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 answer

To calculate the levelized cost of energy (LCOE), we can use the following formula:

LCOE = (Total present value of costs) / (Total present value of energy produced)

First, we need to calculate the total present value of costs. This includes the capital costs and the average yearly operating costs over the 25-year lifetime of the project.

Total present value of costs = Capital costs + (Operating costs * 25)

Total present value of costs = $995,000 + ($175,000 * 25)
Total present value of costs = $995,000 + $4,375,000
Total present value of costs = $5,370,000

Next, we need to calculate the total present value of energy produced over the 25-year lifetime of the project. This is the total production during the lifetime of the project.

Total present value of energy produced = 89,500,000 kWh

Now, we can calculate the levelized cost of energy (LCOE):

LCOE = $5,370,000 / 89,500,000 kWh
LCOE = $0.0599/kWh

Therefore, the levelized cost of energy (LCOE) for the solar energy project is $0.0599/kWh.