A Review of Levelized cost of Electricity for Photovoltaic systems combining with their Environmental Impacts

Abstract

There exist several Techno-economic analysis tools and financial indicators used to determine the financial worthwhile of different energy systems. These tools and methods combine the capital costs, operation and maintenance costs, fuel costs and the energy output which when computed provide the necessary metrics which are indicators of energy systems viability in a given region. The metric commonly used by these tools for the assessment of the economic worthwhile of these power generation technologies is the Levelized cost of Electricity (LCOE). The levelized cost is a constant cost per unit of generation which is computed to compare the cost of generation of one unit with other types of generating resources over a similar lifespan with similar operational profiles and system value. It is an economic assessment of the cost of energy generating system that includes all the life cycle costs. The life cycle costs that are included in almost all LCOE calculations are the capital costs, fuel costs, fixed and variable operations and maintenance costs, financing costs, and the assumed capacity factor. LCOE is a representation of the cost of electricity that would equalize the cash flows, that is, the inflows and the outflows which is usually normalized over a certain period of time and allows the IPPs to fully recover all the costs over a predetermined financial lifespan. It is mainly applied in many different evaluative purposes such as utility resource selection, dispatch decisions, electricity pricing, energy conservation programs, R&D incentives, subsidy determination and environmental planning. However there are certain aspects that are not covered by LCOE which includes damage from air pollution, energy security, transmission and distribution costs and the environmental impacts. This paper investigates the types of costs that are included in the techno-economic analysis of solar photo-voltaics incorporating their environmental impacts. The paper identifies a need to come up with an environmental decision making tool with renewable energy technologies as the traditional tools reviewed such as HOMER, SAM, INSEL,SOMES among others do not consider the environment in their analysis. Keywords: Levelized cost of electricity, Environmental Impacts, Life cycle cost