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)
Responses
$0.60 per kWh
$0.60 per kWh
$0.77 per kWh
$0.77 per kWh
$0.06 per kWh
$0.06 per kWh
$0.07 per kWh
The formula for calculating the levelized cost of energy (LCOE) is as follows:
LCOE = (Total present value of costs) / (Total present value of electricity generated)
Total present value of costs = Capital costs + (Average yearly operating costs * lifetime)
Total present value of electricity generated = Total production during the lifetime of the project
Plugging in the values:
Total present value of costs = $995,000 + ($175,000 * 25) = $995,000 + $4,375,000 = $5,370,000
Total present value of electricity generated = 89,500,000 kWh
LCOE = $5,370,000 / 89,500,000 kWh = $0.06 per kWh
Therefore, the levelized cost of energy (LCOE) for this solar energy project is $0.06 per kWh.