Levelised Cost of Electricity (LCOE)
Total cost of electricity generation per kWh over the lifetime of a system -- for PV currently 5--10 cents/kWh.
Also known as: LCOE, Levelized Cost of Electricity, Generation Cost
What Is the Levelised Cost of Electricity?
The levelised cost of electricity (also LCOE — Levelized Cost of Electricity) indicates how much it costs to generate one kilowatt-hour of electricity over the entire lifetime of a system. It encompasses investment, operation, maintenance, and financing costs, divided by total energy production.
Calculation
LCOE = (Investment costs + Operating costs over lifetime) / Total electricity generation over lifetime
LCOE of Different Energy Sources (Germany, 2024)
| Energy Source | LCOE (ct/kWh) |
|---|---|
| Photovoltaics (rooftop, small) | 7—12 |
| Photovoltaics (ground-mounted) | 4—7 |
| Wind onshore | 4—8 |
| Wind offshore | 7—12 |
| Natural gas (CCGT) | 8—13 |
| Hard coal | 10—15 |
| Grid electricity (household) | 30—40 |
Significance for Profitability
The LCOE of a private PV system is well below the household electricity price. The difference (approx. 20—30 ct/kWh) is the economic advantage of self-consumption.
Influencing Factors
- Purchase costs: Module prices, installation
- Location: Solar irradiance determines the yield
- Lifetime: Longer operation reduces the LCOE
- Degradation: Power loss over the years
Practical Tip
Solar electricity is now the cheapest form of electricity generation. Even with storage, the total costs (12—18 ct/kWh) are well below the grid electricity price.
Related Terms
kWh (Kilowatt-Hour)
Unit of electrical energy -- one kWh equals the energy converted at a power of 1 kW over one hour.
Amortisation
The period until a PV system's investment costs are recouped through electricity savings and feed-in tariff revenue.
Self-Consumption
Share of self-generated solar electricity consumed directly in the household rather than fed into the grid.
Degradation
Gradual power loss of solar modules over their operating lifetime, typically 0.3--0.5% per year.