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Niembro García, Isabel Joaquína
Life cycle cost and life cycle assessment: an approximation to understand the real impacts of the Electricity Supply Industry
2022
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Niembro García, Isabel Joaquína
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Alfaro-Martínez, Patricia
,
Marmolejo Saucedo, José Antonio
The real cost that consumers should pay for the use of electrical energy could be estimated using a life cycle approach (LCT). This approach is about visualizing not the traditional focus on the production site and manufacturing processes but the focus on environmental, social, and economic impacts of goods or services over its entire life cycle. The LCT is really a new thought form on which tools such as the life cycle assessment (LCA) and the life cycle cost (LCC) are based. The LCA applied to the Electricity Supply Industry includes the study of each and every one of the steps from the production and extraction of raw materials, processing, transportation, storage, distribution, and use. Each of these can have an impact on different dimensions: environmental, economic, and social. On the other hand, the LCC considers together the analysis of all the costs and the environmental repercussions throughout its life cycle. The costs of a product throughout its life cycle can be easily visible (direct costs of production) or they can have less visibility (indirect costs for the manufacturer, or costs for society). Electric power is a commodity; since it cannot differentiate, its profit margin is small. Some of its characteristics are (1) large variations in demand, so that the generation and transmission capacity necessary to guarantee the peak is not used at other times. This also implies variation in its price. (2) The demand must be solved almost instantaneously and there are limitations for its storage. (3) In order to lower the cost, a diversified portfolio is required. Electricity is a single, basic good, for which a balance between supply and demand must be guaranteed at all times. The grid operator decides which and for what time the generating plants must generate electricity in order to achieve a balance between supply and demand. Electricity rates or prices depend on several factors: quantity demanded, technology used in its generation, the capacity of the transmission and distribution lines, the location of the generating sources, and the fuels. In addition, similar to many other products, environmental costs are not considered. Different approaches are used to calculate supply and demand: cost recovery, long-term marginal cost, price dynamics, etc. In this chapter, different approaches to the supply and demand calculation problem are proposed and analyzed, and the perspective of LCT, LCA, and LCC is included. © 2022 Elsevier Inc. All rights reserved.