LCOE Calculator
Background:
This calculator estimates a pre-tax revenue equivalent Real LCOE. This LCOE estimate equates to the minimum power price a project must obtain in order to cover all project costs, service debt, and pay required returns to equity shareholders. Inputs should be based on 2014 U.S. Dollars (USD)
Inputs Overview:
The calculator relies on four primary inputs to estimate LCOE: total capital expenditures (CapEX), average annual operations expenditures (OpEx), the wind plant net capacity factor, and a nominal after-tax weighted average cost of capital (WACC). The net capacity factor is intended to reflect an average annual net capacity factor over a 20 year project financial life. The after-tax WACC assumes interest on debt serves as a tax deduction and that equity investor returns are indicative of the required threshold return after payment of taxes (i.e., sufficient revenue must be taken in to pay taxes and pay the threshold IRR). In general, the WACC is calculated as:
WACC = [(cost of equity in %) * (% equity in project)] + [(cost of debt in %) * (% debt in project) * (1 – tax rate)]
Inputs Detail:
LCOE estimates are reported in Real 2014 USD. Your inputs should reflect today's currency (2014 USD), when considering both current and future costs. Future cost estimates are intended to represent a change from today's levels, in real terms (constant 2014 USD).
A simple currency calculator is provided to assist in converting currency to USD from Euro, Danish Krone, Norwegian Kroner, or Great Britain Pounds. A standardized tax rate (25%) and depreciation schedule (20-year straight-line) are assumed. 100% of capital costs are assumed depreciable. It is also assumed that project financial life is 20 years. Long-term inflation is approximated at 2%.