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LCOE (Levelised Cost)

Discounted levelised cost of energy over the plant life.

Financial

Inputs (SI units)

Simple mode divides lifetime cost by lifetime energy with no discounting; detailed mode discounts both streams.

Total installed cost at year 0.

First-year operations & maintenance cost.

Annual change in O&M cost; can be negative if costs are expected to fall.

First-year AC energy output.

Annual generation decline.

Used only in detailed mode.

Analysis horizon.

Cost incurred once, in the inverter replacement year (detailed mode only).

Year the inverter is replaced; set 0 to skip.

Optional one-time battery replacement cost; 0 skips it.

Year of battery replacement; set 0 to skip.

Residual value recovered at the end of the project life, treated as a negative cost (credit) in the final year.

Results

Detailed discounted LCOE
0.832 /kWh
Discounted lifetime cost
1,188,687
Discounted lifetime energy
1,429,128 kWh
✓ PASS — Discounted LCOE computed successfully.
✓ PASS — Inverter replacement year is within the analysis period.

Engineering Recommendations

  • →The year-by-year discounted cost and energy table (logs) shows exactly where inverter/battery replacement and salvage value affect LCOE — inspect it before quoting a headline figure.
  • →Use a discount rate consistent with the project's actual cost of capital (WACC), not an arbitrary hurdle rate.
  • →Engineering-grade preliminary calculation. Final design must be verified against project-specific site conditions, manufacturer datasheets, applicable standards and utility requirements.

Detailed Calculation Log

Year | Generation (kWh) | O&M | CAPEX event | Discount factor | Disc. cost | Disc. energy
0 | — | — | 1,000,000 (initial CAPEX) | 1.0000 | 1,000,000 | —
1 | 140,000 | 12,000 | — | 0.9259 | 11,111 | 129,630
2 | 139,230 | 12,360 | — | 0.8573 | 10,597 | 119,367
3 | 138,464 | 12,731 | — | 0.7938 | 10,106 | 109,917
4 | 137,703 | 13,113 | — | 0.735 | 9,638 | 101,216
5 | 136,945 | 13,506 | — | 0.6806 | 9,192 | 93,203
6 | 136,192 | 13,911 | — | 0.6302 | 8,766 | 85,824
7 | 135,443 | 14,329 | — | 0.5835 | 8,361 | 79,030
8 | 134,698 | 14,758 | — | 0.5403 | 7,974 | 72,773
9 | 133,957 | 15,201 | — | 0.5002 | 7,604 | 67,012
10 | 133,221 | 15,657 | — | 0.4632 | 7,252 | 61,707
11 | 132,488 | 16,127 | — | 0.4289 | 6,917 | 56,822
12 | 131,759 | 16,611 | — | 0.3971 | 6,596 | 52,323
13 | 131,034 | 17,109 | 60,000 | 0.3677 | 28,353 | 48,181
14 | 130,314 | 17,622 | — | 0.3405 | 6,000 | 44,367
15 | 129,597 | 18,151 | — | 0.3152 | 5,722 | 40,854
16 | 128,884 | 18,696 | — | 0.2919 | 5,457 | 37,620
17 | 128,175 | 19,256 | — | 0.2703 | 5,204 | 34,642
18 | 127,470 | 19,834 | — | 0.2502 | 4,963 | 31,899
19 | 126,769 | 20,429 | — | 0.2317 | 4,734 | 29,374
20 | 126,072 | 21,042 | — | 0.2145 | 4,515 | 27,049
21 | 125,379 | 21,673 | — | 0.1987 | 4,306 | 24,907
22 | 124,689 | 22,324 | — | 0.1839 | 4,106 | 22,935
23 | 124,003 | 22,993 | — | 0.1703 | 3,916 | 21,120
24 | 123,321 | 23,683 | — | 0.1577 | 3,735 | 19,448
25 | 122,643 | 24,394 | — | 0.146 | 3,562 | 17,908

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Engineering Formula

  • LCOE = [CAPEX + Σ O&M_t/(1+r)^t] / [Σ E_t/(1+r)^t]
  • E_t = E₁ × (1 − d)^(t−1)

LCOE discounts both costs and energy to present value, giving the break-even tariff at which the project exactly recovers its cost. It is the standard metric for comparing PV against grid or diesel supply.

