Levelized Cost of Energy Calculator Formula
Understand the math behind the levelized cost of energy calculator. Each variable explained with a worked example.
Formulas Used
Levelized Cost of Energy
lcoe = total_cost / total_energyLCOE in cents
lcoe_cents = total_cost / total_energy * 100Total Lifetime Cost
total_lifetime_cost = total_costVariables
| Variable | Description | Default |
|---|---|---|
capital_cost | Total Capital Cost(USD) | 50000 |
annual_output_kwh | Annual Energy Output(kWh) | 10000 |
annual_opex | Annual Operating Cost(USD/yr) | 500 |
lifetime_years | Project Lifetime(years) | 25 |
total_cost | Derived value= capital_cost + annual_opex * lifetime_years | calculated |
total_energy | Derived value= annual_output_kwh * lifetime_years | calculated |
How It Works
Levelized Cost of Energy (LCOE)
LCOE is the average cost per unit of energy over the entire lifetime of a generating asset, allowing fair comparison between different energy sources.
Simplified Formula
LCOE = (Capital Cost + Lifetime Operating Costs) / Lifetime Energy Output
A full LCOE includes discounting future costs and energy, but this simplified version gives a useful first approximation. Lower LCOE means cheaper energy.
Worked Example
A $50,000 solar system produces 10,000 kWh/year with $500/year maintenance over 25 years.
- 01Total cost = $50,000 + ($500 x 25) = $62,500
- 02Total energy = 10,000 x 25 = 250,000 kWh
- 03LCOE = $62,500 / 250,000 = $0.25/kWh
- 04That is 25 cents per kWh
Frequently Asked Questions
What is a good LCOE?
In 2024, utility-scale solar achieves 3-5 cents/kWh, onshore wind 2-5 cents/kWh, and natural gas 4-7 cents/kWh. Residential solar is typically 8-15 cents/kWh.
Why is this simplified?
A full LCOE calculation discounts future cash flows using a weighted average cost of capital (WACC). This simplified version assumes no time-value of money adjustment.
Does LCOE include storage costs?
Standard LCOE does not include storage or integration costs. The term LCOS (Levelized Cost of Storage) covers battery expenses separately.
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Open Levelized Cost of Energy Calculator