Avoided Cost Comparison Levelized Cost of Energy ($/MWh)

figure 7: aVoided cosT comParison
Levelized Cost of Energy ($/MWh)
$140
$120
$100
$ 80
$ 60
$ 40
$ 20
$ 0
Energy Only
Coal Region
Avoided Cost Comparison
Energy & Capacity Energy Only
aSSESSIng THE ROlE OF dISTRIBuTEd POwER SySTEmS In THE u.S. POwER SECTOR
24
Natural Gas Region
$7.5/MMBtu
$4/MMBtu
Levelized Cost of Energy ($/MWh)
capital and fixed costs associated with the need
to build new plants. Thus, when comparing the
distributed resource to the avoided cost, it is critical
to ask whether or not the resource can provide
peak power, as a significant amount of the avoided
cost may come from avoided transmission and
distribution capacity and peak generation capacity.
This means that to achieve maximum avoided
cost value, the distributed system must be located
close to load at a congested node which would
otherwise require a transmission or distribution
upgrade. For the natural gas region, the energy
value is shown assuming a low natural gas price
of $4/MMBtu reflecting continued low gas prices
perhaps from shale gas, and a higher price of
$7.50/MMBtu which reflects higher prices and
restricted or limited impact from shale gas.
2.2 Results of Cost / Benefit Comparison
Figure 8 shows the comparison of the LCOE of
a range of distributed generation technologies to
Energy & Capacity
Distribution
Transmission
Fuel and Variable O&M
Capital and Fixed
the regional coal and natural gas avoided costs.
The minimum avoided cost is about $25/MWh in
coal regions which is representative of the energy
cost of coal. For the natural gas region, the minimum
is about $40/MWh reflecting low natural
gas price. The high end of the avoided cost spectrum
is similar based on displacement of either
natural gas or coal-fired generation and includes
capital and fixed costs for new power plant construction
as well as higher avoided transmission
and distribution capacity costs and a higher gas
price. To achieve this level of benefit, a generator
would need to produce energy during peak hours
in a location with planned distribution and transmission
capacity investments and be located in an
area without excess generation capacity.
The distributed resources which are closest to the
current avoided cost of the centralized generation
system are gas turbines and internal combustion
(IC) engines with combined heat and power
(CHP), and the larger solar project sizes. Wind