Electricity should be sold as a service

In the days of vertically integrated utilities, and when fixed prices were set by a regulator, electricity was always cross subsidised, leading to the false assumption that electricity costs were the same during the day and night and carried the same value to consumers during those periods. The various generating technologies were compared to one another, using a simplistic discounted cash-flow model, called the Levelized “lying” Cost of Electricity (LCOE), and electricity to the end users was priced in dollars or rand per kilowatt-hour. The LCOE is determined by dividing the entire cost of the electrical plant in net present value by the amount of electricity that it will generate over its lifetime.
The unfortunate consequence of the tradition is that it gave policy makers the wrong paradigm about electricity, which was to regard it as a commodity and not as a service (EOS). The metric is used today by salespeople, but few experts inside the energy sector take it seriously, because it does not account for the full cost to guarantee the end user a security of supply.