The U.S. Energy Information Administration (EIA) publishes updates to its Annual Energy Outlook (AEO), which provides long-term projections of energy production and consumption in the United States using EIA’s National Energy Modeling System (NEMS). The AEO update for 2022 (AEO2022) includes projections through 2050 given certain specified assumptions and methodologies.
Investment in the expansion of electric generation capacity requires an assessment of the competitive value of generation technologies in the future that is determined as part of a complex set of modeling systems. To better understand investment decisions in NEMS, we use specialized measures that simplify
those modeled decisions. Levelized cost of electricity (LCOE) refers to the estimated revenue required to build and operate a generator over a specified cost recovery period. Levelized avoided cost of electricity (LACE) is the revenue available to that generator during the same period. Beginning with AEO2021, we
include estimates for the levelized cost of storage (LCOS). Although LCOE, LCOS, and LACE do not fully capture all the factors considered in NEMS, when used together as a value-cost ratio (the ratio of LACEto-LCOE or LACE-to-LCOS), they provide a reasonable comparison of first-order economic competitiveness among a wider variety of technologies than is possible using LCOE, LCOS, or LACE individually.
In this report, the EIA staff present average values of LCOE, LCOS, and LACE for electric generating technologies entering service in 2024, 2027, 1 and 2040 as represented in NEMS for the AEO2022 Reference case. They presented the costs for electric generating facilities entering service in 2027 in the body of this report, and they included the costs for 20242 and 2040 in Appendixes A and B, respectively. They provided both a capacity-weighted average based on projected capacity additions and a simple average (unweighted) of the regional values across the 25 U.S. supply regions of the NEMS Electricity Market Module (EMM),together with the range of regional values.
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