Levelized cost of electricity

But I just wanted to make an observation that in the short run, the softening phase that you've talked about, whilst we're building the new supply, we have to keep the old supply open.

And this means, almost certainly, that the capture prices that solar and wind and batteries can get are going to be below their long-run marginal cost, their LCOE for their capital types.

And indeed, coal and gas plants will also earn less than they really need and will also have to be supported because definitionally, during the transition, you're running oversupply.

And I think market PPAs and market designs need to think about this.

Funnily enough, in the longer run, I'm actually less worried, conceptually, whilst it would be nice to have a guaranteed takeout, in the end, the system should settle where Prozix earned their LCOE.

That's what a good designed market actually delivers.

Sorry.

According to Envision, the turbine has been designed to meet European offshore operating conditions and regulatory requirements.

And Envision also focused particularly on highlighting the turbine's potential to support reductions in levelized cost of energy, so LCOE.

And in terms of Envision's strategy, how do you think it compares based on what they've stated so far with the approach that has been taken by Ming Yang in trying to enter the European market?

Well, Envision's approach appears to be product focused at this stage, concentrating on promoting its technology.

Laurent, I'm really looking forward to this conversation.

We're going to talk about LCOE, Levelized Cost of Energy.

And actually, Lazard's really have made this LCOE their term over the last, I don't know how long it's been.

It's been 15, 20 years of this report coming out every year.

It's amazing.

And these are also places where you can build things.

In the Northeast, California, Pacific Northwest, there's power demand, but it's very difficult to build anything in those areas.

Lazar is known for a lot of things, but in particular, when it comes to energy, you put together, and I guess that's the 18th year, your LCOE report.

And it sounds like there is appropriate cautious optimism around the opportunity for cost reductions based on what we saw in shale.

And the technology is already at a decent, you know, it's relatively comparable on an LCOE basis.

So... you know plenty of room for potential improvement there so we'll hand off to them now

enjoy

I think nuclear is perhaps the closest.

And some would describe that as a premium electron, so a higher cost electron.

Can you talk about what some of those costs look like on an LCOE or levelized cost of electricity basis? and where you see some of the things going in terms of that LCOE becoming more competitive.

Sure.

Yeah, let's talk about the quality issues raised.

PV systems LCOE more than 20%.

Everybody know what LCOE is? Levelized Cost of Electricity.

Story in PV tech.

So essentially, the failures of components, the downtimes of inverters, and the other negatives will lower the amount of electricity you generate, And increase the cost to get it working, which effectively makes the price of the energy you are allowed to sell to be financially viable 20% higher, which is a lot.

So, oh, I subscribe to PV Tech, Timothy.

I can jump in there for you.

But they said that one line that I really liked, they said, our modeling reveals that the gap between an A-rated system and an F-rated system would drive the LCOE by 20%.

And they have convinced some capital markets that they can do better.

And as you said, reach a level of economy where by and large, I don't know the price of the LCOE per megawatt hour because we see pretty much everything, but somewhere between $100 and $200 per megawatt hour.

Now, some people may say it's expensive, but as you pointed out at the beginning, there's a lot of value in the power which is delivered clean 24-7 and so on.

So that whole crowd, are they all the same? That whole private investors in SMR or developer?

I started by asking him what he was trying to fix.

LCOE, levelized cost of energy, is a typical metric that we use to compare energy resources, and it's great on a project basis, but I think once you zoom out, it tends to fall, uh, short, uh, when we wanna talk about, you know, reliability, when we wanna talk about, uh, firming, right? That typically needs-- Uh, there's extra steps there, right? And so the marginal cost, firm cost capacity, the MCC, uh, takes that into account.

It, it in- incorporates the, uh, this concept called the effective-- marginal effective load carrying capacity of, uh, a resource, which is essentially how much a resource will contribute to when, uh, when the grid is stressed during peak hours.

Maybe that's the hottest summer day or these weird winter peaks that we're seeing.

... as load grows, the peak grows, and that's how the build, uh, the, the grid rather, is, is built and planned and operated.

And so I think the MCC better reflects that.

In combination with LCOE, you get a pretty s- good picture, a better picture of, of, uh, a resource's true cost.

Is there an example that might be useful around what is a decision that I might make one way using LCOE that I would look at differently using MCC? In creating this metric, what is it that...

So that's where primarily benefits from economies of scale.

Now, when you're talking about solar technology, you really have to look at LCOE, which really considers the lifetime of the solar panel and the amount of power that it can output.

And this is critically important because the largest solar industry is not necessarily rooftop solar that everybody imagines.

It is industrial scale solar.