NOVEMBER 2019

L A Z A R D ’ S L E V E L I Z E D C O S T O F E N E R G Y A N A LY S I S — V E R S I O N 1 3 . 0

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Introduction
Lazard’s Levelized Cost of Energy (“LCOE”) analysis addresses the following topics:


Comparative LCOE analysis for various generation technologies on a $/MWh basis, including sensitivities for U.S. federal tax subsidies, fuel prices
and costs of capital



Illustration of how the LCOE of onshore wind and utility-scale solar compare to the marginal cost of selected conventional generation technologies



Historical LCOE comparison of various utility-scale generation technologies



Illustration of the historical LCOE declines for wind and utility-scale solar technologies



Illustration of how the LCOEs of utility-scale solar and wind compare to those of gas peaking and combined cycle



Comparison of capital costs on a $/kW basis for various generation technologies



Deconstruction of the LCOE for various generation technologies by capital cost, fixed operations and maintenance expense, variable operations
and maintenance expense and fuel cost



Overview of the methodology utilized to prepare Lazard’s LCOE analysis



Considerations regarding the operating characteristics and applications of various generation technologies



An illustrative comparison of the value of carbon abatement of various renewable energy technologies



Summary of assumptions utilized in Lazard’s LCOE analysis



Summary considerations in respect of Lazard’s approach to evaluating the LCOE of various conventional and renewable energy technologies

Other factors would also have a potentially significant effect on the results contained herein, but have not been examined in the scope of this
current analysis. These additional factors, among others, could include: capacity value vs. energy value; network upgrades, transmission,
congestion or other integration-related costs; significant permitting or other development costs, unless otherwise noted; and costs of
complying with various environmental regulations (e.g., carbon emissions offsets or emissions control systems). This analysis also does not
address potential social and environmental externalities, including, for example, the social costs and rate consequences for those who cannot
afford distributed generation solutions, as well as the long-term residual and societal consequences of various conventional generation
technologies that are difficult to measure (e.g., nuclear waste disposal, airborne pollutants, greenhouse gases, etc.)

1
Copyright 2019 Lazard
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Unsubsidized Analysis
Selected renewable energy generation technologies are cost-competitive with conventional generation technologies under certain circumstances
x
Solar PV—Rooftop Residential

$151

Solar PV—Rooftop C&I

$242

$75

Solar PV—Community

$154

$64

Solar PV—Crystalline Utility Scale(1)

$36

$148

$44

Renewable Energy

Solar PV—Thin Film Utility Scale(1)

$32

$42

Solar Thermal Tower with Storage

$126

Geothermal

$69

Wind

$28

$156

$112

$54

$89(2)

Gas Peaking (3)

$150

Nuclear (4)

$199

$118

$29(5)

$192

Conventional

Coal(6)
Gas Combined Cycle (3)

x

$66

$33(5)

$44
$0

$25

$152
$68

$50

$75

$100

$125

$150

$175

$200

$225

$250

$275

Levelized Cost ($/MWh)
Source:
Note:

(1)
(2)
(3)
(4)
(5)

Lazard estimates.
Here and throughout this presentation, unless otherwise indicated, the analysis assumes 60% debt at 8% interest rate and 40% equity at 12% cost. Please see page titled “Levelized Cost of Energy Comparison—Sensitivity to
Cost of Capital” for cost of capital sensitivities. These results are not intended to represent any particular geography. Please see page titled “Solar PV versus Gas Peaking and Wind versus CCGT—Global Markets” for regional
sensitives to selected technologies.
Unless otherwise indicated herein, the low end represents a single-axis tracking system and the high end represents a fixed-tilt system.
Represents the estimated implied midpoint of the LCOE of offshore wind, assuming a capital cost range of approximately $2.33 – $3.53 per watt.
The fuel cost assumption for Lazard’s global, unsubsidized analysis for gas-fired generation resources is $3.45/MMBTU.
Unless otherwise indicated, the analysis herein does not reflect decommissioning costs, ongoing maintenance-related capital expenditures or the potential economic impacts of federal loan guarantees or other subsidies.
Represents the midpoint of the marginal cost of operating coal and nuclear facilities, inclusive of decommissioning costs for nuclear facilities. Analysis assumes that the salvage value for a decommissioned coal plant is equivalent
to its decommissioning and site restoration costs. Inputs are derived from a benchmark of operating coal and nuclear assets across the U.S. Capacity factors, fuel and variable and fixed operating expenses are based on upper
and lower quartile estimates derived from Lazard’s research. Please see page titled “Levelized Cost of Energy Comparison—Renewable Energy versus Marginal Cost of Selected Existing Conventional Generation” for additional
details.
High end incorporates 90% carbon capture and compression. Does not include cost of transportation and storage.
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

