Question

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Alternative Energy Solutions Quick Check
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Question
A solar energy project is expected to have capital costs of $995,000, average yearly operating costs of $175,000, and a lifetime of 25 years. If the total production during the lifetime of the project is 89,500,000 kWh, what is the levelized cost of energy (LCOE)?(1 point)
Responses

$0.07 per kWh
$0.07 per kWh

$0.60 per kWh
$0.60 per kWh

$0.77 per kWh
$0.77 per kWh

$0.06 per kWh
$0.06 per kWh
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Answer 1

To calculate the Levelized Cost of Energy (LCOE), we can use the formula:

\[
\text{LCOE} = \frac{\text{Total Lifetime Costs}}{\text{Total Lifetime Energy Production}}
\]

**Step 1: Calculate Total Lifetime Costs.**

Total Lifetime Costs = Capital Costs + (Average Yearly Operating Costs × Lifetime)

Given:
- Capital Costs = $995,000
- Average Yearly Operating Costs = $175,000
- Lifetime = 25 years

Calculating the total operating costs over the lifetime:
\[
\text{Total Operating Costs} = 175,000 \times 25 = 4,375,000
\]

Now, add the capital costs:
\[
\text{Total Lifetime Costs} = 995,000 + 4,375,000 = 5,370,000
\]

**Step 2: Calculate LCOE.**

Now we can find the LCOE by dividing the total lifetime costs by the total energy produced:
\[
\text{Total Lifetime Energy Production} = 89,500,000 \text{ kWh}
\]
\[
\text{LCOE} = \frac{5,370,000}{89,500,000}
\]

Calculating LCOE:
\[
\text{LCOE} = 0.0599 \text{ per kWh} \approx 0.06 \text{ per kWh}
\]

**Conclusion:**
The Levelized Cost of Energy (LCOE) is approximately **$0.06 per kWh**.

Therefore, the correct answer is:

**$0.06 per kWh**