Levelised cost of energy (LCOE) calculator

Method

Generation in year t

E_t = kW × 8,760 × CF × (1 − d)^(t − 1)

O&M in year t (today's prices escalated)

O&M_t = (kW × fixed + E_t × variable) × (1 + e)^t

Real discount rate (Fisher)

r = (1 + n) ÷ (1 + i) − 1

Present value of costs

PV(C) = capex + Σ O&M_t ÷ (1 + n)^t

Nominal LCOE

LCOE_nom = PV(C) ÷ Σ E_t ÷ (1 + n)^t

Real LCOE

LCOE_real = PV(C) ÷ Σ E_t ÷ (1 + r)^t

A price in today's money that, escalated at inflation each year, recovers the same present value.

Textbook cross-check

CRF = r (1 + r)^N ÷ ((1 + r)^N − 1) LCOE ≈ (capex × CRF + fixed O&M) ÷ (8,760 × CF) + variable O&M

Assumptions

• Capex is spent at year 0 (no construction period); output and O&M arise at the end of each year.
• O&M is entered at today's prices and escalated from year 0, so with escalation equal to inflation it is constant in real terms.
• No tax, debt, residual value, inverter replacement or decommissioning cost.
• The capacity factor is year-1 output divided by capacity × 8,760 hours; degradation reduces it each year after.

Sources

• NREL: Simple levelised cost of energy calculator documentationThe capital recovery factor and the simple LCOE formula used for the cross-check.
• NREL Annual Technology Baseline: equations and variablesLCOE, CRF and real versus nominal conventions.
• NREL System Advisor Model: LCOE calculatorThe fixed-charge-rate method and its assumptions.