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.
The levelized cost of electricity (LCOE) is the standard metric for comparing generation technologies with different cost structures. It equals the net present value of lifetime costs divided by the net present value of lifetime generation.
Here I is investment (CAPEX), O&M is operating cost (OPEX), F is fuel and carbon, E is electricity generated and r is the discount rate. For capital-intensive plants, LCOE is dominated by CAPEX, the capacity factor and the cost of capital.
Typical unsubsidised ranges: Lazard LCOE+ (June 2025) gives utility-scale solar about 38 to 78 USD/MWh, onshore wind 37 to 86, gas combined cycle 48 to 109, and new nuclear 141 to 220. IRENA reports global weighted-average LCOE for new projects in 2024 of about 43 USD/MWh for solar PV (down roughly 90% since 2010), 34 USD/MWh for onshore wind and 79 USD/MWh for offshore wind.
LCOE has limitations: it ignores when and where power is generated, so it does not capture system integration costs, capacity value or price cannibalisation. Analysts complement it with value-adjusted LCOE (IEA VALCOE), system LCOE, or LCOS for storage.
Related terms
All terms →- 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.
- OPEX
Operating expenditure: recurring costs to run and maintain an energy asset, split into fixed costs per kW-year and variable costs per MWh.
- Discount rate
The annual rate used to convert future costs and revenues into present value, reflecting the time value of money and investment risk.
- Capacity factor
The ratio of the energy a power plant actually produces over a period to the energy it would produce running at full nameplate capacity for the whole period.
- WACC
Weighted average cost of capital: the blended return required by debt and equity investors, used as the discount rate for energy projects.
- LCOS (Levelized Cost of Storage)
The average cost per MWh discharged over a storage asset’s lifetime, including investment, operation, charging energy and efficiency losses.