High cost is the main obstacle against the large-scale development of renewable energy, and accurate cost estimation of renewable power generation is urgently necessary. This article provides a framework to calculate the levelized cost of electricity (LCOE). In order to compare and evaluate the economic feasibility of different electricity-generation technologies, the LCOE generation is a very crucial measure. However, widely varying and contradictory results are produced in the LCOE due to the lack of clarity in the extent of completeness, assumptions, and justifications in the LCOE calculation. This literature rectifies the misconceptions in the assumptions made for properly calculating the LCOE. It discusses the effect of reduction in the prices of module cost and hence capital cost on the LCOE of a typical 1 MW solar photovoltaic power plant as per the data available with the Central Electricity Regulatory Commission of India. The vital statistics of the global and Indian solar photovoltaic (SPV) technology power plant—after finding a suitable procedure for the LCOE calculation based on assumptions such as choice of discount, average system price, financing method, average system life cycle, grid parity, and so on—are considered in the literature. This method may be useful in the implementation of the LCOE in India.
Levelized cost of electricity (LCOE), LCOE methodology, grid parity, sensitivity, interest rate, PV module price, inflation rate
