Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies
Economic evaluations of alternative electric generating technologies typically rely on comparisons between their expected life-cycle production costs per unit of electricity supplied. The standard life-cycle cost metric utilized is the “levelized cost” per MWh supplied. This paper demonstrates that this metric is inappropriate for comparing intermittent generating technologies like wind and solar with dispatchable generating technologies like nuclear, gas combined cycle, and coal. Levelized cost comparisons are a misleading metric for comparing intermittent and dispatchable generating technologies because they fail to take into account differences in the production profiles of intermittent and dispatchable generating technologies and the associated large variations in the market value of the electricity they supply. Levelized cost comparisons overvalue intermittent generating technologies compared to dispatchable base load generating technologies. They also overvalue wind generating technologies compared to solar generating technologies. Integrating differences in production profiles, the associated variations in the market value of the electricity supplied, and life-cycle costs associated with different generating technologies is necessary to provide meaningful comparisons between them. This market-based framework also has implications for the appropriate design of procurement auctions created to implement renewable energy procurement mandates, the efficient structure of production tax credits for renewable energy, and the evaluation of the additional costs of integrating intermittent generation into electric power networks.
|Date of creation:||Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: 77 Massachusetts Ave. (Building E40-279), Cambridge, MA 02139-4307|
Phone: (617) 253-3551
Fax: (617) 253-9845
Web page: http://tisiphone.mit.edu/RePEc
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boccard, Nicolas, 2009. "Capacity factor of wind power realized values vs. estimates," Energy Policy, Elsevier, vol. 37(7), pages 2679-2688, July.
- Timothy D. Mount, Surin Maneevitjit, Alberto J. Lamadrid, Ray D. Zimmerman, and Robert J. Thomas, 2012.
"The Hidden System Costs of Wind Generation in a Deregulated Electricity Market,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 1).
- Mount, Timothy D. & Maneevitjit, Surin & Lamadrid, Alberto J. & Zimmerman, Ray D. & Thomas, Robert J., 2011. "The Hidden System Costs Of Wind Generation In A Deregulated Electricity Market," Working Papers 126529, Cornell University, Department of Applied Economics and Management.
When requesting a correction, please mention this item's handle: RePEc:mee:wpaper:1013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sharmila Ganguly)The email address of this maintainer does not seem to be valid anymore. Please ask Sharmila Ganguly to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.