Step-by-step Calculation

  1. 1.Discounted cost streamCAPEX + Σ (O&M_t + replacements_t − salvage_life)/(1+r)^t1,188,687
  2. 2.Discounted energy streamΣ E_t/(1+r)^t, t=1..251,429,128 kWh
  3. 3.Detailed LCOEΣ discounted costs / Σ discounted energy0.832 /kWh

How to use this calculator: LCOE (Levelised Cost)

Discounted levelised cost of energy over the plant life. The example below is calculated by this page's real engine from the displayed inputs.

  1. 1Confirm that the LCOE (Levelised Cost) matches the quantity or design check you need.
  2. 2Enter CAPEX, Year-1 annual O&M, and O&M escalation using the units printed beside each field.
  3. 3Select the applicable Calculation mode options; these choices change the calculation method or factors.
  4. 4Calculate, then follow the substituted equations in the worked example and compare the result with any stated limit.
  5. 5Read the assumptions, warnings and cited references before using the result for a financial, medical or engineering decision.

Input guide and example values

Use values from the same measurement basis and time period. Conditional fields appear only when the related option is selected.

InputExample valueWhy it matters
Calculation modeMode B — detailed discountedSimple mode divides lifetime cost by lifetime energy with no discounting; detailed mode discounts both streams.
CAPEX1000000 currencyTotal installed cost at year 0.
Year-1 annual O&M12000 currency/yrFirst-year operations & maintenance cost.
O&M escalation3 %/yrAnnual change in O&M cost; can be negative if costs are expected to fall.
Year-1 generation140000 kWh/yrFirst-year AC energy output.
Module degradation0.55 %/yrAnnual generation decline.
Discount rate8 %Used only in detailed mode.
Project life25 yearsAnalysis horizon.
Inverter replacement cost60000 currencyCost incurred once, in the inverter replacement year (detailed mode only).
Inverter replacement year13 yearYear the inverter is replaced; set 0 to skip.
Battery replacement cost0 currencyOptional one-time battery replacement cost; 0 skips it.
Battery replacement year0 yearYear of battery replacement; set 0 to skip.
Salvage value at end of life0 currencyResidual value recovered at the end of the project life, treated as a negative cost (credit) in the final year.

Formula inputs & variables for LCOE (Levelised Cost)

These are the named quantities used by this calculator. When the source formula does not define a mathematical symbol, OneCalcApp keeps the real input label instead of inventing one.

Variable / inputUnitMeaning in this calculation
Calculation mode—Simple mode divides lifetime cost by lifetime energy with no discounting; detailed mode discounts both streams.
CAPEXcurrencyTotal installed cost at year 0.
Year-1 annual O&Mcurrency/yrFirst-year operations & maintenance cost.
O&M escalation%/yrAnnual change in O&M cost; can be negative if costs are expected to fall.
Year-1 generationkWh/yrFirst-year AC energy output.
Module degradation%/yrAnnual generation decline.
Discount rate%Used only in detailed mode.
Project lifeyearsAnalysis horizon.

How the LCOE (Levelised Cost) works

The LCOE (Levelised Cost) uses Calculation mode, CAPEX, Year-1 annual O&M, O&M escalation, Year-1 generation, Module degradation, Discount rate, Project life, Inverter replacement cost, Inverter replacement year, Battery replacement cost, Battery replacement year, and Salvage value at end of life to calculate Detailed discounted LCOE, Discounted lifetime cost, and Discounted lifetime energy. Its engine applies LCOE = [CAPEX + Σ O&M_t/(1+r)^t] / [Σ E_t/(1+r)^t]; the worked values below come from that same live calculation rather than a separately typed example.

With Calculation mode Mode B — detailed discounted, CAPEX 1000000 currency, Year-1 annual O&M 12000 currency/yr, O&M escalation 3 %/yr, Year-1 generation 140000 kWh/yr, Module degradation 0.55 %/yr, Discount rate 8 %, Project life 25 years, Inverter replacement cost 60000 currency, Inverter replacement year 13 year, Battery replacement cost 0 currency, Battery replacement year 0 year, and Salvage value at end of life 0 currency, the main worked-example result is Detailed discounted LCOE = 0.832 /kWh.