2

Copyright 2019 Lazard

(6)

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Sensitivity to U.S. Federal Tax Subsidies(1)
The Investment Tax Credit (“ITC”) and Production Tax Credit (“PTC”), extended in December 2015, remain an important component of the
levelized cost of renewable energy generation technologies
Solar PV—Rooftop Residential

$151

$242

$139
Solar PV—Rooftop C&I

$222

$75

$154

$69
Solar PV—Community

$141

$64

$148

$61
Solar PV—Cry stalline Utility Scale

$36
$34

Solar PV—Thin Film Utility Scale

$32

$31

$142

$44
$42
$42

$40

Solar Thermal Tower with Storage

$126

$156

$125

Geothermal

$69

$112

$58
Wind

$28

$11
$0

$154

$107
$54

$45
$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

$275

Levelized Cost ($/MWh)

Copyright 2019 Lazard

Unsubsidized
Subsidized
Source: Lazard estimates.
Note: The sensitivity analysis presented on this page also includes sensitivities related to the U.S. Tax Cuts and Jobs Act (“TCJA”) of 2017. The TCJA contains several provisions that impact the
LCOE of various generation technologies (e.g., a reduced federal corporate income tax rate, an ability to elect immediate bonus depreciation, limitations on the deductibility of interest
expense and restrictions on the utilization of past net operating losses). On balance, the TCJA reduced the LCOE of conventional generation technologies and marginally increased the
LCOE for renewable energy technologies.
(1)
The sensitivity analysis presented on this page assumes that projects qualify for the full ITC/PTC and have a capital structure that includes sponsor equity, tax equity and debt.

3

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Sensitivity to Fuel Prices
Variations in fuel prices can materially affect the LCOE of conventional generation technologies, but direct comparisons to “competing”
renewable energy generation technologies must take into account issues such as dispatch characteristics (e.g., baseload and/or dispatchable
intermediate capacity vs. those of peaking or intermittent technologies)
x

x
Solar PV—Rooftop Residential

$151

Solar PV—Rooftop C&I

$242

$75

Solar PV—Community

$154

$64

Solar PV—Crystalline Utility Scale

$36

$148

$44

Renewable Energy

Solar PV—Thin Film Utility Scale

$32

$42

Solar Thermal Tower with Storage

$126

Geothermal

$69

Wind

$28

$156

$112

$54

Gas Peaking

$140

Nuclear

$208

$115

$195

Conventional

Coal

$62

Gas Combined Cycle

x

$157

$38
$0

$25

$75
$50

$75

$100

$125

$150

$175

$200

$225

$250

$275

Levelized Cost ($/MWh)
Unsubsidized

Copyright 2019 Lazard

± 25% Fuel Price Adjustment

Source: Lazard estimates.
Note:
Unless otherwise noted, the assumptions used in this sensitivity correspond to those used in the global, unsubsidized analysis as presented on the page titled “Levelized Cost of Energy
Comparison—Unsubsidized Analysis”.

4

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Sensitivity to Cost of Capital
A key consideration in determining the LCOE values for utility-scale generation technologies is the cost, and availability, of capital(1); this
dynamic is particularly significant for renewable energy generation technologies
Midpoint of Unsubsidized LCOE(2)
LCOE
($/MWh)

LCOE v13
$199

$200

$187
$175

Gas Peaker

$190

Nuclear

$172

$163
$172

$152

150

$142

$156

$138

$108

$109
$114

Geothermal

$99
$105

$89
$97

$80

Gas—Combined
Cycle

$91
$85

$74

50

$79

$50

$52

$34

$36

$54
$38

$56
$41
$40

$30

0
After-Tax
IRR/WACC

$33

$58
$44
$44

$61
$48
$47

Solar PV–
Crystalline
Wind

$36

5.4%

6.2%

6.9%

7.7%

8.4%

9.2%

Cost of Equity

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

Cost of Debt

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Copyright 2019 Lazard

Coal

$119

$127

$103

$130

$141

$122

100

Solar Thermal
Tower

$155

Source: Lazard estimates.
Note:
Analysis assumes 60% debt and 40% equity. Unless otherwise noted, the assumptions used in this sensitivity correspond to those used in the global, unsubsidized analysis as presented on
the page titled “Levelized Cost of Energy Comparison—Unsubsidized Analysis”.
(1)
Cost of capital as used herein indicates the cost of capital applicable to the asset/plant and not the cost of capital of a particular investor/owner.
(2)
Reflects the average of the high and low LCOE for each respective cost of capital assumption.

