Enter the NPV of costs over its lifetime and the NPV of energy produced over its lifetime to determine the Levelized cost of energy (LCOE).

LCOE Formula

The following formula is used to calculate a levelized cost of energy:


  • Where LCOE is the levelized cost of energy ($)
  • NPVC is the net present value of the costs of an electrical energy producing asset ($)
  • NPVEE is the net present value of electrical energy produced by the asset over it’s lifetime (kWh)

Levelize Cost of Energy Definition

What is LCOE?

LCEO is short for Levelized cost of energy. It represents a metric used to describe the total cost to run and operate an electrical energy-producing asset per unit of energy produced of its lifetime.

This metric can then be used to compare different types of energy production to see which would be more cost-effective per unit of energy produced.

Example Problem

How to calculate LCOE?

First, determine the NPV of costs over the lifetime of the asset. For this example, we will be looking at a small nuclear power plant that has an NPV of costs of $50,000,000.00.

Next, determine the total amount of energy produced over the lifetime. For this example, the power plant has a produced a total of 40,000 kWH of power of its lifetime.

Finally, calculate the LCOE using the formula:


LCOE = $50,000,000/40,000

LCOE = $1250.00 / kwH