Defined term

Levelized cost of energy

Levelized cost of energy is a discounted lifetime cost measure divided by a discounted lifetime energy measure under a specified method and boundary.

Also known as LCOE

economics · Concept code GS-CONCEPT-075 · Last verified August 20, 2026

Definition and boundaries

Definition

Levelized cost of energy is a discounted lifetime cost measure divided by a discounted lifetime energy measure under a specified method and boundary.

Definition claim verification: Verified August 20, 2026

In plain language

Use Levelized cost of energy only after the cash-flow perspective, timing, contract structure, included costs, and omitted items are made explicit.

What it is not

It is not an electricity bill savings rate, installed price per watt, or customer payback period.

Decision context

Why it matters

State cost perspective, financing and tax treatment, energy boundary, degradation, replacements, residual value, discounting, inflation, and analysis life before comparing results.

Decision-context claim verification: Verified August 20, 2026

Information boundary

This page provides general educational context, not a site design, production guarantee, utility determination, contract interpretation, legal opinion, tax conclusion, or individualized financial advice. Verify property, equipment, utility, jurisdiction, program, and agreement details before acting.

Concept relationships

Affects

  • Payback periodPublished conceptLevelized cost of energy can affect how Payback period is evaluated

Primary sources

What to do next

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