In energy economics, many researchers consider calculating COE ($/kWh) considering capital costs, operation, ROI duration, and this is the minimum price at which energy should be sold, while others follow a different approach by calculating the net profit of selling energy and divide it by overall sold energy (kWh). Are these 2 values comparable?
Dear, Ahmed Elgamal
In this link you can find a lot of information on this thematic.
- https://irena.org/publications/2018/Mar/Renewable-Capacity-Statistics-2018
Hi Ahmed,
The COE/LCOE reflects costs that are intrinsic to the technology (investment costs, fixed costs) and to its role in the energy mix (variable O&M costs, fuel costs). Calculating the net profit would take into account these costs but also the volatility of the price in the market. I personally think the LCOE is easier to interpret, but I would use the net profit calculation if I want to convince investors despite a high LCOE compared to the literature / what they are used to.
Kind regards
Hi Ahmed,
The LCOE represents the unit cost of energy generated by a specific technology and this serves as a basis for comparing the same technology in different localities. However, the net profit calculation represents the technology's feasibility in a considered market. Unfortunately, the net profit value for a specific technology might not easily be compared with net profit values of the same technology in other markets because of the different factors that are considered while setting the energy prices. Therefore, considering the LCOE is more general and comparable to systems in other places.
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