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Definitions

Parameters

Levelized Cost of Energy

Levelized cost of energy (LCOE) is a summary metric that combines the primary technology cost and performance parameters: capital expendituresoperations 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.

Capital Expenditures

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

CategoryItem
Balance of system/balance of plantAll other major plant components within the facility fence line needed to deliver electricity to the bulk power system. 
Electrical infrastructure and interconnection (electrical interconnection, electronic, electrical infrastructure, electrical)

Internal and control connections

On-site electrical equipment (e.g., switchyard)*

Power electronics

Transmission substation upgrades*

Generation equipment and infrastructure (civil works, generation equipment, other equipment, support structure)

Plant construction

Power plant equipment

Installation and indirect

Distributable labor and materials

Engineering

Start-up and commissioning

Owners' costs

Development costs

Environmental studies and permitting

Insurance

Legal fees

Preliminary feasibility and engineering studies

Property taxes during construction*

Site costs

Access roads*

Buildings for operation and maintenance*

Fencing*

Land acquisition*

Site preparation*

Transformers*

Underground utilities*

* - not included in distributed technologies (residential or commercial)

Operations Expenditures

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

CategoryItem
Fixed costs

Administrative fees

Administrative labor

Insurance

Land lease payments*

Legal fees

Operating labor

Other

Property taxes

Site security

Taxes

Fixed costs componentsProject management
Maintenance costs

General maintenance

Scheduled maintenance over technical life

Unscheduled maintenance over technical life

Variable cost components

Consumables (e.g., water, chemicals, and catalysts)

Waste disposal (e.g., ash, slag, process wastes, and process byproducts that are not otherwise sold)

Maintenance componentsTransformers*
Replacement costsAnnualized present value of large component replacement over technical life
* not included in distributed technologies (residential or commercial)
Capacity Factor

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

Base 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.

Projected Years

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.

Dollar Year

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:

Conservative Scenario

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.

Moderate Scenario

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.

Advanced Scenario

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).

R&D Only 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. 

Market + Policies Case

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

TechnologyTechnical Life (years)
Land-based wind30
Offshore wind30
Distributed wind30
Solar: Utility-Scale PV30
Solar: Distributed commercial PV30
Solar: Distributed residential PV30
Solar: CSP (concentrating solar power)30
Geothermal30
Hydropower100
Utility-Scale PV-plus-battery30
Utility-Scale Battery Storage*30†
Commercial Battery Storage*30†
Residential Battery Storage*30†
Pumped storage hydropower*100
Coal*30
Biopower45
Natural gas*30
Nuclear60

*Although LCOE is not computed for energy storage or fossil technologies, design technical life is included here for comparison.

†Project life of 30 years for battery storage assumes augmentation at 10 and 20 years to maintain rated capacity.

Technology Detail Assumptions

Technology Detail

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.

Representative Value

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):

Standard Assumptions (unless otherwise noted on specific technology pages)

Labor cost

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

Regional Cost Variation

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

Materials Cost Index

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

Scale of Industry

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

Policies and Regulations

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

Inflation

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

Capital Regional Multiplier (CapRegMult)

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.

Construction Finance Factor (ConFinFactor)

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.

Theis, Joel. “Quality Guidelines for Energy Systems Studies: Cost Estimation Methodology for NETL Assessments of Power Plant Performance.” National Energy Technology Laboratory, February 2021. https://doi.org/10.2172/1567736.

BLS. “CPI for All Urban Consumers (CPI-U).” U.S. Bureau of Labor Statistics, 2021. https://beta.bls.gov/dataViewer/view/timeseries/CUSR0000SA0.

EIA. “Annual Energy Outlook 2022.” Washington, D.C.: U.S. Energy Information Administration, March 2022. https://www.eia.gov/outlooks/aeo/.

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