Cost of Electricity or Energy, MLACE and Decision Making
AU  - Huseyin Murat Cekirge
AU  - Serdar Erturan
Y1  - 2019/05/23
PY  - 2019
N1  - https://doi.org/10.11648/j.ajme.20190501.11
DO  - 10.11648/j.ajme.20190501.11
T2  - American Journal of Modern Energy
JF  - American Journal of Modern Energy
JO  - American Journal of Modern Energy
SP  - 1
EP  - 4
PB  - Science Publishing Group
SN  - 2575-3797
UR  - https://doi.org/10.11648/j.ajme.20190501.11
AB  - LCOE is the Levelized Cost of Electricity or Energy, which is an economic measure of the minimum price at which energy can be produced over the lifetime of the power plant. This value determines the minimum value at which energy could be sold during the lifetime of the installation, and this value is considered as the net present value of unit cost electricity. It is estimated dividing the net present value of the total expenditure by the total production. The LACE is the Levelized Avoided Cost of Electricity or Energy which is a measure of income for the unit value of electricity. Of course, the value of LCOE should be less than the LACE for considering the project, these metrics are necessary but not sufficient to start the project. For overcoming these difficulties, in this paper MLCOE (Modified Levelized Cost of Electricity or Energy) and MLACE (Modified Avoided Cost of Electricity or Energy) are introduced to the calculations for considering dominant factors of construction of a plant and these are the actual estimations of CAPEX (Capital Expenses) and OPEX (Operation Expenses) through the payback period. The methodology presented in this paper will be an important supporting tool for power plant investments of go - or - not go decision.
VL  - 5
IS  - 1
ER  -

Copy | Download