LCOE calculator

Method and data

LCOE = (capex × CRF + FOM) / (8.76 × CF) + VOM + fuel
CRF = r × (1 + r)^n / ((1 + r)^n - 1)
fuel = fuel price × heat rate
With degradation d: LCOE = (capex + sum of (FOM + (VOM + fuel) × E_t) / (1 + r)^t) / (sum of E_t / (1 + r)^t), E_t = 8.76 × CF × (1 - d)^(t - 1)
With c construction years: capex is spent in c equal parts and carried to the start of operation at r
CRF is the capital recovery factor: the yearly payment that repays 1 USD of capex over n years at rate r

Questions

What discount rate should I use for LCOE?

Use the real, after-tax cost of capital of the project's financing. The calculator starts at 6.0% real, a level typical of contracted projects in low-risk markets; merchant projects and riskier markets need more. Adding the country risk premium adds Damodaran's premium for the country (January 2026): 3.2 percentage points for Brazil and 2.9 for India. The rate matters most for capital-heavy plants: at 8.0% instead of 7.0%, the worked example rises from 48.3 to 51.9 USD/MWh.

Why does my LCOE differ from IRENA's?

IRENA's figures are averages over the projects commissioned in 2025, weighted by capacity and computed with IRENA's own cost of capital for each country. For utility PV in Europe, IRENA's weighted average is 59 USD/MWh, and 90% of projects lie between 40 and 126. A different capacity factor, discount rate, lifetime or O&M cost moves your result away from that average. The PV preset also takes the national fleet's capacity factor on reported capacity, often DC, which is lower than a new plant's AC factor and raises the LCOE.

Does LCOE include grid connection, curtailment or subsidies?

The capex presets are total installed costs as IRENA and NLR define them, which include the plant's own connection to the grid but not wider network reinforcement. Curtailment is not modelled: lower the capacity factor by the share of output you expect to lose. Subsidies, tax credits, carbon prices and revenues are left out, because LCOE is a cost per MWh, not a price or a return.

What is the difference between real and nominal LCOE?

A real LCOE is in money of constant value and uses a real discount rate. Here the IRENA presets are in 2025 US dollars and the NLR ATB presets in 2023 US dollars, so a result that mixes them is only approximately in one money year. A nominal LCOE carries inflation in both the costs and the discount rate, so a flat nominal price per MWh is higher than the real one: later payments lose value to inflation. Rates convert with (1 + nominal) = (1 + real) × (1 + inflation), so the 6.0% real default is 8.1% nominal at 2.0% inflation. Compare real with real and nominal with nominal.

How does the capacity factor change LCOE?

Capital and fixed costs are spread over the energy produced, so that part of the LCOE is inversely proportional to the capacity factor. In the worked example (capex 1,000 USD/kW, fixed O&M 20 USD/kW-yr, 25 years, 7.0% real), the LCOE is 48.3 USD/MWh at 25%, 60.4 at 20% and 40.3 at 30%. Variable O&M and fuel are already per MWh and do not change. The capacity factor calculator measures a plant's factor and passes it to this calculator.

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