Equivalence Analysis of LCOE and IRR for New Energy Projects

[Introduction] With the development of domestic renewable energy industry, the recession of governmental subsidies and the implementation of policies such as competitive allocation of resources, Levelized Cost of Energy (LCOE) is gaining more and more attention and application, but its calculation method is inconsistent in domestic energy industry. In this paper, the relationship between Internal Rate of Return (IRR) and LCOE is analyzed to improve understanding of LCOE and standardize its application. [Method] The characteristics and application scenarios of LCOE and IRR were analyzed, and then their calculation formulas were simplified and transformed to analyze the difference and relation between them in models. Finally through the case analysis of an offshore wind power plant, the actual difference between the results was calculated, and the factors causing the difference and their sensitivities were analyzed. [Result] From the perspective of results, the simplified calculation models are very similar except for the income tax. According to the case analysis, the factors causing the difference between IRR and LCOE include the VAT deduction, after-tax incentives of VAT and income tax, additional taxes, and financing during the construction period, and influenced different directions to different extent. It can be considered that IRR and LCOE are similar in principle, but they become different under the influence of domestic fiscal policy, tax system and increased boundary conditions. [Conclusion] It is suggested that LCOE is properly localized and revised by competent departments, industry associations, etc. In combination with environmental impact costs and power system impact costs, the economy of different power generation approaches can be compared, and the rapid comparison of the economy of different schemes can also be achieved in specific projects

Economic Research on Energy Storage Auxiliary Frequency Regulation of Lithium Iron Phosphate Battery for 2 × 600 MW Coal-fired Unit in Guangdong

[Introduction] In view of the economic benefits of AGC frequency regulation project of combined energy storage in Guangdong coal-fired power plant, the method of establishing typical engineering cases is demonstrated. [Method] This article summarized the latest version of frequency regulation auxiliary market revenue settlement rules in the southern region and calculated the frequency regulation performance index of typical 2 × 600 MW coal-fired units using lithium iron phosphate battery energy storage in Guangdong Province, then established a revenue model, estimated or assumed the key parameters such as cost, mileage, clearing price, running time, etc. Finally, under the contract energy management mode, it calculated its economy from the perspective of investors and analyzed the changes of financial index under different total investment, operation year and revenue sharing. [Result] The results show that in the measured case, except for the first sharing scheme, the internal rate of return of capital in other scenarios all exceeds 7%. [Conclusion] The frequency regulation project of lithium iron phosphate battery energy storage in Guangdong has a good return on investment within four years. After that, investors can still be attracted to participate in this project with the decrease of total investment and the increase of share