Equations and Variables in ATB
The ATB includes various aspects of plant investment decision
- Capital investment
- Operations and maintenance
- Expected energy production
- Interest on debt required to finance a new electricity
- The levelized cost of energy (LCOE) is provided as a summary
metric in the ATB. The 2019 ATB Cost and
Performance Summary page describes the limitations of LCOE and
explains its various components. LCOE is the metric selected to
represent typical electricity generation cost elements in a common
framework including project finance (FCR), capital expenditures
(CAPEX), fixed and variable operations and maintenance costs (FOM and
VOM), and annual-energy-production-per-kilowatt plant capacity based
on capacity factor, hours in a year (8,760), and fuel costs.
Significant variations in LCOE are inherent due to differences in the
nature of the renewable resource, site characteristics, and fuel
prices. Significant variations in each component of LCOE (e.g., capital
investment) are inherent due to regional
cost influences, site specific construction costs, equipment type,
market-based pricing, project capital structure and finance terms.The ATB data
spreadsheet and accompanying documentation illustrate the range of LCOE
for electricity generation technologies. Renewable generation
technology cost ranges are generally dictated by natural long-term
renewable resource characteristics. Fuel-based technology cost ranges
are generally dictated by assumed range of future fuel cost.
ATB emphasizes fundamental, long-term technology changes rather
than short-term market changes.
- The LCOE values presented here represent busbar costs at the
plant gate; regional costs
associated with materials or labor, transmission spur lines and
electric system operation costs are not included. Effects of taxes and
tax credits are not included in the R&D Only case but are included
in the R&D + Market case.
- Standard Scenarios results
produced with the ReEDS
model reflect additional system considerations such as planning and
operating reserves, output correlation with nearby plants,
transmission infrastructure expansion and regional costs associated with
materials and labor. Incentives such as PTC and ITC are included
according to existing law.
- This framework should be suitable to inform input assumptions
for capacity expansion models such as the National Energy Modeling
Planning Model. (These models typically do not use LCOE as an input.)
- This framework could be adapted to provide similar comparisons
of inputs to other model-based studies such as those using System
Advisor Model (SAM), Buildings
Industry Transportation Electricity Scenarios (BITES), and the Cost of Renewable
Energy Spreadsheet Tool (CREST).
Calculation of LCOE
In the ATB, the LCOE is calculated as follows:
FCR × CAPEX + FOM
CF × 8,760 hours/yr
+ VOM + FUEL
where CF is the capacity factor.
Assumptions common to all technologies include the following:
- Variables are defined in the Financial Definitions worksheet
in the ATB data spreadsheet,
where two sets of financial assumptions are available: R&D Only
Financial Assumptions and R&D + Market Financial Assumptions.
- While the tax rate has been updated to include the changes in
corporate taxes in the R&D + Market case, the federal/state
blended tax rate is not assumed to vary by technology in our
calculations; in practice, depreciation schedules vary by technology
based on the tax code.
Technology-specific assumptions are detailed in each technology
section and include:
- We only include declines in performance with time for PV
technologies. We do not include performance declines (or increases in
O&M) for any other technology, although this could be addressed in
- Capital expenditures (CAPEX) are represented by the total
expenditures per kilowatt of plant capacity that is required to
achieve commercial operation in a given year.
- Operations and maintenance (O&M) costs are represented by
average annual fixed O&M (FOM) and variable O&M (VOM) costs
over the technical life of the project.
- Fuel costs derived AEO2019 (EIA,
2019) from are applied to natural gas, coal, and nuclear technologies.
- The capacity factor is used to represent the average annual
energy production per kilowatt of plant capacity over the technical
life of the project.