5

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Renewable Energy versus Marginal Cost of
Selected Existing Conventional Generation
Certain renewable energy generation technologies are approaching an LCOE that is competitive with the marginal cost of existing
conventional generation
$70

Marginal Cost of Selected Existing
Conventional Generation(1)

Levelized Cost of New-Build Wind and Solar
60
$54
50

Cost of Energy ($/MWh)

$45
$42

$40

$41

40

$32

30

$31

Unsubsidized
Solar PV

$27

Subsidized
Solar PV
Unsubsidized
Wind

$31

$28

$26

20

10

Subsidized
Wind

$11

0

Onshore Wind

Onshore Wind
(Subsidized)(2)

Solar PV—Thin Film Utility
Scale

Solar PV—Thin Film Utility
(2)
Scale (Subsidized)

Coal

Nuclear

Source: Lazard estimates.
Note:
Unless otherwise noted, the assumptions used in this sensitivity correspond to those used in the global, unsubsidized analysis as presented on the page titled “Levelized Cost of Energy
Comparison—Unsubsidized Analysis”.
(1)
Represents the marginal cost of operating coal and nuclear facilities, inclusive of decommissioning costs for nuclear facilities. Analysis assumes that the salvage value for a decommissioned coal
plant is equivalent to its decommissioning and site restoration costs. Inputs are derived from a benchmark of operating coal and nuclear assets across the U.S. Capacity factors, fuel and variable
6
and fixed operating expenses are based on upper and lower quartile estimates derived from Lazard’s research.
Copyright 2019 Lazard
(2)
The subsidized analysis includes sensitivities related to the TCJA and U.S. federal tax subsidies. Please see page titled “Levelized Cost of Energy Comparison—Sensitivity to U.S. Federal Tax
Subsidies” for additional details.
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Historical Utility-Scale Generation
Comparison
Lazard’s unsubsidized LCOE analysis indicates significant historical cost declines for utility-scale renewable energy generation technologies
driven by, among other factors, decreasing capital costs, improving technologies and increased competition
Selected Historical Mean Unsubsidized LCOE Values(1)
Mean LCOE
($/MWh)
$380
$359

320

260

$275

Gas Peaker
(37%)

$248

Nuclear
26%

$243
$227

200

$216
$205
$157

140

$111

80

$83

$95
$83

$76

$116

$111
$104

$150

$145
$125

$124

$107
$96

$191
$183

$157

$111

$175
$192

$159

$135
$123

$205

$174

$168

$116
$102
$96
$75

$105
$104
$98
$74

$82

$124
$116
$112
$109
$79
$74

$71

$72

$117

$59

$117

$155

$148
$140

$140

$141
$109

$108

$102

$102

$100

$98

$97

$64
$65

$70

$151

$179
$151

$91
$63
$55

$60

2009
3.0

Copyright 2019 Lazard

2010
4.0

2011
5.0

2012
6.0

2013
7.0

2014
8.0

$58
$43

$56

$47

$45

$42

$40

2016
10.0

2017
11.0

2018
12.0

2019
13.0

$55

2015
9.0

$91

$50

20
LCOE Version

$102

$41

Source: Lazard estimates.
(1)
Reflects the average of the high and low LCOE for each respective technology in each respective year. Percentages represent the total decrease in the average LCOE since Lazard’s LCOE—
Version 3.0.

Solar Thermal
Tower
(16%)
Coal
(2%)
Geothermal
20%
Gas—Combined
Cycle
(32%)
Wind
(70%)
Solar PV—
Crystalline
(89%)

7

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Historical Renewable Energy LCOE
Declines
In light of material declines in the pricing of system components and improvements in efficiency, among other factors, wind and utility-scale
solar PV have exhibited dramatic LCOE declines; however, as these industries mature, the rates of decline have diminished

Unsubsidized Wind LCOE
LCOE
($/MWh)

Unsubsidized Solar PV LCOE
LCOE
($/MWh)

Wind 10-Year Percentage Decrease: (70%)(1)
Wind 10-Year CAGR: (11%)(2)

$250

Utility-Scale Solar 10-Year Percentage Decrease: (89%)(1)
Utility-Scale Solar 10-Year CAGR: (20%)(2)

$450

Wind 5-Year CAGR: (7%)(2)

Utility-Scale Solar 5-Year CAGR: (13%)(2)
400

200

$394

350
$169
300

$148

$323
$270

150

250

$92

100
$101

$95

$81

$99

$166
$77

$149

150
$62

$60

$56

$148
$54

$104
100

50
$50

$48

$45

$37

$101

$86
$91

$32

$32

$30

$29

$70
$72

50

$61

$58
$49

$28

0

$53
$46

$46

$44

$40

$36

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

LCOE
Version

$226

200

$95

3.0

Copyright 2019 Lazard

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
LCOE
Version

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Wind LCOE Mean

Crystalline Utility-Scale Solar LCOE Mean

Wind LCOE Range

Crystalline Utility-Scale Solar LCOE Range

Source: Lazard estimates.
(1)
Represents the average percentage decrease of the high end and low end of the LCOE range.
(2)
Represents the average compounded annual rate of decline of the high end and low end of the LCOE range.

