Total Systems Cost: A Better Metric for Valuing Electricity in Supply Network Planning and Decision-Making

Abstract

Comparing the cost and value of electricity generation technologies is becoming more complex as electricity grids become more diverse. The changing generation mix, along with the need to maintain a competent grid, is resulting in previously acceptable cost comparison metrics being used outside of their limited range of applicability. In particular Levelised Cost of Energy (LCOE), if used to evaluate options for a future, low carbon grid, could result in erroneous and misleading conclusions. Electricity generation facilities do not only provide energy, they also provide an array of additional services which are fundamental to maintaining a permanent and reliable electricity supply across the system, including reserve capacity, and voltage and frequency control. Indeed, some technology options pro- vide these services without generating any energy. These services, corresponding costs and operational implications need to be included in the evaluation of technologies in order to ensure the grids emerge transformed, resilient and genuinely sustainable. Total system cost and its derivative metrics are the most appropriate economic metrics for analysis and decision making in a future for low carbon grid.

Keywords: total system cost, grid security, cost metrics, levelised cost of electricity