A financial metric that provides a single, consistent value for comparing the average cost of electricity generation over the lifetime of a project. This metric incorporates all costs, including initial investment, operations, maintenance, fuel, and financing costs, discounted back to a present value. For example, it allows for a direct comparison between the cost of electricity generated from a solar farm versus a nuclear power plant, taking into account their different lifespans and cost structures.
This calculated value is crucial for informed decision-making in the energy sector. It enables policymakers, investors, and developers to assess the economic viability of various energy technologies and projects. By providing a standardized cost comparison, it facilitates efficient resource allocation, supports the development of cost-effective energy strategies, and promotes investment in sustainable energy solutions. Its use has grown significantly as the energy landscape has evolved, driven by the need for objective assessments of increasingly diverse energy options.
