Final answer:
The high LCOE for diesel-generated electricity is due to the high cost of diesel fuel and the ongoing operational and maintenance expenses. The LCOE is not significantly influenced by WACC because capital costs are low in comparison to operational costs for diesel generators.
Step-by-step explanation:
The reason the Levelized Cost of Electricity (LCOE) for electricity produced from diesel is so high is largely due to the high cost of the fuel itself, which is a significant ongoing expense for the operation of diesel generators. Diesel generators incur high operational costs because diesel fuel is expensive compared to other energy sources and this cost is directly proportional to the amount of electricity produced. Additionally, diesel engines require regular maintenance, which contributes to the high operational costs.
Furthermore, the LCOE for diesel-generated electricity does not depend strongly on the Weighted Average Cost of Capital (WACC) because the capital investment required for diesel generators is relatively small compared to other power generation technologies. The cost is primarily driven by fuel prices and operational expenses rather than the up-front capital, which is where WACC would have more influence. As a result, changes in WACC have less impact on the overall costs of diesel electricity production.