12.0

13.0

8

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Solar PV versus Gas Peaking and Wind versus CCGT—Global Markets(1)
Solar PV and wind have become increasingly competitive with conventional technologies with similar generation profiles; without storage,
however, these resources lack the dispatch characteristics, and associated benefits, of such conventional technologies
LCOE v13

$154

$36

$199

$150
U.S.

Australia

PV(2)

Solar
versus
Gas Peaker(3)

$111
$122
$102

$31
$33

Brazil

$162

$189

$144
$135

$47

$168

$61
$141

$50

$244

$198

Japan

$131

$42

$186
$179

$156
Europe

$53

$200

$162

LCOE v13

$54

$28

$68

$44

U.S.

$46

$24

$59
$61

$41
Australia

$29

$69

$46

Brazil

$54

$32

$106

$76

India

$96

$51

$102

$71
South Africa

$78

$49

$99

$70

Japan

$71

$39

Europe

$35
$0

Copyright 2019 Lazard

$258

$208

South Africa

Wind(4)
versus
Combined Cycle
Gas Turbine(5)

$250

$207
India

$25

$85

$65
$54
$60

$50

$83
$75

$100

$125

$150

$175

$200

$225

$250

$275

Unsubsidized LCOE
Solar PV
Gas Peaker
Levelized Cost ($/MWh)
Wind
CCGT
Source: Lazard estimates.
Note: The analysis presented on this page assumes country-specific or regionally-applicable tax rates.
(1)
Equity IRRs are assumed to be 10.0% – 12.0% for Australia, 15.0% for Brazil and South Africa, 13.0% – 15.0% for India, 8.0% – 10.0% for Japan, 7.5% – 12.0% for Europe and 7.5% – 9.0% for
the U.S. Cost of debt is assumed to be 5.0% – 5.5% for Australia, 10.0% – 12.0% for Brazil, 12.0% – 13.0% for India, 3.0% for Japan, 4.5% – 5.5% for Europe, 12.0% for South Africa and 4.0% –
4.5% for the U.S.
(2)
Low end assumes crystalline utility-scale solar with a single-axis tracker. High end assumes rooftop C&I solar. Solar projects assume illustrative capacity factors of 21% – 28% for the U.S., 26% –
30% for Australia, 26% – 28% for Brazil, 22% – 23% for India, 27% – 29% for South Africa, 16% – 18% for Japan and 13% – 16% for Europe.
(3)
Assumes natural gas prices of $3.45 for the U.S., $4.00 for Australia, $8.00 for Brazil, $7.00 for India, South Africa and Japan and $6.00 for Europe (all in U.S.$ per MMBtu). Assumes a capacity
factor of 10% for all geographies.
(4)
Wind projects assume illustrative capacity factors of 38% – 55% for the U.S., 29% – 46% for Australia, 45% – 55% for Brazil, 25% – 35% for India, 31% – 36% for South Africa, 22% – 30% for
Japan and 33% – 38% for Europe.
(5)
Assumes natural gas prices of $3.45 for the U.S., $4.00 for Australia, $8.00 for Brazil, $7.00 for India, South Africa and Japan and $6.00 for Europe (all in U.S.$ per MMBtu). Assumes capacity
factors of 55% – 70% on the high and low ends, respectively, for all geographies.

9

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Capital Cost Comparison
In some instances, the capital costs of renewable energy generation technologies have converged with those of certain conventional
generation technologies, which coupled with improvements in operational efficiency for renewable energy technologies, have led to a
convergence in LCOE between the respective technologies
Solar PV—Rooftop Residential

$2,800

Solar PV—Rooftop C&I

$2,950

$1,750

Solar PV—Community

$2,950

$1,600

$2,250

Solar PV—Crystalline Utility Scale

$900

$1,100

Solar PV—Thin Film Utility Scale

$900

$1,100

Renewable Energy

Solar Thermal Tower with Storage

$6,000

Geothermal

$3,950

Wind
Gas Peaking

$9,100

$1,100
$700

$1,500

$6,600

$2,925(1)

$950

Nuclear

$6,900

$12,200

Conventional

Coal
Gas Combined Cycle

$3,000

$700
$0

$6,250

$1,300
$1,500

$3,000

$4,500

$6,000

$7,500

$9,000

$10,500

$12,000

$13,500

Capital Cost ($/kW)
Source: Lazard estimates.
(1)
Represents the estimated midpoint of the total capital cost for offshore wind.

