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You can compare different kinds of energy generation using a metric called the Levelised Cost of Energy, LCOE.
This includes the cost of equipment, transport, installation and grid connection; the cost of finance which can vary depending on the type of projects (it’s getting harder to finance coal projects for example); fuel costs for fossil fuel generators; operations and maintenance including land lease costs.
If the generator is located somewhere with a price on carbon that would be included too. But even without a carbon tax, solar and wind are cheaper than gas and coal generation since 2015.
In this video we talk through all of the components that make up the cost of energy from various sources, and we talk about other values beyond just the cost. What happens when the sun goes down and we still want to use electricity?
What will the future look like with more wind and solar in the grid? And further beyond when we have a lot more batteries and other energy storage available?
Thanks to John Poljak, founder of Keynumbers.com for doing all the calculations and Keynumber visualisations for this video. You can play around with the assumptions, add a carbon price, change the fuel cost etc by heading to www.keynumbers.com and then search for “rosie” to get all the models used here (which all end in “(Lazard)”). Add them to the whiteboard to get all of them on one page.
01:40 Cost of 500MW nameplate capacity
02:27 Difference between power and energy
02:55 Capacity factor
05:09 Financing costs
06:07 Fuel costs
06:24 Heat rate
07:11 Efficiency comparison coal, gas, wind , solar
07:32 Fuel costs and the European gas crisis
08:35 Operations and maintenance
09:27 Solar is the cheapest energy source in 2021
10:40 Marginal cost of fossil fuels vs new build wind and solar
11:31 Moving beyond cost of energy to value
12:18 Value adjusted LCOE – VALCOE
14:30 Future energy value
15:51 Other values besides $$
16:36 Getting real about energy tech tradeoffs
17:02 Thanks John Poljak!
Lazard’s LCOE v.15 is here:
For more on VALCOE including for other sources not included in the figure I showed here (nuclear, coal, offshore wind) check out these links:
If you would like to help develop the Engineering with Rosie channel, you could consider joining the Patreon community, where there is a chat community (and Patreon-only Discord server) about topics covered in the videos and suggestions for future videos and production quality improvements. https://www.patreon.com/engineeringwithrosie
Thanks for watching the video Renewables vs. Fossil Fuels: The True Cost of Energy