Date: 2011
Type: Working Paper
Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies
Working Paper, EUI RSCAS, 2011/45, Loyola de Palacio Programme on Energy Policy
JOSKOW, Paul L., Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies, EUI RSCAS, 2011/45, Loyola de Palacio Programme on Energy Policy - https://hdl.handle.net/1814/18239
Retrieved from Cadmus, EUI Research Repository
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 lifecycle
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. These comparisons also typically
overvalue wind generating technologies compared to solar generating technologies. Integrating
differences in production profiles, the associated variations in the market value of the electricity at the
times it is supplied, and the expected life-cycle costs associated with different generating technologies
is necessary to provide meaningful economic 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, incentives for and the evaluation of electricity storage technologies and the
evaluation of the additional costs of integrating intermittent generation into electric power networks.
Cadmus permanent link: https://hdl.handle.net/1814/18239
ISSN: 1028-3625
Series/Number: EUI RSCAS; 2011/45; Loyola de Palacio Programme on Energy Policy