The special case of electricity

Electricity consumption is an important part of most LCAs and modelling marginal electricity in life cycle inventory has given rise to many debates during the last decades.

There are several reasons why the identification of the marginal electricity source is one of the most difficult and contentious issues in LCA modelling:

  • Electricity is a strategic product: This means that changes in capacity are often subject to political decisions on a national level, influenced by national plans and regulations. For this reason, electricity markets are normally regarded as national markets based on the national electricity production plus a limited import. Countries have national energy plans and regulations, which justifies this delimitation. This also means that when identifying which technologies are likely to increase their capacity, political plans may be more relevant than competitiveness and historical trends.
  • Electricity is difficult and costly to store, which leads to temporally segmented markets: Some suppliers are more able and willing to change their output when demand changes in the short-term, leading to a different mix of suppliers for the peak load hours than for the base load hours, see the example on temporal markets for electricity. In areas with large amounts of hydropower and windpower, seasonal variation in rainfall and wind may furthermore lead to different seasonal markets. Each of these temporal markets needs to be analysed separately. This has sometimes led to a confusion between the short-term marginal power source (and short-term costs) involved in these daily or seasonal fluctuations, and the long-term marginal power source (and long-term costs), which is related to the next power plant installed to meet the additional demand on each of these temporal markets (and which is the relevant one for LCA).
  • Electricity is sometimes co-produced with heat for industrial or district heating (or cooling) purposes, and it is not always immediately obvious whether the heat or the electricity is the determining product, especially when this can change over time for the same power plant (for example, some gas fired power plants are optimised for heat production and has electricity as the dependent by-product during periods of high demand for heat, while shifting to an electricity-optimised state during periods of low demand for heat).
  • Electricity may be labelled according to origin, and some of these labels have been used as environmental labels, to indicate a particularly “clean” electricity source. However, such “origin” labels typically do not indicate the environmental consequences of purchasing the labelled product, unless it reflects a commitment of the producer to a specific investment in improved technology as part of the revenue or premium generated from the labelled product. If an “origin” label is placed on power from a constrained technology, such as hydropower in many places in Europe, this can be regarded as misleading since the produced amount would anyway have been sold. An LCA should only give credit for – and incentive to – a shift to specific products or suppliers with “cleaner” technologies when this shift can actually be expected to lead to an increase in the capacity of the “cleaner” technology.
  • Electricity can be produced in many ways (by many different technologies), and there is not one technology that is superior in all respects: The power sources that are currently the cheapest in the long-term (hydropower and coal power) require large capital investments, which are not always available. Hydropower is furthermore constrained by the availability of suitable water regimes, while coal power may run up against emission quotas and is anyway not flexible enough to be the only power source, a problem that is shared with nuclear power and wind power. So when flexibility is required, i.e. the ability to increase and decrease output quickly when demand changes, oil and especially gas fired power is often the choice. Political interest in supply security and the need to reduce fossil carbon emissions furthermore create room for a number of non-fossil alternatives that generally require subsidies to be competitive, at least during the years of development. National energy plans may express the targets for alternative power sources in absolute terms (thereby acting as a constraint on the ability of the alternative power source to react on a change in demand) or in relative terms (as a percentage of the total supply), in which latter case a change in demand will affect the alternative power source to that specified extent.

This landscape is very different from that of most industry products, where a new, improved technology replaces the previous one in a smooth and relatively predictable way, based on their relative competitiveness.

The issues in the debate are discussions on geographical delimitation of electricity markets, the question of which short‐term and the long-term constraints are relevant for identifying the marginal supplier, and the identification of the determining product when electricity is co‐produced with heat. Forecasts of the market situation are particularly relevant, and the choice of time horizon for these forecasts is also a specific issue; see the link below.

Further readings:
Masanet, E. et al. (2013). Life-Cycle Assessment of Electric Power Systems. Annu. Rev. Environ. Resour. 2013. 38:107–36.

Schmidt J H, Merciai S, Thrane M, Dalgaard R (2011). Inventory of country specific electricity in LCA – Consequential and attributional scenarios. Methodology report v2. 2.‑0 LCA consultants, Aalborg, Denmark.

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How to cite this: 
Consequential-LCA (2023). The special case of electricity. Last updated: 2023-09-20.