﻿ levelisedcost

Calculator designed by  Grey Cells Energy Ltd

 Levelised Cost of Energy (LCOE) The various inputs into this calculator are in green. The results are two levelized cost calculations. One is a "simple" one, which ignores tax and financing structure. The other is a "leveraged" one, which differs in the following ways: • a cost benefit is produced via the tax handling of depreciation • a cost benefit is produced via the tax handling of interest on debt • effective operating costs are reduced by their offset against tax • annual costs are increased to pay back the debt raised to pay the initial costs • the costs accrued immediately by the project are decreased (they represent the equity portion required up-front) (Note that setting both the debt amount and tax rates to zero removes these tax and financing effects and so results in the leveraged LCOE result being identical to that of the simple LCOE). Both calculations take into account the input annual degradation rate, and both assume a lifetime (analysis period) of 20 years. In italics, after installed cost, O&M cost, fuel cost and debt amount are calculated some simple, commonly-used metrics (such as \$ per W for installed cost) as a "sanity check". The chart below the calculator shows a simple representation of the various lifetime costs and lifetime revenues (all brought back to present value), along with - in dark blue - the difference between them. So the blue bar above the line means net present value (NPV) positive, below the line means net present value positive. The various bars are derived from the leveraged case (or both cases if as mentioned above, there is no debt or tax included in the calculation). The revenue (dark green bar) is derived from the input sale price. This sale price remains unchanged over the twenty year analysis period (we haven't included inflation or other pricing impacts in this simple calculator). Note that if the input sale price exactly matches the leveraged LCOE, the blue bar in the chart disappears. That's because the lifetime costs and lifetime revenues exactly match (in present value terms). This illustrates the idea that one way to think about LCOE is not as a cost, but as a breakeven price that a power plant must achieve over the project lifetime such that its revenues will exactly match its costs (in present value terms, so dependent on a particular choice of discount rate). If the actual price it can achieve is higher, the project will make money (blue bar above the line); if the actual price it can achieve is lower, the project will lose money (blue bar below the line). What should become clear after a short time of playing around with different inputs, is how much it is possible to vary the result of a LCOE calculation by changing the assumptions behind it! Key learning takeaway: read LCOE numbers with a large dose of caution...
 Energy: Capacity (MW) Capacity Factor (%) Energy degradation Year 1 energy (MWh) Revenues: Sale Price (\$/MWh) Year 1 revenue (m\$) Costs: Installed Cost (m\$) Annual O&M (m\$) Annual Fuel (m\$) (leveraged case) Finance: Debt amount (m\$) Debt term (yrs, max 20) Interest Rate Tax Rate Discount Rate LCOE: Simple (\$/MWh) Leveraged* (\$/MWh) * applies tax benefits to depreciation, costs, interest [No canvas support]