10

Copyright 2019 Lazard
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Components—Low End
Certain renewable energy generation technologies are already cost-competitive with conventional generation technologies; a key factor
regarding the continued cost decline of renewable energy generation technologies is the ability of technological development and industry
scale to continue lowering operating expenses and capital costs for renewable energy generation technologies
Solar PV—Rooftop Residential

$143

Solar PV—Rooftop C&I

$68

Solar PV—Community

$7

$58

Solar PV—Crystalline Utility Scale

$31

$5
$4

$8

$151

$75

$64

$36

Renewable Energy

Solar PV—Thin Film Utility Scale

$29

$3 $32

Solar Thermal Tower with Storage

$114

Geothermal

$45

Wind

$22

$6

$13

$24

$126

$69

$28

Gas Peaking

$105

Nuclear

$6 $5

$91

$15

$4

$9

$34

$150

$118

Conventional

Coal

$45

Gas Combined Cycle

$18
$0

$2 $3

$6 $3
$21

$25

$13

$66

$44
$50

$75

x

$125

$150

$175

Levelized Cost ($/MWh)
Capital Cost

Copyright 2019 Lazard

$100

Source: Lazard estimates.

Fixed O&M

Variable O&M

Fuel Cost

11

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Components—High End
Certain renewable energy generation technologies are already cost-competitive with conventional generation technologies; a key factor
regarding the continued cost decline of renewable energy generation technologies is the ability of technological development and industry
scale to continue lowering operating expenses and capital costs for renewable energy generation technologies
Solar PV—Rooftop Residential

$220

Solar PV—Rooftop C&I

$22

$142

Solar PV—Community

$11

$136

Solar PV—Crystalline Utility Scale

$39

$5

$12

$242

$154
$148

$44

Renewable Energy

Solar PV—Thin Film Utility Scale

$36

$6

$42

Solar Thermal Tower with Storage

$132

Geothermal

$23

$78

Wind

$43

$34
$11

$156

$112

$54

Gas Peaking

$142

Nuclear

$24
$162

$6

$28

$17

$4 $9

$199
$192

Conventional

Coal

$115

Gas Combined Cycle

$38
$0

$25

$3 $4

$24
$50

$14

$18

$152

$68

$75

$100

x

$125

$150

$175

$200

$225

$250

$275

Levelized Cost ($/MWh)
Capital Cost

Copyright 2019 Lazard

$5

Source: Lazard estimates.

Fixed O&M

Variable O&M

Fuel Cost

12

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy Comparison—Methodology
($ in millions, unless otherwise noted)

Lazard’s LCOE analysis consists of creating a power plant model representing an illustrative project for each relevant technology and solving
for the $/MWh value that results in a levered IRR equal to the assumed cost of equity (see subsequent “Key Assumptions” pages for detailed
assumptions by technology)
Unsubsidized Wind — High Case Sample Illustrative Calculations

Year

(1)

0

1

2

3

4

5

20

Key Assum ptions

(4)

Capacity (MW)

(A)

150

150

150

150

150

150

Capacity (MW)

150

Capacity Factor

(B)

38%

38%

38%

38%

38%

38%

Capacity Factor

38%

Total Generation ('000 MWh)

(A) x (B) = (C)*

499

499

499

499

499

499

Levelized Energy Cost ($/M Wh)

(D)

$54.1

$54.1

$54.1

$54.1

$54.1

$54.1

Heat Rate (Btu/kWh)

Total Revenues

(C) x (D) = (E)*

$27.0

$27.0

$27.0

$27.0

$27.0

$27.0

Fixed O&M ($/kW-year)

Total Fuel Cost

(F)

Total O&M

(G)*

Total Operating Costs

(F) + (G) = (H)

Fuel Cost ($/MMBtu)

Variable O&M ($/MWh)
--

--

--

--

--

--

5.4

5.6

5.7

5.8

5.9

8.5

$5.4

$5.6

$5.7

$5.8

$5.9

$8.5

O&M Escalation Rate

(E) - (H) = (I)

Debt Outstanding - Beginning of Period

(J)

Debt - Interest Expense

(K)

Debt - Principal Payment

(L)

Levelized Debt Service

(K) + (L) = (M)

$21.6

$135.0
(10.8)

