A real System Cost Landscape

Background

In the ideologically driven Power system discussion of today, expectations on intermittent Renewable Energy technologies, Batteries and Hydrogen are skyhigh. Often we hear that Solar & Wind are cheap nowadays that nothing else can compete. The LCOE numbers for those techologies are said to be at “$20-30/MWh” and “100% RE Believers” round the globe are happy to convey that “the problem is solved”. At the same time those markets promoting themselves as most progressive on RE, Germany, California, Spain, Ireland, have among the highest rates there is, and with no real improvements in sight. So how does this come together? Well, there are still some “Natural laws”in Energy Transition to comply to, as discussed in earlier WattWatch posts, the most obvious one that Intermittancy is actually that, Intermittant.

First, let’s based on IEA’s latest analysis, talk through some terminology; LCOE,LCOS,LCONG&H and  VALCOE. Then try to have a short discussion and simple sumup on where we stand. This could be the basis for further work and discussions.

LCOE

The most established, and often reffered to measure is Levelized Cost of Energy, LCOE. We will not go into defentions, all can be found back in for example IEA’s latest 2020 Generation Cost report:
https://www.iea.org/reports/projected-costs-of-generating-electricity-2020

Below is the numbers for most technologies based on actual projects captured by IEA.

LCOS:

The next acronymn is Levelized Cost of Storage, LCOS. This is also covered in the IEA report referenced above, where IEA further refernce to the following report; https://www.cell.com/joule/pdfExtended/S2542-4351(18)30583-X : from where the figure is copied

The main conclusion here is that battery technologies are to come down to $150-250/MWh by 2050.

LCONG&H:

Levelized cost of Electricity from Natural gas and Hydrogen, which would together with batteries be the backup for any intermittent supply, is summing up in the span from  $150-250/MWh

VALCOE:

This is the model presented from IEA on Value adjusted levelized Cost of Electricity. There is not much specific data available yet. The model can be further explored in coming steps, with all its variables.

Existing Price structures related to two generation types:

This is from a report on “Road to EU Climate Neutrality by 2050”; https://roadtoclimateneutrality.eu/Energy_Study_Full.pdf , where European residential rates are plotted vs Intermittent as well as Nuclear shares in respective power mix. One could spend a lot of discussion on all kinds of different angles here, including ideological ones. These are the prices that are paid in those countries and in many cases, no relief in sight.

Discussion:

Power System modelling and research is executed by thousands and thousands of academics, professors, and PhD’s, around the globe. As mentioned at the beginning, the Ideological angle is often very present, in academia as well as with the public and topics becomes often very emotional.

To make a basic and oversimplified roundup of the earlier mentioned terms and numbers, here is an amateur simulation of a future North West Europe System cost. In Germany, the latest Solar and Onshore wind auctions was at €50-60/MWh, (latest Onshore wind auction in France also at 60). Simplistically let’s put both on 50 and Offshore wind at 50 (a bit away from that including connections). Backup, either Gas, Hydrogen or Batteries, where expected to be at €150-250/MWh 20-30 years out as seen above. Solar has 20%, Onshore 35% and Offshore 50% load factor, assuming 40% on average, at €50/MWh. The remaining 60% must be produced, stored, and released, assuming at a cost of €200/MWh. (0.4*50+0.6*200)=€145/MWh. Not included any needed inertia, grid expansion or what have you. There should be Fossil free Generation types that should come out much better than a System cost of €145/MWh. 

All this reasoning is only to see if there is a case to be stated and an interest to explore alternatives to the 100% RE scenarios. That most of the times seems to be the default case. It has/can be proven that there are cheaper systems, it would probably also be proven that there is a better Security of Supply with a balanced system. So, left to anyone who would find an interest to fund such a work.