`University of San Carlos

Department of Electrical and Electronics Engineering

Name: Neil John Perez
Date Submitted: February
9, 2014
Subject&Schedule:EE030/4:30-6:00/MW
Remarks:
Levelized Cost of Energy
(LCOE)
Societys progress is greatly linked on how its members use energy. It can be
traced way back to the prehistoric times when people majorly use heat energy and
chemical energy until the modern days where people utilize electrical energy
produced from complex generation sources like nuclear, fossil fuels, solar, etc.
Nowadays, as a consequence of rapidly growing technology, the need for utilizing
electrical energy rises tenfold, but it is also due to technology that our options as to
how we generate such energy diversifies. Added to the fact that our environment is
ailing due to global warming, it Is highly critical to benchmark from these options as
to which one is very efficient (high output, low cost) without compromising
environmental safety. This is where Levelized-cost of Energy (LCOE) comes in. LCOE
is the measure of how competitive an energy generation plant is; it is a grading
system for our different energy generating options.
LCOE deals less on EE technicalities and more on the Economics side. LCOE
is normally calculated by accounting for all of a systems expected lifetime cost
which is then divided by the systems lifetime expected power output. This is why
LCOE has units in currency per kilowatt/hour (e.g. P50 per kilowatt hour). These
costs will include initial costs, equipment costs,
fuel costs, maintenance costs,
etc. From these costs, you will determine when your system will breakeven, that is
the amount you will start to profit considering the numerous costs is will involve. A
lower LCOE means energy is produced at a lower cost otherwise energy production
cost will be higher if there would be high LCOE value. In order to make our
understanding of LCOE go further, here is an example.
Engr. Xs firm plans to enter into the power generation business. After
careful studying, and assessing, he was able to come up 4 different options along
with some necessary data. Engr. X now asks for your help as to which of these
opti9ns would be the most viable for him to invest. All generation systems are
studied to last for 5 years. Currency in Pesos.
Type of
Energy
generation

Initial Costs

Replacemen
t Costs

Fuel Costs

kW Output
in one hour

LCOE

P25,000,000

Maintenanc
e and
operation
costs
P10,000,000

Coal power
plant
Nuclear
Power Plant

P120,000,00
0
P180,000,00
0

P45,000,000

50.95

P30,000,000

P8,000,000

P31,000,000

97.68

P3925.42/kW
h
P2549.14/kW
h

Solar
Power
Plant
Biomass

P150,000,00
0

P40,000,000

P100,000,0
00

P20,000,00
0

P50,000

42.60

P4461.27/kW
h

P2,000,000

P500,000

76.65

P1598.17/k
Wh

From the examples results, It would be more profitable if Engr. X would invest in
Biomass Energy since Biomass has the lowest cost per kWh. Solar Panel on the
other hand is has a very high cost due to expensive equipment and geographical
constraints.
One major advantage of LCOE is that the options for a more economical, efficient
and greener are more easy to see and compare hem through a specific benchmark.
One major disadvantage of LCOE on the other hand is the failure to account for
extra costs incurred. By the system