$21.5

$132.3
(10.6)

$21.3

$129.4
(10.4)

$21.2

$126.3
(10.1)

$21.1

$122.9
(9.8)

$18.5

(1.0)

(2.7)

(2.9)

(3.1)

(3.4)

(3.6)

(12.5)

($13.5)

($13.5)

($13.5)

($13.5)

($13.5)

Debt

(I)

$21.6

$21.5

$21.3

$21.2

$21.1

(N)

(45.0)

(72.0)

(43.2)

(25.9)

(25.9)

Interest Expense

(K)

Taxable Incom e

(I) + (N) + (K) = (O)

(10.8)

(10.6)

(10.4)

(10.1)

(9.8)

($34.2)

($61.1)

($32.2)

($14.8)

($14.7)

(2)

(O) x (tax rate) = (P)

40.0%
12.0%

Taxes and Tax Incentives:
Combined Tax Rate
Economic Life (years)(5)

$18.5
-(1.0)
$17.5

$13.7

$24.5

$12.9

$5.9

$5.9

($7.0)

IRR For Equity Investors

Copyright 2019 Lazard

Source:
Note:
*
(1)
(2)
(3)
(4)
(5)

(I) + (M) + (P) = (Q)

(3)

($90.0)

$21.8

$32.4

$20.7

$13.7

$13.5

($2.0)

40%
20
5

Capex
EPC Costs ($/kW)
Additional Ow ner's Costs ($/kW)
Transmission Costs ($/kW)

Total Capex ($m m )
After-Tax Net Equity Cash Flow

8.0%

Cost of Equity

Total Capital Costs ($/kW)
Tax Benefit (Liability)

60.0%

Equity

MACRS Depreciation (Year Schedule)

Depreciation (MACRS)

$0.0
2.25%

$12.5

($13.5)

EBITDA

0
$36.5

Capital Structure

Cost of Debt
EBITDA

$0.00

$1,500
$0
$0
$1,500

$225

12.0%

Lazard estimates.
Technology-dependent
Wind—High LCOE case presented for illustrative purposes only.
Denotes unit conversion.
Levelized
Assumes half-year convention for discounting purposes.
Assumes full monetization of tax benefits or losses immediately.
Reflects initial cash outflow from equity investors.
Reflects a “key” subset of all assumptions for methodology illustration purposes only. Does not reflect all assumptions.
Economic life sets debt amortization schedule. For comparison purposes, all technologies calculate LCOE on a 20-year IRR basis.
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

13

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Energy Resources—Matrix of Applications
Despite convergence in the LCOE between certain renewable energy and conventional generation technologies, direct comparisons must take
into account issues such as location (e.g., centralized vs. distributed) and dispatch characteristics (e.g., baseload and/or dispatchable
intermediate capacity vs. those of peaking or intermittent technologies)


This analysis does not take into account potential social and environmental externalities or reliability-related considerations
Location

Dispatch

Carbon
Neutral/
REC
Potential

Distributed

Centralized

Geography

Intermittent

Peaking

Solar PV(1)







Universal(2)





Solar Thermal





Rural





Geothermal





Varies

Onshore Wind





Rural

Gas Peaking





Universal

Nuclear





Rural







Co-located or rural







Universal

Renewable
Energy



LoadFollowing

Baseload









Conventional
Coal

Gas
Combined Cycle

Copyright 2019 Lazard



Source: Lazard estimates.
(1)
Represents the full range of solar PV technologies; low end represents thin film utility-scale solar single-axis tracking, high end represents the high end of rooftop residential solar.
(2)
Qualification for RPS requirements varies by location.



14

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Value of Carbon Abatement Comparison
As policymakers consider ways to limit carbon emissions, Lazard’s LCOE analysis provides insight into the economic value associated with
carbon abatement offered by renewable energy technologies. This analysis suggests that policies designed to shift power generation towards
wind and utility-scale solar could be a particularly cost-effective means of reducing carbon emissions, providing an abatement value of $36 –
$41/Ton vs. Coal and $23 – $32/Ton vs. Gas Combined Cycle


These observations do not take into account other environmental and social externalities, reliability or grid-related considerations
Conventional Generation

Capital Investment/KW of Capacity

(1)

Units

Coal

Gas Combined
Cycle

Renewable Energy Generation
Nuclear

Wind

Solar PV
Rooftop

Solar PV
Utility Scale

Solar Thermal
with Storage

$/kW

$2,975

$700

$6,900

$1,100

$2,800

$900

$9,100

Total Capital Investment

$mm

1,993

560

4,209

1,111

8,232

1,476

7,462

Facility Output

MW

670

800

610

1,010

2,940

1,640

820

%

83%

70%

91%

55%

19%

34%

68%

Capacity Factor
MWh/Year Produced

(2)

