A peer-reviewed study using Denmark as a case study has found that renewable energy portfolios outperform nuclear power on total system cost in the modeled future integrated Danish energy system, once the expenses of grid balancing, storage, and sector coupling are included in the comparison.

The “SLCOE – system-based LCOE for comparing energy technologies in different systems” study, recently published in Energy and led by Henrik Lund of Aalborg University, introduces system-based levelized cost of energy (SLCOE) as an alternative to the standard LCOE metric. LCOE only measures the cost of producing a unit of electricity from a given technology, but SLCOE adds the cost of integrating that technology into the wider energy system. The co-author list includes 10 other researchers.

“While the LCOE is a function of the technology itself, the SLCOE is a function of both the technology and the energy system context in which it operates,” the paper states.

Co-author Christian Breyer, a professor of solar economy at LUT University in Finland, told pv magazine that the metric addresses a fundamental gap. “If one only optimizes within the electricity sector, one will not be able to identify these much better solutions,” said Breyer.

The study models Denmark's current electricity-only grid and a future climate-neutral energy system with full sector coupling, using the EnergyPLAN model for hourly simulation across all energy sectors. The authors note that some conclusions are Denmark-specific, given its wind-dominant resource base and existing flexibility infrastructure.

In today's electricity-only system, system costs are high across all technologies when each is modeled as the sole supply source. Solar carries a combined SLCOE of approximately €/MWh in that context – not because PV is inherently expensive to integrate, the authors argue, but because any single technology faces steep system costs without the flexibility options a fully coupled energy system provides. Nuclear reaches approximately €141 ($166.3)/MWh in the same electricity-only context. The least-cost mix of offshore wind, solar, and gas combined-cycle turbines reaches approximately €66/MWh.

In a future climate-neutral integrated system, which is the paper’s central comparison, nuclear’s SLCOE is approximately €100/MWh. The least-cost mix of offshore wind and PV reaches about €46/MWh. Offshore wind alone also reaches about €46/MWh. Onshore wind reaches about €106/MWh, while solar reaches about €178/MWh as a standalone technology. Its cost falls sharply when combined with wind in the least-cost portfolio.

The driver of that cost reduction for renewables is sector coupling, said Breyer.

“We document how essential it is to include the whole energy system in the search for least cost solutions,” Breyer said. Sector coupling provides thermal storage, hydrogen storage via electrolysis, flexible heat pump operation, and electric vehicle smart charging – options unavailable in an electricity-only grid, he added.

The sensitivity analysis tests four cost assumption sets – IEA World Energy Outlook 2023 and 2024 projections and two Danish Energy Agency scenarios, one applying 50% higher capital expenditure on renewables to reflect post-2022 inflation. The cost of flexibility technologies is also stress-tested with a 50% capex increase, with minimal effect on the results.

Under all scenarios in the future integrated system, renewables outperform nuclear on SLCOE. Nuclear does not appear in the least-cost solution under any assumption set tested.

The paper uses International Energy Agency (IEA) assumptions of €480/kW for utility-scale solar in 2050. Breyer noted that current real-world utility-scale solar is closer to €400/kW, meaning the modeled solar advantage may understate what current market conditions would produce.

For solar-dominant markets outside Denmark – southern Europe, the Middle East, India – where wind resources are limited, Breyer pointed to external literature indicating batteries and flexible demand serve as the primary integration tools.

“The combination of very low-cost solar PV LCOE and low-cost battery Capex emerge as the central backbone of any energy system in the Sunbelt,” he said. Those figures are not part of the Denmark SLCOE modeling.

The paper explicitly excludes the cost of nuclear waste storage facilities and the opportunity cost of foregone renewable deployment during nuclear construction. Breyer said their inclusion would widen the cost gap further, although the paper does not quantify this.

For nuclear, the paper models an effective capital cost of €10,000/kW in EnergyPLAN. The paper notes that this is not a literal overnight cost but a modeling device: applying an 8% discount rate to the IEA's overnight cost assumption of €4,500/kW yields the same annualized capital burden as assuming €10,000/kW at a uniform rate. The paper notes that nuclear capital costs in recent European projects have exceeded initial estimates by roughly 100%, and that a literature review of nuclear learning rates found a range of negative 25% to zero – the least favorable of any generation technology reviewed.

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