Why Levelized Cost of Electricity is an important measurement in wind

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Courtesy of Orenda Energy Solutions Ltd.

As the wind industry continues to grow, it is faced with much opposition, and a lot of misinformation is being shared.

Some of the biggest myths around wind is that the costs of building and installing wind turbines are too high (compared to the costs of other energy sources) and that the industry is overly subsidized. Many anti-wind lobbyists point out that subsidies and tax benefits are the only reasons why the industry is currently flourishing, without actually looking at the hard facts and numbers such as the levelized cost of electricity (LCOE).

At the end of the day, the real numbers don’t lie, and one of the only numbers that matters the most when it comes to looking at the real costs of energy is the LCOE.

The US Energy Information Administration gives the best description of levelized cost of electricity: “…often cited as a convenient summary measure of the overall competiveness of different generating technologies. It represents the per-kilowatthour cost (in real dollars) of building and operating a generating plant over an assumed financial life and duty cycle. Key inputs to calculating LCOE include capital costs, fuel costs, fixed and variable operations and maintenance (O&M) costs, financing costs, and an assumed utilization rate for each plant type.”

The Levelized cost of electricity calculation does not take into account subsidizations or tax benefits, looking at the real costs of each energy source.

One of the best sources for calculating LCOE is the company Lazard. In its Levelized Cost of Energy Analysis Version 9.0 (released November 2015) Lazard’s calculations put onshore wind at the lowest cost of any energy source available right now, and far below many conventional sources (see image below).

All of the arguments that anti-wind groups cite are moot points when you look at the facts and real numbers. It is the hope of everyone within the industry that the truth is told and shared, and that the anti-wind groups are exposed for their shameful fear-mongering tactics and spreading of misinformation.

Investors all over the world, including large corporations (like Shell) are putting their money in wind for a reason. They see the numbers, the benefits and the ROI.

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