The Energy–Logistics–Cost Nexus: Assessing LCOE Volatility, Decarbonization Barriers, and SDG 7 Alignment

Abstract

Ramy Moussa, Nebal Magdy, Ahmed Sokkar, Fayrouz Tantawy, Retaj Khaled and Mariam Bassem

Background/Purpose: While the Levelized Cost of Energy (LCOE) is the universal benchmark for renewable energy investment decisions, conventional models remain static and fail to internalize the financial impacts of supply chain volatility, logistical disruptions, and institutional constraints. This creates critical “integration gaps” that systematically underestimate the true cost of the global energy transition.

Methodology: Adopting a critical realist perspective, this study employs a sequential explanatory mixed-methods design. Semi-structured expert interviews with logistics managers and energy professionals across Egypt and the Gulf region were analyzed through thematic analysis and subsequently informed a Structural Equation Model (SEM) and an Integrated LCOE (I-LCOE) framework.

Findings: Logistics constitutes approximately 18% of final LCOE and 16–20% of CAPEX in offshore wind deployments. “Logistical velocity” is identified as a critical determinant of the Weighted Average Cost of Capital (WACC), with supply chain friction acting as an aggressive risk multiplier. Geopolitical disruptions particularly Red Sea and Strait of Hormuz crises introduce 10–15-day transit delays and 200–300% spikes in war-risk insurance premiums, directly inflating financing costs. Expert interviews revealed five systemic gaps: limited knowledge management, logistics–LCOE disconnection, fragmented sustainability metrics, coordination inefficiencies, and tacit knowledge dependence.

Originality/Value: This study introduces the Dynamic Logistics–Sustainability Integration Model and proposes an integrated digital Knowledge Management (KM) platform to resolve information asymmetry. By internalizing geopolitical disruptions and logistical costs into LCOE modeling, the research provides a transformative framework for achieving SDG 7 and optimizing systemic decarbonization costs.