Geothermal technology has a high level of uncertainty and, thus, requires thorough risk analysis for economic decisions. The levelized cost of energy (LCOE) is a basic economic analysis widely used in determining an investment or energy mix. Many reputable institutions and government agencies provide LCOE, to which they apply different levels of discount rates to reflect project risk. To this end, the weighted average cost of capital (WACC) is frequently used as a proxy for project risk-adjusted discount rate. However, whether using a higher discount rate for a riskier project is appropriate in calculating LCOE has not been scrutinized. The purpose of this paper is to propose a certainty equivalent method of LCOE as an alternative way for considering risk. We present a theoretical background and formula based on the utility theory, improving the probabilistic LCOE estimation methodology of previous studies. We also perform scenario analysis to show how the certainty equivalent model changes LCOE reflecting different level of risk of the individual variables, which traditional LCOE does not. Additionally, we suggest that the traditional LCOE should be used prudently, recognizing it can distort the result when an individual project has a different level of risk from the industry average.

中文翻译：

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测量地热技术中风险对 LCOE（能源平准化成本）的影响

地热技术具有高度的不确定性，因此需要对经济决策进行彻底的风险分析。能源平准化成本 (LCOE) 是一种广泛用于确定投资或能源组合的基本经济分析。许多信誉良好的机构和政府机构提供 LCOE，他们对其应用不同级别的贴现率以反映项目风险。为此，加权平均资本成本 (WACC) 经常被用作项目风险调整贴现率的代理。然而，在计算 LCOE 时对风险较高的项目使用较高的贴现率是否合适尚未经过仔细审查。本文的目的是提出一种 LCOE 的确定性等效方法，作为考虑风险的替代方法。我们提出了基于效用理论的理论背景和公式，改进先前研究的概率 LCOE 估计方法。我们还进行了情景分析，以展示确定性等效模型如何改变 LCOE，反映各个变量的不同风险水平，而传统 LCOE 则没有。此外，我们建议谨慎使用传统的 LCOE，因为当单个项目的风险水平与行业平均水平不同时，它可能会扭曲结果。