CAPEX
Capital expenditure: the upfront investment to build an energy asset, usually quoted per kW of capacity for power plants or per kWh for storage.
CAPEX (capital expenditure) is the one-off cost of developing and constructing an asset, including equipment, balance of plant, civil works, grid connection, engineering, permitting and often financing during construction. In energy it is normalised by capacity: USD/kW or EUR/kW for generators, USD/kWh of energy capacity for storage.
Capital-intensive technologies with low fuel cost, such as solar, wind, hydro and nuclear, have levelised costs dominated by CAPEX and the cost of capital; for gas plants, fuel dominates instead.
The capital recovery factor (CRF) converts an upfront sum into equal annual payments over n years at rate r. "Overnight cost" excludes interest during construction, which can add 10 to 30% for projects built over many years.
Indicative installed costs from IRENA (global weighted averages, 2024): utility-scale solar PV about 690 USD/kW, onshore wind about 1,040 USD/kW, offshore wind about 2,850 USD/kW. NREL ATB and Lazard give new gas combined cycle roughly 1,000 to 2,500 USD/kW and new nuclear 6,000 to 12,000 USD/kW in Western countries; Vogtle 3 and 4 in Georgia exceeded 30 billion USD for 2.2 GW. Four-hour lithium-ion storage turnkey costs fell to about 165 USD/kWh globally in 2024 (BNEF).
CAPEX feeds directly into LCOE, NPV, IRR and payback calculations alongside OPEX.
Related terms
All terms →- OPEX
Operating expenditure: recurring costs to run and maintain an energy asset, split into fixed costs per kW-year and variable costs per MWh.
- LCOE (Levelized Cost of Electricity)
The constant price per MWh that recovers all lifetime costs of a power plant, discounted to present value, divided by its discounted lifetime output.
- WACC
Weighted average cost of capital: the blended return required by debt and equity investors, used as the discount rate for energy projects.
- NPV (Net Present Value)
The sum of all future cash flows of a project discounted to today, minus the initial investment; a positive NPV indicates value creation.
- Learning rate (Swanson's law)
The percentage cost reduction of a technology for every doubling of cumulative production; for solar modules, Swanson’s law puts it near 20%.
- Payback period
The time needed for the cumulative savings or revenues of an investment to equal its initial cost.