Americas Power & Energy Transition: Beyond the cheapest MWh - a note on levelized cost metrics

This note explains what levelized cost metrics are, what they measure, where they are best used, and their limitations. We have built an Excel LCOE/LCOS model for various technologies and storage systems. Pricing Energy, Capacity, and Firm Deliverable Power: This note provides a framework for evaluating generation and storage cost metrics, typically measured on a levelized-cost basis. We discuss where these metrics are useful, where they fall short, and why LCOE (Levelized Cost of Electricity) should not be viewed in isolation. Key Takeaways: LCOE measures the cost to make a MWh. It does not measure the timing of when that MWh arrives, where it is delivered, whether the asset is available during system stress, or what the asset earns. LCOS (levelized cost of storage) measures the cost to shift and discharge a MWh. It accounts for charging energy, round-trip losses, cycle life, degradation, and augmentation. It does not price the optionality/flexibility that storage is actually built to