Question
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
$0.07 per kWh
$0.07 per kWh
$0.77 per kWh
$0.77 per kWh
$0.06 per kWh
$0.06 per kWh
$0.60 per kWh
The correct response is:
$0.07 per kWh
To calculate the Levelized Cost of Energy (LCOE), we use the formula:
LCOE = (Total present value of costs over lifetime of project) / (Total production over lifetime of project)
First, we need to calculate the total present value of costs over the 25-year lifetime of the project. This includes the initial capital costs and the average yearly operating costs. We can use an annual discount rate of 5% for this calculation.
Total present value of capital costs = $995,000
Total present value of operating costs = $175,000 per year * ((1 - (1 + 0.05)^-25) / 0.05) = $2,834,259.17
Total present value of costs = $995,000 + $2,834,259.17 = $3,829,259.17
Next, we divide the total present value of costs by the total production over the lifetime of the project:
LCOE = $3,829,259.17 / 89,500,000 kWh = $0.0428 per kWh
Therefore, the correct answer is not provided in the given options.