GWh/yr

4,888

4,888

4,888

4,888

4,888

4,888

4,888

Levelized Cost of Energy

$/MWh

$66

$44

$118

$28

$151

$32

$126

Total Cost of Energy Produced

$mm/yr

$322

$215

$576

$136

$740

$159

$618

2

1

CO2 Equivalent Emissions

Tons/MWh

0.92

0.51

––

––

––

––

––

Carbon Emitted

mm Tons/yr

4.51

2.50

––

––

––

––

––

Difference in Carbon Emissions

mm Tons/yr

vs. Coal

––

2.01

4.51

4.51

4.51

4.51

4.51

vs. Gas

––

––

2.50

2.50

2.50

2.50

2.50

vs. Coal

––

($107)

$254

($187)

$418

($163)

$296

vs. Gas

––

––

$361

($80)

$525

($56)

$403

vs. Coal

––

$53

($56)

$41

($93)

$36

($66)

vs. Gas

––

––

($144)

$32

($210)

$23

($161)

Difference in Total Energy Cost

Implied Abatement Value/(Cost)

: Favorable vs. Coal/Gas

3

$mm/yr

4

$/Ton

5

: Unfavorable vs. Coal/Gas
Implied Carbon Abatement Value Calculation (Wind vs. Coal)—Methodology
4 Difference in Total Energy Cost (Wind vs. Coal) =
5 Implied Carbon Abatement Value (Wind vs. Coal) =

Copyright 2019 Lazard

1 –
4 ÷

= $136 mm/yr (Wind) – $322 mm/yr (Coal) = ($187) mm/yr

2
3

= $187 mm/yr ÷ 4.51 mm Tons/yr = $41/Ton

Source: Lazard estimates.
(1)
Assumptions utilized for the technologies presented in this analysis correspond to those associated with the Low LCOE cases.
(2)
All facilities illustratively sized to produce 4,888 GWh/yr.

15

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy—Key Assumptions
Solar PV

Net Facility Output

Units

Rooftop—Residential

Rooftop—C&I

Com m unity

Utility Scale—
Crystalline (2)

Utility Scale—
Thin Film (2)

MW

0.005

1

5

100

100

$1,750

– $2,950

$1,600

– $2,250

$1,100

–

$900

$1,100

–

$/kW

Capital Cost During Construction

$/kW

––

––

––

––

––

Other Ow ner's Costs

$/kW

included

included

included

included

included

(1)

$2,800

– $2,950

EPC Cost

$900

$/kW

$2,800

– $2,950

$1,750

– $2,950

$1,600

– $2,250

$1,100

–

$900

$1,100

–

$900

Fixed O&M

$/kW-yr

$14.00

– $25.00

$15.00

– $20.00

$12.00

– $16.00

$12.00

–

$9.00

$12.00

–

$9.00

Variable O&M

$/MWh

––

––

––

––

––

Btu/kWh

––

––

––

––

––

Total Capital Cost

Heat Rate

Capacity Factor

%

19%

–

13%

25%

–

$/MMBtu

––

––

Construction Tim e

Months

3

3

Facility Life

Years

25

25

Levelized Cost of Energy

$/MWh

Fuel Price

Copyright 2019 Lazard

$151

–

$242

$75

–

20%

25%

–

15%

32%

––

4

–

6

30

$154

$64

–

$148

$36

–

21%

34%

–

––

––

9

9

30

30

–

$44

$32

–

23%

$42

Source: Lazard estimates.
(1)
Includes capitalized financing costs during construction for generation types with over 24 months construction time.
(2)
Left column represents the assumptions used to calculate the low end LCOE for single-axis tracking. Right column represents the assumptions used to calculate the high end LCOE for fixed-tilt
design.

16

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy—Key Assumptions (cont’d)
Units

Solar Therm al Tow er
w ith Storage (2)

