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)

Question

Responses

$0.60 per kWh
$0.60 per kWh

$0.06 per kWh
$0.06 per kWh

$0.07 per kWh
$0.07 per kWh

$0.77 per kWh

Answer 1

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

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

Where:

• Total Costs is the sum of capital costs and total operating costs over the project's lifetime.
• Total Energy Production is the total energy produced over the lifetime of the project.

1. Calculate the Total Operating Costs:

   • Average yearly operating costs = $175,000
   • Lifetime = 25 years
   • Total Operating Costs = Average Yearly Operating Cost × Lifetime \[ \text{Total Operating Costs} = 175,000 \times 25 = 4,375,000 \]

2. Calculate Total Costs:

   • Total Costs = Capital Costs + Total Operating Costs \[ \text{Total Costs} = 995,000 + 4,375,000 = 5,370,000 \]

3. Calculate the Total Energy Production:

   • Total Energy Production = 89,500,000 kWh

4. Calculate LCOE: \[ \text{LCOE} = \frac{5,370,000}{89,500,000} \] \[ \text{LCOE} \approx 0.0599 \text{ per kWh} \]

Now rounding this to two decimal places, we have:

\[ \text{LCOE} \approx 0.06 \text{ per kWh} \]

Thus, the Levelized Cost of Energy (LCOE) is $0.06 per kWh.

The correct response is:

$0.06 per kWh