Levelized Cost Calculations

Levelized Cost Calculations

Levelized costs are dynamically calculated for generation, fuels and vehicles. The following sections describe in more detail how these calculations are done, but there are common principles.

There are three modes that are available in calculating levelized costs. The mode defaults to normalized, but can be changed by selecting the radio button above the chart.

  • Normalized Mode - This uses a single discount rate and lifetime across all technologies. The rate used can be seen in the Advanced Parameters panel on the left.
  • Market Mode - This uses a different discount rate, lifetime and other costs for each technology. The rates are defined by the DOE Program Estimates that were published in 2011. These values can also be seen in the Advanced Parameters panel on the left (when Market Mode is selected).
  • User Defined - The discount rate, lifetime, and other costs are different for each technology and default to the market mode values. But you are able to change these in the Advanced Parameters panel. These are the only parameters that can be changed.

Data for these calculations has been collected and adjudicated from a variety of sources, and more sources are being added. If you have published data, please submit it for consideration. However, publications do not consistently report data values. To maximize the usefulness of the data, many of the parameters can be determined by alternative methods. Please refer to the detailed discussion on each calculation for an explanation of the possibilities.

Disclaimer

The data gathered here are for informational purposes only. Inclusion of a report in the database does not represent approval of the estimates by DOE or NREL. Levelized cost calculations DO NOT represent real world market conditions. The calculation uses a single discount rate in order to compare technology costs only.

CRF: Capital Recovery Factor

A common element in the levelized cost calculations is capital expenditures. The capital expenditure is turned into annual payments with a Capital Recovery Factor (CRF) that is defined using a common calculation.

Capital Recovery Factor (CRF) DEFINITIONS
TermDescriptionGenerationFuelsVehicles
DDiscount Rate is the assumed effective rate at which future income streams are discounted. Used to compute the capital recovery factor. In Normalized mode, a single discount rate is used. In Market and User modes, the discount rate can be different for each technology. 7% 7% 7%
NLifetime of the Investment. It is the assumed lifetime of a new plant/vehicle and the period over which the investment is computed (unless specified otherwise) 30 yrs 30 yrs 15 yrs

As noted above, the actual discount rate and investment lifetime parameters may be different depending on the technology and calculation mode. The descriptions of the different levelized cost calculations define the options.

If the discount rate (D) is zero, then the following formula is used to calculate the CRF.

Levelized Cost of Energy - LCOE

Levelized cost of electricity in cents / kWh. This is an approximation for the price at which electricity would need to be sold to break even.

LCOE Paramaters
TermUnitsDescriptionAlternative SourcesDatabase Column
Capital CostUS$/KwCost of the plantOnghCptCstDlKwInclCtng will be used first, but if not available, the product of the Contingency Factor and OnghtCptlCostDolPerKw will be used, otherwise just OnghtCptlCostDolPerKw. OnghCptCstDlKwInclCtng, ContingencyFactor, OnghtCptlCostDolPerKw
CRFCapital expenditures are annualized into the CRF term defined abovecalculated
τTax rate paid (applied after depreciation credits). It is 39.2%.
DPVThe present value of depreciation, depending on the MACRS schedule (Modified Accelerated Cost Recovery System):
Battery: 1Fuel Cell: 0.83155Onshore: 0.83155
Biopower: 0.83155Hydro: 0.54407Photovoltaic (PV): 0.83155
Blind Geothermal: 0.83155Hydrothermal: 0.83155Pumped Hydro Storage: 1
Blind Geothermal System: 0.83155Ice Storage: 1Residential PV: 0.83155
Combined Cycle: 0.54407Integrated Gasification Combined Cycle (IGCC): 0.54407Scrubbed: 0.54407
Combustion Turbine: 0.59476Land Based Wind: 0.83155Small Hydropower: 0.83155
Commercial PV: 0.83155Marine Hydrokinetic: 0.83155Solar Thermal: 0.83155
Compressed Air Energy Storage: 1Near Field (or Enhanced Hydrothermal): 0.83155Utility pv: 0.83155
Concentrating Solar Power: 0.83155Nuclear: 0.59476Unscrubbed: 0.54407
Distributed Generation: 0.54407Ocean: 0.83155Unspecified: 0.54407
Enhanced Geothermal: 0.83155Offshore: 0.83155Otherwise: 1
Enhanced Geothermal System (egs): 0.83155Offshore Wind: 0.83155
8760Hrs/YrNumber of hours in a year.
Capacity FactorYearly average percentage of power as a fraction of capacityThe average capacity factor defined with the data point will be used. If that is not available, the maximum capacity factor is used. Otherwise the default value defined for the technology (please see refer to the Levelizing Parameters for the default values based on the levelizing mode you have selected).AvgCapacityFactor, MaxCapacityFactor
All Inclusive O&MUS$/kWTotal (fixed and variable) cost of operations and maintenance of the plant, in $/kW. This value would be used if provided (divided by the product of the Capacity Factor and 8760). If this value is not provided, then the fixed and variable O&M values would be used as shown in the formula above. OMAllInclusive
Fixed O&MUS$/kWFixed operations and maintenance cost of the plant per capacity in $ / kW. This will not be used if the All Inclusive O&M is available.
If this is zero, then this term will zero out and processing will continue.
FixedOMDolPerKw
Variable O&MUS$/mWhVariable operations and maintenance cost of the plant per capacity in $ / kW. This will not be used if the All Inclusive O&M is available.
If this is zero, then this term will zero out and processing will continue.
VariableOMDolPerMwh
O&MUS$/kWIf the data point does not have any operational costs at all, then the same approach will be used with the Program Estimates; namely, for the given technology, if there is a program estimate for AllInclusive O&M, that will be used. If not, the program estimates for the technology fixed and variable O&M will be used. If none of these exist, then the LCOE will be set to zero.
Fuel PriceUS$/MMBtufuel cost of the plant in ($/mmBTU)The cost depends on the type of fuel used:
Bio Gas = $4.40 Coal = $2.34
Oil, Gas, or Steam = $4.40 Biomass = $2.27
Natural Gas = $4.40 Uranium = $0.76
Heat RateUS$/MMBtuThe efficiency of the power plant in converting fuel into electricityIf the value is not defined in the data, zero is used.HeatRate

