Renewable energy project development is highly complex and success is by no means guaranteed. Decisions are often made with approximate or uncertain information yet the current methods employed by decision-makers do not necessarily accommodate this. Levelised energy costs (LEC) are one such commonly applied measure utilised within the energy industry to assess the viability of potential projects and inform policy. The research proposes a method for achieving this by enhancing the traditional discounting LEC measure with fuzzy set theory. Furthermore, the research develops the fuzzy LEC (F-LEC) methodology to incorporate the cost of financing a project from debt and equity sources. Applied to an example bioenergy project, the research demonstrates the benefit of incorporating fuzziness for project viability, optimal capital structure and key variable sensitivity analysis decision-making. The proposed method contributes by incorporating uncertain and approximate information to the widely utilised LEC measure and by being applicable to a wide range of energy project viability decisions.
Bibliographical noteNOTICE: this is the author’s version of a work that was accepted for publication in Energy policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Wright, DG, Dey, PK & Brammer, JG, 'A fuzzy levelised energy cost method for renewable energy technology assessment' Energy policy, vol. 62 (2013) DOI http://dx.doi.org/10.1016/j.enpol.2013.07.077
This work was supported by the Economic and Social Research Council [ES/H035818/1] and through the EREBUS (Engaging Research for Business Transformation) cluster in the West Midlands region of the UK.
- project development
- levelised energy cost