Find the levelized cost of electricity in $/kWh for a new natural gas fired powe

Question

Find the levelized cost of electricity in $/kWh for a new natural gas fired power plant that has an initial capital cost of $700 million, an expected lifetime of 35 years, and will produce 1.2 billion kWh/year of electricity. Assume there will be no salvage value or decommissioning costs. Total operating costs are $20 million per year. The power plant developer needs a 12% rate of return to cover financing costs and the expected profit on the investment. How does the LCOE compare to representative LCOE values for electricity from wind or solar?

Explanation / Answer

Solution :

Capital recovery factor = i / ( 1 - ( 1+i)-n )

Capital recovery factor = 0.12 / ( 1 - ( 1+0.12)-35 )

Capital recovery factor = 0.1223

levelized cost of electricity in $/kWh = CRF X Capitalinvestment + Total operating costs / no of kilo watt hours produced per year

levelized cost of electricity in $/kWh = 0.1223 X $ 700,000,000 + $ 20,000,000 / 1,200,000,000

levelized cost of electricity in $/kWh = 0.0880 $ / KWH

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