CRITICAL REVIEW OF THE LEVELISED COST OF ENERGY METRIC

M.D. Sklar-Chik, A.C. Brent, I.H. De Kock

Abstract


The purpose of this paper is to critically review the ‘levelised cost of energy’ metric used in electricity project development. This metric is widely used, because it is a simple metric to calculate the cost per unit of electricity for a given technology connected to the electricity network. However, it neglects certain key terms such as inflation, integration costs, and system costs. The implications of incorporating these additional costs would provide a more comprehensive metric for evaluating electricity generation projects, and for the system as a whole. It is therefore recommended to refine the metric for the South African context. 


Keywords


Levelized Cost of Electricity; electricity generation projects; South Africa

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DOI: https://doi.org/10.7166/27-4-1496

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Copyright (c) 2016 The South African Journal of Industrial Engineering

ISSN 2224-7890 (on-line) ; ISSN 1012-277X (print)

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