Read through as we help you make an informed decision by highlighting its key features and which costs it covers.

## What is the Levelized Cost of Energy (LCOE)?

The minimum average price that an electricity-producing asset requires in order to offset its investment and operational costs over its lifetime.

## Use Cases

- To determine the feasibility on an investment
- To compare the value of different energy-producing sources

## Basic Formula

**(Present value of total investment and operational costs) / (Present value of total generated electricity)**

## Calculating the LCOE

**The total costs associated with the project:**

**It** = Investment costs in year t

**Mt** = Operation and maintenance costs in year t

**Ot** = Other costs in year t

**The total output of the power-generating asset will include:**

**Et** = Electricity generation in year t

**Important factors to be considered in the equation:
n** = Life of the asset

**r**= Discount rate (the rate of return used to discount future cash flows to their present value)

## Key Points

- The LCOE will determine the expected profitability of an asset

- The LCOE is defined on a Euro per Megawatt hour basis

- The risk of an energy-producing asset is reflected in the
**discount rate**, which has a strong impact on LCOE computations

## About Synertics

Synertics provides advisory services and develops digital data-driven solutions for the energy industry with the purpose of driving productivity and transferring knowledge.