Research Methodology
Transparency in modeling is critical. Here is how we arrive at the figures published across our research hub.
Levelized Cost of Energy (LCOE)
Our LCOE calculations utilize a standard discounted cash flow (DCF) methodology. However, unlike some industry benchmarks that use idealized assumptions, we attempt to capture real-world frictions:
- Interconnection Costs: We add a standard $100/kW penalty to VRE (Variable Renewable Energy) projects to account for average network upgrade requirements.
- Interest During Construction (IDC): We rigorously model construction timelines. For nuclear and offshore wind, IDC can represent 15-30% of total CapEx depending on the assumed WACC.
- Degradation: For solar PV and battery storage, we model annual yield degradation (typically 0.5% for PV, and non-linear cycle-based degradation for batteries).
Grid Dispatch Modeling
Static LCOE is insufficient for understanding grid dynamics because it ignores the time value of energy. A MWh generated at 2 PM is not worth the same as a MWh generated at 7 PM.
We employ hourly chronological dispatch modeling using 8760-hour load profiles against historical weather data (GHI for solar, wind speeds at hub height). This allows us to calculate the 'captured price' of different assets, revealing the cannibalization effect that VREs have on their own revenues as penetration increases.