Calculator Inputs
Example Data Table
| Item | Example Value | Meaning |
|---|---|---|
| Capital Cost | 850,000 | Installed project spending before operations begin. |
| Project Life | 20 years | Economic life used for discounting and output forecast. |
| Annual Output | 1,250,000 kWh | Expected first-year production or service delivery. |
| Fixed O&M | 32,000 per year | Scheduled maintenance, labor, and recurring overhead. |
| Variable O&M | 0.012 per kWh | Output-dependent cost rate. |
| Discount Rate | 8% | Required return used to convert future values. |
Formula Used
The core measure is the levelized cost per unit of output. It divides discounted lifecycle cost by discounted lifecycle output.
LCOE or Levelized Cost = (Initial Investment + PV of annual costs − PV of salvage value) ÷ PV of output
Annual Cost = Fixed O&M + (Variable O&M × Annual Output) + Fuel Cost + Overhaul Cost
Discounted Value = Future Value ÷ (1 + Discount Rate)Year
Output with degradation = Year 1 Output × (1 − Degradation Rate)Year − 1
Equivalent Annual Cost = Present Value of Costs × Capital Recovery Factor
The capital recovery factor equals r(1+r)n ÷ ((1+r)n − 1). When the discount rate is zero, the annualization factor becomes 1 ÷ n.
How to Use This Calculator
- Enter the project name, currency, and output unit.
- Provide total capital, start-up, and working capital values.
- Set project life, discount rate, and annual degradation.
- Enter annual output, fixed O&M, variable O&M, and fuel cost.
- Add overhaul cost and overhaul timing if a major event is expected.
- Enter any salvage value expected at the end of life.
- Submit the form to show the result block above the calculator.
- Use the CSV or PDF buttons to save the result summary.
FAQs
1. What does levelized cost show?
It shows the average discounted cost for each unit of lifetime output. Engineers use it to compare assets with different lifespans, output patterns, and maintenance structures on a consistent basis.
2. Why is discount rate important?
The discount rate converts future costs and output into present terms. A higher rate reduces the present value of later production and usually increases the reported levelized cost.
3. Should I include fuel cost here?
Yes, if the asset consumes fuel or other recurring feedstock. Enter the expected annual amount so the calculator captures the full lifecycle burden, not just maintenance and capital spending.
4. What is output degradation?
It represents yearly decline in performance or production. Examples include solar module degradation, equipment wear, membrane fouling, or reduced throughput from aging components.
5. Why include salvage value?
Salvage value reduces net lifecycle cost because it is a terminal credit. The tool discounts that value back to today before subtracting it from present value costs.
6. Is simple unit cost the same as levelized cost?
No. Simple unit cost ignores discounting and timing. Levelized cost uses discounted cash flow logic, which makes it more suitable for serious engineering and investment comparisons.
7. Can I compare two projects with this tool?
Yes. Run each project with its own assumptions, then compare levelized cost, present value of costs, and equivalent annual cost to identify the more efficient option.
8. When is overhaul cost useful?
Use overhaul cost when the asset needs a major midlife replacement or refurbishment. It helps reflect turbines, engines, pumps, and similar systems more realistically.