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Policymakers, sector planners, regulators and investors will face important decisions in the next ten years about how to replace aging generating fleets. The comparative cost of new plants and the impact the plants will have on overall system cost are key decision criteria.
The levelized cost of energy (LCOE) is a useful metric for comparing the “all-in” costs of potential generating plants and for measuring how the cost of generation in an electricity system will be affected by the addition of one or multiple new plants.
Slight changes in plant capacity factors, financing costs, capital and fuel costs can have dramatically different implications for investors (through the rate-of-return), end-users (through tariffs), and governments (through fiscal obligations).
Levelized costs are sensitive to variations in all of these input assumptions, and they are assumptions that can change quickly. Decision makers must therefore be able to model them quickly, but modeling levelized costs requires a knowledge of financial modeling, advanced spreadsheet skills, and many hours of work.
LCOE-z lets users undertake complex levelized cost calculations in minutes, using only basic input assumptions. LCOE-z is:
- Scalable. Users can calculate levelized costs for individual plants or for an entire system. Levelized costs for (literally) hundreds of plants can be re-calculated simultaneously within seconds, a task that would crash most laptops.
- Adaptable. Users can adopt the simplified, default modelling assumptions suggested by LCOE-z or can choose to highly customize input assumptions for each plant.
- Versatile. In addition to levelized cost, the LCOE-z model outputs include plants’ internal rates of return (IRR), net present value (NPV), and levelized cost of capacity and energy at a range of capacity factors.
- Graphical. Users can easily create screening curves showing the comparative levelized costs of energy (see above) and capacity (see the back) of plants in their portfolios. Users can also create supply curves showing the levelized cost of plants relative to the energy they produce.
- Auditable. LCOE-z lets users download the cash flows used in its calculations, allowing for easy checking against LCOE-z output results. Data for the graphs are also downloadable, and re-usable in Excel.
- Affordable. An LCOE-z subscription provides functionality that would typically cost tens of thousands of US dollars of consultant time.
Not just another calculator
LCOE-z is a discounted cash flow modeling tool for power plants. The application takes user input assumptions about the costs of various power plants, and calculates the levelized cost of energy (LCOE) for each plant.
There are some excellent LCOE calculators available on the web (see, for example. the National Renewable Energy Laboratory's calculator here), but ours has some additional features useful for power sector planning and policy analysis. The features include the ability to:
- Calculate multiple LCOEs plants at once
- Create screening curves and supply curves for easy comparison of LCOEs at different capacity factors
- Create and save multiple "portfolios" of plants, so you can easily model and save a large collection of plants for each country, project, or power system you are focused on
- Download the cash flows for each plant, so you can double-check the results. We don't believe in "black box" models
- Include, separately, the costs of equity and debt, and the tenor of debt (instead of a single, weighted average cost of capital or WACC)
- Specify plant construction periods.