##### LCOE

The Levelized Cost Of Energy (LCOE) is a standard methodology used by utilities, policy-maker, and industry to calculate the cost of electricity produced by a generator over its lifetime. It is the ratio of the initial capital cost plus the present value of all future operational costs (administration, maintenance and fuel) to the present value of all the energy produced during the anticipated lifetime of the project.

For a solar project, the fuel (the sun) is free and without administration costs, the LCOE formula is:

where:

*LCOE is in $/MWh*

*CapInit = Initial Capital Cost = cost per watt * 10*^{6 }

*Mi = Maintenance cost at year i taking into account inflation (cpi) and calculated at mid-year. Mi = mY1 * (1+cpi) ^{(i-0.5)} *

*mY1= Maintenance costs $/MW in the first year*

*cpi = Consumer Price Index*

*Ei = Energy produced at year I taking into account annual PV modules derating = enY1 *( 1 – (lid + (dr25 – lid)/lt*(i – 1)))*

*cpw = Cost per Watt ($/Wp)*

*enY1 = Energy produced the first year*

*lid = PV first light induced degradation*

*dr25= PV total derating after 25 years*

*lt = project lifetime*

*PV = present value : PV(x) = x * (1+bnkr)*

^{–(i-0.5)}calculated at mid-year*bnkr = Discount ( or sometimes called bank) rate*

##### ROI

The Return on investment (ROI) is a simple, basic financial benchmark: (Total gain from investment – Total cost of investment) / Total cost of Investment.

In the case of a solar plant, the formula is the following:

where:

- p = ROI period
- TRFi = Tariff of electricity paid at year i
- Ei = Energy produced in year i (derated by 20% over 25 years)
- OMi = O&M cost during year i
- CAPinit = Initial capital cost