Definitions

Parameters

Levelized cost of energy (LCOE) is a summary metric that combines the primary technology cost and performance parameters: capital expenditures, operations expenditures, and capacity factor. It is useful for discussing technology advances that yield future projections because it illustrates the combined effect of the primary cost and performance parameters in each of the ATB technology innovation scenarios. The Electricity ATB focuses on defining the primary cost and performance parameters for use in electric sector modeling or other analysis where more sophisticated comparisons of technologies are made. LCOE accounts for the energy component of electric system planning and operation. It uses an assumed annual average capacity factor when spreading costs over the anticipated energy generation. Although LCOE accounts for many variables that are important to determining the competitiveness of building and operating a specific technology (e.g., up-front capital costs, capacity factor, and cost of financing), it does not necessarily demonstrate which technology in a given place and time would provide the lowest-cost option for the electric grid. Importantly, LCOE does not capture the economic value of a particular generation type to the system and therefore may not serve as an appropriate basis for comparisons of technologies. For example, LCOE ignores attributes that can vary significantly across different technologies (both in terms of capability and cost), such as ramping, startup, and shutdown that could be relevant for more detailed evaluations of generator cost and value to the system. Such analysis is performed using electric sector models such as the Regional Energy Deployment System (ReEDS) model and corresponding analysis results such as the National Renewable Energy Laboratory (NREL) Standard Scenarios.

The 2022 ATB does not include calculation of LCOE or other related financial parameters for fossil-fueled technologies. Please refer to the techno-economic studies of electricity generating plants (described in the DOE’s Office of Fossil Energy and Carbon Management's Quality Guidelines for Energy Systems Studies documents (Theis, 2021) for analytic metrics that it recommends as more appropriate to fossil energy technologies, applications, and industries.

The following cost items are included in capital expenditures (CAPEX) for all technologies, unless otherwise noted. Individual technologies may include additional items as explained on the technology pages.

Inclusions in CAPEX

The following operating expenditures are included in operation and maintenance (O&M) expenditures for all technologies, unless otherwise noted. Individual technologies may include additional items as explained on the individual technology pages.

Inclusions in O&M

Capacity factor is generally defined as the ratio of actual annual output to output at rated capacity for an entire year, using a long-term average over the lifetime of an asset, without curtailment for renewable generation. The default capacity factors listed in the ATB data spreadsheet are meant to be representative—actual plant capacity factors will depend on many factors power plant-specific conditions. The annual capacity factor ignores specific operating behavior such as ramping, startup, and shutdown that could be relevant for more-detailed evaluations of generator cost and value. Electricity generation technologies have different capabilities to provide capacity and flexibility services. These services are difficult to value and depend strongly on the system in which a new generation plant is introduced. These services are represented in electric sector models such as ReEDS and in corresponding analysis results such as the Standard Scenarios.

Other Data Dimensions

Year

2020 is the base year for the 2022 ATB, because this is the year for which sufficient historical data are available. Sources for the base year include cost and performance estimates from published regularly updated sources or methods. If estimates are not based directly on market data, they are compared with market observations as possible.

2021–2050 is the range of 2022 ATB projections. Projections are based on trend lines between historical data and long term (2030 and 2050) estimated costs. For most technologies, the base year (2020) is the final year of historical data. Near-term values in the ATB do not reflect every local or near-term market condition, nor are the longer-term ATB projections informed by recent changes.

All monetary values are in 2020 USD based on the Consumer Price Index for All Urban Consumers (BLS, 2021) for dollar year conversions where the publication source year dollars do not match 2020, unless noted otherwise. We do not rigorously distinguish prices from costs.

Technology Innovation Scenarios

The three technology innovation scenarios are generally described as follows:

Historical investments come to market with continued industrial learning. Technology looks similar to today, with few changes from technology innovation. Public and private R&D investment decreases.

Innovations observed in today's marketplace become more widespread, and innovations that are nearly market-ready today come into the marketplace. Current levels of public and private R&D investment continue. This scenario may be considered the expected level of technology innovation.

Innovations that are far from market-ready today are successful and become widespread in the marketplace. New technology architectures could look different from those observed today. Public and private R&D investment increases.

For nuclear and biopower technologies, technology cost designations appearing in ATB tables and figures refer to technology assumptions and the range of fuel price projections as described in the other technologies section.

Financial Assumptions Cases

Financial assumptions impact LCOE by changing the cost of capital needed to finance electricity generation projects. Two project finance structures are used within the ATB: an R&D Only Financial Assumptions Case (R&D Only Case) and a Market + Policies Financial Assumptions Case (Market + Policies Case).

