Levelized Revenue of Electricity (LROE) - Part 2

In part 1 of this post, we introduced a new concept for comparing the revenue from different energy sources and markets, called the levelized revenue of electricity (LROE). In part 2, we show some specific calculations of the LROE for solar. We show that in some markets the incentives are set properly to encourage growth in solar by having LROE>LCOE. Other markets, however, don't provide enough incentives, thus LROE<LCOE.  

Levelized Revenue of Electricity (LROE) - Part 1

I introduce a new term, the levelized revenue of electricity (LROE), an analogue of the levelized cost of electricity (LCOE). It is a financial instrument to discount the flow of revenue from a renewable or non-renewable source of electricity. Like the LCOE, the LROE is vital for comparing the revenue from different energy sources in different markets. It is needed, especially for renewable projects, because revenue includes several time component variables such as the retail or wholesale electricity rates, tax breaks, and government incentives.


There is no easy answer to the question of how much energy costs. Utility scale projects are complicated, incredibly expensive, and contain many variables that affect the cost over the lifetime of the project.  

The Costs of Solar Power from Space

Delivering power from space using photovoltaic panels is incredibly costly and not a reasonable option for the collection of energy today, nor likely in future.  On earth, the cost of installing solar modules (BoS) nearly equals the cost of the module itself, and will become a bigger share of the total costs in the future. Presumingly, the costs of installing modules on the ground or on rooftops will always be significantly lower than in space.  An estimate for the price of sending cost-effective modules to space is at least $285/W. The deployment costs for weight-optimized modules can be much smaller, $17/W, but these modules are much more expensive. In either case the deployment costs alone are a magnitude higher than the current total cost of solar on earth (~$3/W). 

Sunlight is a very diffuse source of energy. To capture a useful amount of it, a large area is needed. To collect sunlight in a cost effective manner, it must be deployed incredibly cheaply, no matter the technology.

Energy 101

In this post, I briefly introduce some basic concepts important for understanding the amount of energy we use.

For any discussion about energy it is helpful to understand how we measure energy, how much we currently use, and where it comes from.  Let’s start with an easy number important for understanding the amount of power used in the world: 17 TW (terawatts). But to understand this number, it is important to understand the difference between energy and power, and the units used to describe these quantities.

Energy is a scalar quantity that is in simplest terms the ability of a physical system to produce changes on another physical system.

Introduction to Blog

This blog will take an integrated approach to understand renewable energy, covering three main topics: science, business, and policy. The goal is quality over quantity: each post will be a smart and well-researched introduction to a new topic or insightful analysis into a topic important to renewable energy. 

Renewable sources of energy play an important role in our society, a role that will only increase in the future. 10-20 years ago this may have been a risky sentence to start a blog with. Today, it is unequivocal, in fact, it’s already happening (in the last 5 years the capacity of solar and wind generation has increased by about 9 and 4 times, respectively; and all renewables make up about 20% of the world’s electricity generation). I believe there are two main factors (among many) that will lead to their increased use: (1) the rising costs of non-renewable sources of energy versus the falling costs of renewables and (2) the realization that non-renewables have indirect costs as a result of their use (pollution, global warming, political and military support, safety concerns, etc.)