Levelized Cost of Fuel - LCOF

Levelized cost of fuel results in the US$/Gallon of Gasoline Equivalent (gge). This calculation is the cost of a fuel production plant, that is distributed over the lifetime of the plant, plus the per-gallon production costs. The result is the approximate price at which the fuel would need to be sold to break even.

LCOF Parameters
TermUnitsDescriptionAlternative SourcesDatabase Column
Total Capital CostUS$Cost of the plant in $/ggeTotalCapitalCostDol
CRFCapital expenditures are annualized into the CRF term defined abovecalculated
Plant ScaleMGal/YrNumber of millions of gallons of fuel produced in a yearScaleMmGalYr
Capacity FactorYearly average percentage of production as a fraction of total capacity capacityOnlineCapctyFactorPrct
O&MUS$/ggeOperations and maintenance cost of the plantOperatingCost
Delivered Feedstock CostsUS$/ggeThis value is from the cost of the feedstock.DlvrFstkCst
Total Fuel YieldunitsTotal fuel yield in gal fuel/ dry short ton biomass unitsTtlFlYldGlFlDryShtTnBm
CoproductUS$/galCoproduct credit. The data point flag (IncludeCoprodCredit) determines if this should be included in the equation (and it typically is included).CoprodCreditDlgal, IncludeCoprodCredit
BTU/gallon gasoline
BTU/gallon fuel
An energy correction ratio that only applies to ethanol. The value is 1.5.

Levelized Cost of Driving - LCOD

Levelized cost of driving (LCOD) $ / mile for all vehicles other than PHEV. This calculation is essentially the distributed upfront cost of the vehicle plus the per-mile fuel cost.

The formula takes two forms depending on whether the vehicle uses a single type of fuel or a combination of electric and another type of fuel.

Vehicles – levelized cost of driving (LCOD) in $ / mile for all vehicles other than PHEV.

The formula includes terms for fuel and electric, but because these vehicles do not run as a hybrid, one of the terms will be zero (the %G or %E will be zero and the other 100%). The MPGG or MPGE has been calculated outside of the app and is stored in the CalculatedMpgg database column.

For PHEVs (defined by having a fuelType of: Gas & Elec, Diesel & Elec or h2 & Elec), which run on a combination of electricity and liquid fuel, the combined MPG (MPGGE) is calculated and used in the formula below, but here too, the actual calculated value is stored in the CalculatedMpgg column of the database and used directly by the app.

It is assumed that MPGE = z*MPGG, and the LCOD formula for PHEVs is:

LCOD Parameters
TermUnitsDescriptionAlternative SourcesDatabase Column
Capital CostUS$Cost of the new vehiclealtEstmtdVhclManufCst
CRFCapital expenditures are annualized into the CRF term defined abovecalculated
VMTmilesVehicle Miles Travelled, per year. Assumed to be 10,000
Fuel PriceUS$/gge Retail cost of the fuel for gallon of gasoline equivalent.
Diesel = $3.54Hydrogen = $3.90Diesel & Electric = $3.54
Electricity = $3.866Natural Gas = $2.07Gas & Electric = $3.68
Ethanol Flex Fuel = $4.60Propane = $4.26H2 & Electric = $3.90
Gasoline = $3.68Default = $3.866
FuelType
%GPercent of time driving on gasoline (ie 100% - %E)calculated
%E Percent of time driving on electricity, which is looked up depending upon the BattryOnlyRngNomMiles value associated with the data. If none is provided, this is zero. If battery only range is 75 miles or more, then this value is one. Otherwise the table below lists the mapping.
10 -> 0.27120 -> 0.45640 -> 0.677
12 -> 0.31430 -> 0.58575+ -> 1
18 -> 0.4183338 -> 0.661default -> 0
BattryOnlyRngNomMiles
MPGGmiles/ggeMiles Per Gallon of GasolineCalculatedMpgg
MPGEmiles/ggeMiles Per Gallon of Gasoline EquivalentCalculatedMpgg
MPGGEmiles/ggeTotal Miles Per Gallon of Gasoline Equivalent when considering running on gasoline and electricCalculatedMpgg
PGUS$/ggeRetail cost of a gallon of gasoline. Use Fuel Price lookup. FuelType
PEUS$/ggeRetail cost of a gallon of gasoline equivalent. Use Fuel Price lookup. "Electricy"
zIndicating electric travel is 3.5 times as efficient on a delivered energy use basis. The value used is 3.5.