How each LCOE (Levelised Cost) input is used

Calculation mode

The LCOE (Levelised Cost) worked example selects “Mode B — detailed discounted”. Available choices include Mode A — simple preliminary (undiscounted) and Mode B — detailed discounted. This selection may change the method or factor used by the engine, so choose the option that matches the real case.

CAPEX

The LCOE (Levelised Cost) worked example uses CAPEX = 1000000 currency. This value is passed directly into the calculation, with an allowed minimum 1. Total installed cost at year 0.

Year-1 annual O&M

The LCOE (Levelised Cost) worked example uses Year-1 annual O&M = 12000 currency/yr. This value is passed directly into the calculation, with an allowed minimum 0. First-year operations & maintenance cost.

O&M escalation

The LCOE (Levelised Cost) worked example uses O&M escalation = 3 %/yr. This value is passed directly into the calculation, with an allowed minimum -10 and maximum 20. Annual change in O&M cost; can be negative if costs are expected to fall.

Year-1 generation

The LCOE (Levelised Cost) worked example uses Year-1 generation = 140000 kWh/yr. This value is passed directly into the calculation, with an allowed minimum 1. First-year AC energy output.

Module degradation

The LCOE (Levelised Cost) worked example uses Module degradation = 0.55 %/yr. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 2. Annual generation decline.

Discount rate

The LCOE (Levelised Cost) worked example uses Discount rate = 8 %. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 25. Used only in detailed mode.

Project life

The LCOE (Levelised Cost) worked example uses Project life = 25 years. This value is passed directly into the calculation, with an allowed minimum 1 and maximum 40. Analysis horizon.

Inverter replacement cost

The LCOE (Levelised Cost) worked example uses Inverter replacement cost = 60000 currency. This value is passed directly into the calculation, with an allowed minimum 0. Cost incurred once, in the inverter replacement year (detailed mode only).

Inverter replacement year

The LCOE (Levelised Cost) worked example uses Inverter replacement year = 13 year. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 40. Year the inverter is replaced; set 0 to skip.

Battery replacement cost

The LCOE (Levelised Cost) worked example uses Battery replacement cost = 0 currency. This value is passed directly into the calculation, with an allowed minimum 0. Optional one-time battery replacement cost; 0 skips it.

Battery replacement year

The LCOE (Levelised Cost) worked example uses Battery replacement year = 0 year. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 40. Year of battery replacement; set 0 to skip.

Salvage value at end of life

The LCOE (Levelised Cost) worked example uses Salvage value at end of life = 0 currency. This value is passed directly into the calculation, with an allowed minimum 0. Residual value recovered at the end of the project life, treated as a negative cost (credit) in the final year.

LCOE (Levelised Cost) formulas and result interpretation

Formula 1: relationship used

In the LCOE (Levelised Cost), LCOE = [CAPEX + Σ O&M_t/(1+r)^t] / [Σ E_t/(1+r)^t]. The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Formula 2: relationship used

In the LCOE (Levelised Cost), E_t = E₁ × (1 − d)^(t−1). The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Detailed discounted LCOE

For the displayed LCOE (Levelised Cost) worked example, Detailed discounted LCOE is 0.832 /kWh. Verify Calculation mode, CAPEX, and Year-1 annual O&M and their units before relying on this output.

Discounted lifetime cost

For the displayed LCOE (Levelised Cost) worked example, Discounted lifetime cost is 1,188,687. Verify Calculation mode, CAPEX, and Year-1 annual O&M and their units before relying on this output.

Discounted lifetime energy

For the displayed LCOE (Levelised Cost) worked example, Discounted lifetime energy is 1,429,128 kWh. Verify Calculation mode, CAPEX, and Year-1 annual O&M and their units before relying on this output.

