Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2020

Release date: February 21, 2020

This paper presents average values of levelized costs and levelized avoided costs for electric generating technologies entering service in 2022, 2025,[1] and 2040 as represented in the National Energy Modeling System (NEMS) for the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2020 (AEO2020) Reference case.[2] Both values estimate the factors contributing to the capacity expansion decisions modeled, which also consider policy, technology, and geographic characteristics that are not easily captured in a single metric.

The build decisions in the real world and as modeled in AEO2020,however, are more complex than a simple LACE-to-LCOE comparison presented in the paper, because they include such factors as policy and non-economic drivers. Nevertheless, the value-cost ratio (the ratio of LACE-to-LCOE) provides a more intuitive framework for understanding economic competitiveness between generation technologies in the capacity expansion decisions than is possible using either LCOE or LACE metric individually.

The costs for electric generating facilities entering service in 2025 are presented in the body of the report, with those for 2022[3] and 2040 included in Appendices A and B, respectively. Both a capacity-weighted average based on projected capacity additions and a simple average (unweighted) of the regional values across the 25 U.S. supply regions of the NEMS electricity market module (EMM)[4] are provided, together with the range of regional values.





Footnotes

[1] Given the long lead-time and licensing requirements for some technologies, the first feasible year that all technologies are available is 2025.

[2] AEO2020 reports are available at https://www.eia.gov/outlooks/aeo/.

[3] Appendix A shows LCOE and LACE for the subset of technologies available to be built in 2022.

[4] The map of EMM regions is available at https://www.eia.gov/outlooks/aeo/pdf/nerc_map.pdf.