Opublikowano: 12/03/2025

The European "dark doldrum" (Dunkelflaute) from November 4-14, 2024, when heavy cloud cover and a lack of wind occurred simultaneously, necessitated covering energy system losses using dispatchable sources. This phenomenon, regularly observed in many EU countries, highlights one of the challenges in estimating energy production costs. The world's most widely used metric, LCOE (Levelized Cost of Electricity), only describes the cost of generating electricity from a given source. However, LCOE does not account for all costs associated with integrating a generation unit into the power system to ensure stable electricity supply. In cases of "dark doldrum," which forces renewable energy-based infrastructure to rely on dispatchable sources, relying solely on LCOE significantly underestimates real costs. According to PEI’s analysis, LCOE-based calculations should be supplemented with additional indicators such as VALCOE or LCOLC. This combination would provide a more comprehensive picture of the costs associated with different energy sources in the power system, as detailed in the PEI report "Exceeding LCOE: Calculating Energy Costs in Energy Policy Formation."

A high share of non-dispatchable energy sources can cause challenges for the energy system operation , especially during “dark doldrum” periods, which some EU countries, including Poland, experience multiple times a year. This situation occurs when wind farms and photovoltaic panels operate at below 20% capacity for at least 24 hours. One of the most recent dark doldrums, from November 4-14, 2024, caused the share of non-dispatchable sources in German electricity production to drop from an average of 43% to less than 15%. Germany covered two-thirds of this gap with coal and gas power plants and one-third with electricity imports from France.

“The cost of generating electricity from a given source must account for the need to maintain dispatchable capacity in the power system, expand the grid, and develop energy storage. The characteristics of non-dispatchable energy sources necessitate balancing them with dispatchable capacity. Currently, this is primarily achieved using gas power plants and, to a lesser extent, coal and pumped-storage plants. In the future, energy storage solutions and gas power plants using biomethane and hydrogen from low- and zero-emission sources are expected to play this role. However, these costs are typically not included in LCOE calculations. LCOE also does not consider extreme conditions unfavorable for generating electricity from non-dispatchable sources, such as the ‘dark doldrum’, which national power systems must be prepared for,” says Dr. Adam Juszczak, Senior Advisor from the Climate and Energy Team at PEI.

Alternative indicators better reflect the actual costs of energy procurement than LCOE

Alternative indicators to LCOE, such as VALCOE (Value-adjusted Levelized Cost of Electricity) and LCOLC (Levelized Full System Costs of Electricity), provide a more comprehensive view of the true costs of different electricity sources for the entire system. The starting point for VALCOE calculations is the average LCOE value for various projects using the analyzed technology. Adjustments include three key components: energy value (comparing individual units to the system-wide average), capacity, and flexibility.

Applying the VALCOE indicator significantly impacts the assessment of the cost-effectiveness of different energy generation technologies. The most notable effect is observed in photovoltaics, where the cost of generating 1 MWh more than doubles after adjustment compared to LCOE. Conversely, offshore wind farms, which are the most stable among non-dispatchable sources, show the smallest differences.

Meanwhile, the LCOLC indicator is based on the required generation capacity needed to meet the projected demand of a given power system. It evaluates available generation capacities and the cost-efficient energy generation mix to precisely meet the demand profile. While the LCOE of wind and solar energy is significantly below EUR 50/MWh, after accounting for balancing costs, the LCOLC for wind and solar farms ranges from EUR 70.8/MWh (when balanced with a mix of battery storage, natural gas, and hydrogen) to as much as EUR 210.7/MWh (when relying exclusively on battery storage).

Failing to account for additional costs, such as the need to maintain dispatchable capacity, higher grid costs, or costs arising from energy oversupply, in the metrics used for evaluating Polish and EU strategic documents can lead to incorrect cost assessments of investments in national power systems. Consequently, this could result in suboptimal and irresponsible energy mix planning. Therefore, we recommend supplementing LCOE calculations in Poland and the EU with at least one simpler alternative indicator, such as VALCOE or LCOLC, says Dr. Adam Juszczak, Senior Advisor from the Climate and Energy Team at PEI.

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The Polish Economic Institute is a public economic think tank with a history dating back to 1928. Its research areas primarily include macroeconomics, energy and climate, global economy, economic foresight, digital economy, sustainable development, and behavioral economics. The institute prepares reports, analyses, and recommendations on key areas of the economy and social life in Poland, considering the international context.

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