This sensitivity case allows technology-specific changes to debt interest rates, return on equity rates, and debt fraction to reflect effects of R&D on technological risk perception, but it holds background rates constant and excludes effects of tax reform and tax credits. See the financial assumptions cases and methods for details. 

This sensitivity case retains the technology-specific changes to debt interest, return on equity rates, and debt fraction from the R&D Only Case and adds in the variation over time consistent with AEO2022 (EIA, 2022)as well as effects of tax reform and tax credits. See the financial assumptions cases and methods for details.

Cost Recovery Period

An important assumption for computing LCOE is the assumption about the period over which the electricity generation plant cost and performance are levelized. In the ATB, this period is defined as the cost recovery period, and it represents the period over which the initial capital investment to build a plant is recovered. Three options are available for the cost recovery period. Use the chart below to explore the effects of cost recovery period.

The technical life for each technology is shown in the following table. A technical life that is longer than the cost recovery period means residual value may be left after costs have been recovered. The value of a 30-year life is justified by current industry trends, such as for wind technologies. However, ReEDS continues to use a 20-year cost recovery period for all generating technologies regardless of their technical life.

Technical Lifetimes for Technologies

Technology Detail Assumptions

Technology details indicate resource levels and specific technology subcategories. Minima and maxima show the range of resource- and technology-specific values. For renewable technologies, ranges span resource characteristics available within the contiguous United States.

The ATB plant characteristics (and associated resource quality) that most closely align with recently installed or anticipated near-term installations of electricity generation plants are defined as the representative value. The representative value for renewable technologies is calculated based on the resource quality that is used in recent or near-future plants in the base year, in combination with the technology cost and performance and financial assumptions indicated. For coal and natural gas technologies, only technology cost and performance is indicated. The technology detail plant characteristics selected as representative values are as follows (see individual technology sections for description of ATB representative plant characteristics):

• Land-based wind: Wind Speed Class 4
• Offshore wind: Wind Speed Class 3
• Distributed wind: Wind Speed Class 4
• Utility-scale PV: Class 5: GHI (global horizontal irradiance) of 4.75–5 kWh/m²/day
• Commercial PV: Class 5: GHI of 4.75–5 kWh/m²/day
• Residential PV: Class 5: GHI of 4.75–5 kWh/m²/day
• Concentrating solar power: Class 2: excellent resource (refers to Daggett, California, resource of 7.65 kWh/m²/day DNI [direct normal irradiance])
• Geothermal: hydrothermal flash technology
• Hydropower: non-powered dam (NPD) 1
• Utility-Scale PV-Plus-Battery: Class 5: GHI of 4.75–5 kWh/m²/day
• Utility-Scale Battery Storage: 60 MW, 240 MWh
• Commercial Battery Storage: 600 kW, 2400 kWh
• Residential Battery Storage: 5 kW, 12.5 kWh
• Pumped Storage Hydropower: National Class 3: 359 MW average generation capacity
• Fossil Energy Technologies:
  • New natural gas:  NG F-Frame CC 95% CCS
  • New coal: Coal-95%-CCS
• Other technologies (EIA):
  • Nuclear: no range represented in the ATB; may be developed in future collaborations with nuclear experts
  • Biopower: EIA (U.S. Energy Information Administration)-dedicated.

Standard Assumptions (unless otherwise noted on specific technology pages)

Labor costs are the average of union and nonunion labor rates.

Capital costs represent a national average benchmark. Regional variations are not applied.

Materials costs are given in 2020 USD, based on the Consumer Price Index for All Urban Consumers (BLS, 2021) for dollar year conversions.

Technology costs assume fully mature and industrialized supply chain and manufacturing capacity for a given technology and economies of scale are reached.

Financial assumptions include financial effects of selected laws and regulatory regimes that are currently in effect.

All values are given in 2020 USD, using the Consumer Price Index for All Urban Consumers (BLS, 2021) for dollar year conversions where the source year dollars do not match 2020. Financial calculations for projections use an inflation assumption of 2.5% per year when converting between nominal and real interest rates. While inflation may be higher or lower in any particular year, we assume an average of 2.5% over the life of the project.

Other

Regional multipliers are not used in ATB, but they are often applied in modeling tools such as ReEDS. For regional capital cost multipliers for the United States, see the ReEDS model documentation.

This factor is applied to an overnight capital cost to represent the financing costs incurred during the construction period. In the calculation of construction finance factor in the ATB spreadsheet, year index 0 is closest to the plant's commercial operation date, whereas the highest year number corresponds to the start of construction.

Limitations

See the following links for the disclaimer agreement and a guide to technical limitations.

References

The following references are specific to this page; for all references in this ATB, see References.