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

$0.06 per kWh
$0.06 per kWh

$0.07 per kWh
$0.07 per kWh

$0.77 per kWh
$0.77 per kWh

$0.60 per kWh

Answer 1

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

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

Where:

• Total Lifetime Costs = Capital Costs + (Operating Costs per Year × Lifetime in Years)

Given the provided data:

• Capital Costs = $995,000
• Average Yearly Operating Costs = $175,000
• Lifetime = 25 years
• Total Production = 89,500,000 kWh

First, let's calculate the Total Lifetime Costs:

1. Calculate the total operating costs over the lifetime: \[ \text{Total Operating Costs} = \text{Operating Costs per Year} \times \text{Lifetime} = 175,000 \text{ per year} \times 25 \text{ years} = 4,375,000 \]

2. Now, calculate the Total Lifetime Costs: \[ \text{Total Lifetime Costs} = \text{Capital Costs} + \text{Total Operating Costs} = 995,000 + 4,375,000 = 5,370,000 \]

Now, we can calculate the LCOE: \[ LCOE = \frac{\text{Total Lifetime Costs}}{\text{Total Energy Produced}} = \frac{5,370,000}{89,500,000} \]

Calculating this gives: \[ LCOE = \frac{5,370,000}{89,500,000} \approx 0.0599 \text{ per kWh} \]

Rounding to two decimal places, we find: \[ LCOE \approx 0.06 \text{ per kWh} \]

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

$0.06 per kWh