Levelized avoided cost of electricity model based on power system operation

Abstract

This paper presents a methodology to estimate the Levelized Avoided Cost of Electricity (LACE) of new generation projects based on the assessment of economic and operational benefits perceived by an existing power system. The marginal economic benefit caused by the integration of a new generation project is captured using the Differential Revenue Requirement method (DRR); whereas the operational benefits are observed by analyzing the performance of the new project through a preventive DC Security-Constrained Optimal Power Flow (SCOPF) tool. The SCOPF also allows quantifying economic benefits due to replacement of expensive generation, transmission congestion, and N-1 security improvement. Additionally, another metric, called Net Benefit (NB) of a generation project, expressed as the difference between LACE and LCOE (Levelized Cost of Electricity) is also employed in this work. It provides a realistic, easy-to-compute, and intuitive index that helps identifying the most promising generation projects during system expansion planning procedures. Finally, the proposed methodology is applied for computing LACE and NB of different generation projects in Colombia. According to the results, geothermal projects display the most significant LACE and NB. These metrics (LACE and NB) can become useful tools for decision-making in planning process.