LCOE (Levelised Cost of Energy)
The lifetime cost of a plant divided by the lifetime energy it produces, both discounted to present value — the only number that lets you compare solar against a grid tariff on equal terms.
Why it is not just cost ÷ units
A rupee saved in year 20 is not worth a rupee spent today. LCOE discounts both the costs (capex, O&M, inverter replacement) and the energy (declining each year with degradation) to present value before dividing. Skip the discounting and you will understate LCOE by 25-40%.
What moves it
Four things dominate: capex per Wp, the specific yield at the site, the discount rate, and degradation. Note that a lower discount rate makes solar look better, which is why a developer's LCOE and a lender's LCOE for the same plant are rarely the same number — always ask which rate was used.
Related terms
Where this applies
Utility-Scale Solar EPC, C&I Rooftop Solar
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