The levelised cost of electricity – LCOE – is defined as the total cost per kilowatt hour of electricity accounting for the installation, operation, maintenance, financing, taxes, decommissioning, and other minor considerations for a given technology over its operating lifetime. LCOEs are routinely presented to compare different sources of electricity – unfortunately often when someone wants solar or wind energy to appear cheaper than nuclear energy.
It’s being increasingly recognised that LCOE doesn’t suit this sort of comparison. Important factors which aren’t accounted for, according to Aurora Energy Research, include market value, realistic generator performance and the value of storage technologies.
Furthermore, as explained by the IEA and NEA:
The LCOE methodology was developed in a period of regulated markets. As electricity markets diverge from this origin, the LCOE should be accompanied by other metrics when choosing among electricity generation technologies.
Probably the most important of these other metrics excluded from LCOE calculations is capacity credit, which is a function of the intermittent nature of the “fuel” for some technologies in the context of the demand on the grid. To take the IEA definition:
The capacity credit is the peak demand less the peak residual demand, expressed as a percentage of the variable renewables installed. For example, if 10 GW [gigawatts] of wind power plants are installed in a region, and their capacity credit is 10%, then there will be a reduction of 1 GW in the amount of other plants required, compared to a situation with no wind capacity. This is due to the weather-influenced output of variable generators (generally wind and solar, and also wave and tidal).
Clearly, if a 1 GW nuclear power plant is installed and operated well in the neighbouring region, it’ll replace 1 GW of, ideally, fossil fuel energy. The extraneous issue of its “waste” – which has no climate impact – will be capably solved through recycling and repositories without burdening our decendants.
Contrast the way the LCOE metric is used (or misused) to a rather different metric, the greenhouse gas lifecycle assessment – LCA:
There are many sources for LCAs of practically every generation technology, but arguably the most authoritative is provided in comprehensive meta-analyses by the US National Renewable Energy Laboratory.
Advocates of nuclear energy as a tool in climate action persistently cite this sort of authoritative metric, and one crucial thing should be recognised: they don’t exclude renewable energy sources by doing so.
Such advocates, exemplified by the 75 leading conservation scientists from around the world, who in 2014 implored environmental groups to reconsider nuclear energy, recognise the importance of not excluding any proven or promising options.
The NREL LCA for nuclear energy – already a very low emissions power source – analysed fast breeder reactors in supplementary material, finding a median value of 0.87 gCO₂-e/kWh, the lowest of all. This is mainly because they wouldn’t require mining for their fuel.
This is why such advocates are determined to include this option. And while the IEA’s example of wind energy may have a tenth of the supply capacity with over 10 times the median LCA emissions (on paper), they certainly don’t want it excluded.
And of course, it’s not just electricity. Take another look at that REN21 chart. Still nearly 80% fossil fuels to meet total energy demand – who exactly wants to limit our tools to just “cheapest” wind? Please be wary of anyone who does.