Levelized cost of electricity

A line graph tracking the levelized cost of major electricity sources between 2009 and 2023 in dollars, according to data from Lazard. With time, the cost of renewable energies goes down significantly, most notably solar, for which the price goes from 359 dollars per megawatt-hour in 2009 to 60 dollars in 2023
Average unsubsidized levelized cost of electricity in the United States. With increasingly widespread implementation of sustainable energy sources, costs for sustainable have declined, most notably for energy generated by solar panels. Data source is Lazard.[1]

The levelized cost of electricity (LCOE) is a measure of the average net present cost of electricity generation for a generator over its lifetime. It is used for investment planning and to compare different methods of electricity generation on a consistent basis.

The more general term levelized cost of energy may include the costs of either electricity or heat. The latter is also referred to as levelized cost of heat[2] or levelized cost of heating (LCOH), or levelized cost of thermal energy.

The LCOE "represents the average revenue per unit of electricity generated that would be required to recover the costs of building and operating a generating plant during an assumed financial life and duty cycle", and is calculated as the ratio between all the discounted costs over the lifetime of an electricity generating plant divided by a discounted sum of the actual energy amounts delivered.[3] Inputs to LCOE are chosen by the estimator. They can include the cost of capital, decommissioning, fuel costs, fixed and variable operations and maintenance costs, financing costs, and an assumed utilization rate.[4]

  1. ^ "2023 Levelized Cost Of Energy+". Lazard. 12 April 2023. p. 9. Archived from the original on 27 August 2023. (Download link labeled "Lazard's LCOE+ (April 2023) (1) PDF—1MB")
  2. ^ A Comparative Cost Assessment of Energy Production from ... Nian, Energy Procedia, 2016
  3. ^ Lai, Chun Sing; McCulloch, Malcolm D. (March 2017). "Levelized cost of electricity for solar photovoltaic and electrical energy storage". Applied Energy. 190: 191–203. doi:10.1016/j.apenergy.2016.12.153. S2CID 113623853.
  4. ^ U.S. Energy Information Administration (March 2022). "Levelized Costs of New Generation Resources in the Annual Energy Outlook 2022" (PDF).