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Which Power Generation Sources are the most Cost-Effective?

The Levelized Cost of Energy (LCOE) compares initial and ongoing costs of installing and maintaining various power generation solutions, as diverse as coal, natural gas and renewable energy. 

Traditionally, this cost has been undertaken entirely by utilities or power generation companies.  The introduction of renewable energy democratizes power generation, enabling Distributed Generation (DG) (residential, commercial, community) to thrive alongside Utility Scale Generation crucial to business success.  More on that in a future post.

The overall cost of installing and maintaining Utility Scale Renewable Energy sources is less than their Conventional counterparts.

Using Lazard data below, the capital cost ($47/MWh) of a new Coal Generation facility, far surpasses the capital cost for Solar PV-Utility Scale ($21/MWh) and even for Solar PV + Storage-Utility Scale ($37/MWh). 

Of course, a substantial cost advantage of Renewable Energy solutions stems from the fact that there is no fuel cost because these systems run on freely available Solar, Wind and Geothermal Energy.  Moreover, except for Geothermal sources, there is also no Variable O&M ascribed to Renewable Energy solutions.

Therefore, even the cheapest of Conventional power generation systems, Gas Combined Cycle have an overall LCOE of $39/MWh to account for fuel, variable O&M, capital and fixed O&M costs, while Solar PV-Utility Scale boasts a much lower $24/MWh and Wind-Onshore is also at $24/MWh.  The costs of adding Storage are projected to reduce as economies of scale and better battery technologies take root for stationery and automotive applications.

Lastly, what is not shown in the Lazard data above, is the cost incurred by society due to Natural Disasters that are radically increasing in frequency and intensity.  The cost in the U.S. alone has risen from $21.4B/yr. in the 1980s to $143.8B/yr. most recently 2021-2023. A large contributor to this cost is conventional power generation sources (Coal and Natural Gas) that generate vast amounts of Greenhouse Gas (GHG) emissions, making Solar and Wind by far the most cost-effective power generation options to install going forward.

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