with a higher interest rate a larger capital expenditure implies greater upfront financing costs while the effect of fuel savings throughout a plant s life cycle tapers off quickly because of discounting this highlights the critical importance of sensitivity analysis in the interpretation of the lcoe while its exclusive focus on private costs is in line with private investment decisions it neglects key policy issues including unpriced environmental externalities systemwide considerations notably the time profile of generation and energy security energysecurity concerns underline the importance of attention to resource endowments and geographical factors as well as the relative climate resilience of different energy sources highlighted by the slump in hydrobased electricity generation following the drought in southern africa such considerations are essentially ignored in lcoe metrics iea c anticipating growing complexity as systems develop and enhancing system flexibility from the planning and design phases for newly built electricity infrastructure could offer significant leapfrogging opportunities to ldcs by reducing the need to retrofit existing infrastructure welsch et al