The IESIS levelised cost spreadsheet 2019
Covering paper
The spreadsheet can be used to give indications of the relative costs of methods of generation. The use of probabilities via the macro scratchpad can be used to do sensitivity analysis.
A 2011 version of the Spreadsheet that includes worksheets for 4 different types of coal generation and for the Severn Barrage tidal project is available here. Covering paper here.
Levelised cost
The levelised cost methodology was developed to inform long-term strategic discussions on the relative costs of various types of generating plant. The method should not be used as a planning tool. Planning should be done using Total System Cost analysis which would take account of the characteristics of the particular system e.g. the shape of the load curve, the existing and follow-on generation plant, the existing transmission system etc.
The basis of the levelised cost method is first to identify the
cost items that contribute to the overall cost. The cost of each
item is then (a) estimated for each year of the investment period,
(b) discounted to present value and (c) summed for all years. The
energy generated per MW of installed generation is estimated and
also discounted. The sum of all the discounted cost items is then
divided by the discounted energy production to give the levelised
cost of electricity (LCOE) - normally stated in £/MWhr.All the
costs to the customer of a type of plant should be included e.g.
System Integration Costs. The studies should be done at current
prices, but with any forecast ‘real’ cost changes included.
Re-financing could be considered if the riskiness of the project
is forecast to change over its life. It is not necessary to
include ‘general inflation’ since this could vary over the life of
a project and is ‘unknown’ on long timescales. Also, changes to
the discount rate used over the life would be required
It should be noted that the chosen input figures in the spreadsheet and the handling of these data are those of the authors, and not necessarily those of IESIS