LCOE (Levelised Cost) accuracy, checks and limitations

  • LCOE (Levelised Cost) units check: confirm Calculation mode, CAPEX (currency), Year-1 annual O&M (currency/yr), O&M escalation (%/yr), Year-1 generation (kWh/yr), Module degradation (%/yr), Discount rate (%), Project life (years), Inverter replacement cost (currency), Inverter replacement year (year), Battery replacement cost (currency), Battery replacement year (year), and Salvage value at end of life (currency) before calculating.
  • LCOE (Levelised Cost) result check: compare Detailed discounted LCOE, Discounted lifetime cost, and Discounted lifetime energy with the substituted formula steps and the displayed rounding precision.
  • LCOE (Levelised Cost): This is an estimate, not a lender offer. Verify fees, taxes, rate changes, eligibility and repayment terms in the official product documents.

Understanding the result

Read the main result together with supporting checks, assumptions, limits and intermediate values.

For a manual check, repeat the first equation, confirm the units and change one input at a time.

Common mistakes when using LCOE (Levelised Cost)

  • Do not mix units for CAPEX (currency), Year-1 annual O&M (currency/yr), O&M escalation (%/yr). A unit mismatch changes the input magnitude even when the typed number looks reasonable.
  • Do not leave Calculation mode on the default choice unless that choice matches the real scenario; the selected option can change the calculation path or factor.
  • Do not replace the displayed LCOE = [CAPEX + Σ O&M_t/(1+r)^t] / [Σ E_t/(1+r)^t] relationship with a different convention without also changing the underlying assumptions; compare like-for-like methods when checking the result.
  • Do not treat Detailed discounted LCOE = 0.832 /kWh from the worked example as a universal answer. It belongs to the displayed example inputs and must be recalculated for the actual case.

When the LCOE (Levelised Cost) is useful

LCOE (Levelised Cost) is designed for cases where Calculation mode, CAPEX, Year-1 annual O&M, O&M escalation are known and you need Detailed discounted LCOE, Discounted lifetime cost, Discounted lifetime energy. The page keeps the live calculator, calculation method and worked example together so the result can be checked instead of treated as a black-box number.

Use the calculator for the scope described by its inputs and notes. The displayed method is LCOE = [CAPEX + Σ O&M_t/(1+r)^t] / [Σ E_t/(1+r)^t]. If the real project or decision needs factors that are not represented here, treat the result as an estimate and add the missing checks separately.

Calculation mode and CAPEX: what changes the answer

The worked example uses Calculation mode = Mode B — detailed discounted, CAPEX = 1000000 currency, Year-1 annual O&M = 12000 currency/yr, O&M escalation = 3 %/yr. With those values, Detailed discounted LCOE is 0.832 /kWh. Changing an input should be interpreted according to that field's unit, range, option and hint rather than by the number alone.

For this calculator, the main input roles are: Calculation mode: Simple mode divides lifetime cost by lifetime energy with no discounting; detailed mode discounts both streams. Available choices include Mode A — simple preliminary (undiscounted), Mode B — detailed discounted. CAPEX (currency): Total installed cost at year 0. Year-1 annual O&M (currency/yr): First-year operations & maintenance cost. O&M escalation (%/yr): Annual change in O&M cost; can be negative if costs are expected to fall.

How to sanity-check a LCOE (Levelised Cost) result

Start by confirming the entered values and units, then compare the substituted working with the displayed formula or calculation steps. Pay particular attention to Detailed discounted LCOE, because it is the first worked-example output shown by the live engine.

Finally, compare the result with the assumptions, warnings and related calculators on this page. A nearby calculator can be useful as a cross-check when it measures the same workflow from a different input or output direction.

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Design Assumptions

  • • CAPEX incurred entirely at t = 0.
  • • O&M constant in nominal terms (use a real discount rate for real O&M).
  • • No residual value or decommissioning cost.

Engineering Tips

  • ◆Compare LCOE against the retail tariff, not the feed-in rate, for self-consumption plants.
  • ◆A 1% change in discount rate typically shifts LCOE by 5–8%.

Warnings

  • ▲LCOE ignores time-of-day value — do not use alone for storage or export projects.

Standards & References

IEC 61724-1IEA PVPS Task 13 (performance & LCOE)

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