Critical review of the levelised cost of energy metric

Sklar-Chik, M. D. ; Brent, A. C. ; De Kock, I. H. (2016)

CITATION: Sklar-Chik, M. D., Brent, A. C. & De Kock, I. H. 2016. Critical review of the levelised cost of energy metric. South African Journal of Industrial Engineering, 27(4):124-133, doi:10.7166/27-4-1496.

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The purpose of this paper is to critically review the ‘levelised cost of energy’ metric used in electricity project development. This metric is widely used, because it is a simple metric to calculate the cost per unit of electricity for a given technology connected to the electricity network. However, it neglects certain key terms such as inflation, integration costs, and system costs. The implications of incorporating these additional costs would provide a more comprehensive metric for evaluating electricity generation projects, and for the system as a whole. It is therefore recommended to refine the metric for the South African context.

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