Abstract

The Levelized cost of electricity (LCOE) is a techno-economic parameter applied in evaluation of the cost of power or energy produced by a power plant. The costs that are considered are initial cost of the power plant, cost of operation and maintenance and the production cost constitute the main input data for LCOE determination. The LCOE does not account for the interaction of the new power plant hence indirectly assumes the power plant as stand-alone. This study critically reviews the ‘Levelized cost of energy' metric and application in electricity project development. Levelized cost is a simple metric hence widely used to compute the unit cost of power generated from power generation technologies. Limitation of the metric includes lack of consideration for key parameters like inflation, power integration costs, and system costs whose integration would provide a more comprehensive metric for evaluating power generation projects, and the entire power system.  The study showed that the Levelized costs of electricity generation of for the low carbon technologies have reduced significantly and are now cost competitive with the conventional fossil fuel generation technologies although specific costs are country specific.