Geotherm al

Wind—Onshore

150

MW

110

–

150

20

–

50

EPC Cost

$/kW

$7,950

–

$5,250

$3,450

–

$5,750

Capital Cost During Construction

$/kW

$1,150

–

$750

$500

–

$850

Other Ow ner's Costs

$/kW

Net Facility Output

(1)

included

$1,100

included

–

$1,500

Wind—Offshore

210

–

385

$2,350

–

$3,550

––

––

included

included

$/kW

$9,100

–

$6,000

$3,950

–

$6,600

$1,100

–

$1,500

$2,350

–

Fixed O&M

$/kW-yr

$75.00

–

$80.00

$0.00

–

$0.00

$28.00

–

$36.50

$80.00

– $110.00

Variable O&M

$/MWh

$24.00

–

$34.00

Total Capital Cost

Heat Rate

––

––

Btu/kWh

Capacity Factor

%

68%

–

––

39%

90%

–

85%

55%

––

––

––

––

–

38%

55%

–

$/MMBtu

––

––

––

––

Construction Tim e

Months

36

36

12

12

Facility Life

Years

35

25

20

20

Levelized Cost of Energy

$/MWh

Fuel Price

Copyright 2019 Lazard

$126

–

$156

$69

–

$112

$28

–

$54

$64

Source: Lazard estimates.
(1)
Includes capitalized financing costs during construction for generation types with over 24 months construction time.
(2)
Left column represents the assumptions used to calculate the low end LCOE, representing a project with 18 hours of storage capacity. Right column represents the assumptions
used to calculate the high end LCOE, representing a project with eight hours of storage.

–

$3,550

45%

$115

17

This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Levelized Cost of Energy—Key Assumptions (cont’d)
Units

Gas Peaking

MW

240

–

50

EPC Cost

$/kW

$650

–

$900

Capital Cost During Construction

$/kW

––

Other Ow ner's Costs

$/kW

included

Net Facility Output

(1)

$5,400

Nuclear

Coal

Gas Com bined Cycle

2,200

600

550

–

$9,600

$2,400

––

–

$4,900

$650

––

–

$1,200

––

$1,500

–

$2,650

$600

–

$1,300

$50

–

$100

$/kW

$700

–

$950

$6,900

–

$12,200

$3,000

–

$6,250

$700

–

$1,300

Fixed O&M

$/kW-yr

$5.50

–

$20.75

$108.50

–

$133.00

$40.75

–

$81.75

$11.00

–

$13.50

Variable O&M

$/MWh

$4.75

–

$6.25

$3.50

–

$4.25

$2.75

–

$5.00

$3.00

–

$3.75

Heat Rate

Btu/kWh

9,804

–

8,000

10,450

–

10,450

8,750

–

12,000

6,133

–

6,900

91%

–

90%

83%

–

66%

70%

–

55%

Total Capital Cost

Capacity Factor

%

10%

Fuel Price

$/MMBtu

$3.45

–

$3.45

$0.85

–

$0.85

$1.45

–

$1.45

$3.45

–

$3.45

Construction Tim e

Months

12

–

18

69

–

69

60

–

66

24

–

24

Facility Life

Years

Levelized Cost of Energy

$/MWh

20

$150

–

40

$199

$118

–

40

$192

Source: Lazard estimates.
(1)
Includes capitalized financing costs during construction for generation types with over 24 months construction time.

$66

–

20

$152

$44

–

$68

18

Copyright 2019 Lazard
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.

 LAZARD’S LEVELIZED COST OF ENERGY ANALYSIS—VERSION 13.0

Summary Considerations
Lazard has conducted this analysis comparing the LCOE for various conventional and renewable energy generation technologies in order to
understand which renewable energy generation technologies may be cost-competitive with conventional generation technologies, either now
or in the future, and under various operating assumptions. We find that renewable energy technologies are complementary to conventional
generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons, including to mitigate the
environmental and social consequences of various conventional generation technologies, RPS requirements, carbon regulations, continually
improving economics as underlying technologies improve and production volumes increase, and supportive regulatory frameworks in certain
regions.
In this analysis, Lazard’s approach was to determine the LCOE, on a $/MWh basis, that would provide an after-tax IRR to equity holders equal
to an assumed cost of equity capital. Certain assumptions (e.g., required debt and equity returns, capital structure, etc.) were identical for all
technologies in order to isolate the effects of key differentiated inputs such as investment costs, capacity factors, operating costs, fuel costs
(where relevant) and other important metrics. These inputs were originally developed with a leading consulting and engineering firm to the
Power & Energy Industry, augmented with Lazard’s commercial knowledge where relevant. This analysis (as well as previous versions) has
benefited from additional input from a wide variety of Industry participants and is informed by Lazard’s many client interactions on this topic.
Lazard has not manipulated the cost of capital or capital structure for various technologies, as the goal of this analysis is to compare the
current levelized cost of various generation technologies, rather than the benefits of financial engineering. The results contained herein would
be altered by different assumptions regarding capital structure (e.g., increased use of leverage) or the cost of capital (e.g., a willingness to
accept lower returns than those assumed herein).
Key sensitivities examined included fuel costs and tax subsidies. Other factors would also have a potentially significant effect on the results
contained herein, but have not been examined in the scope of this current analysis. These additional factors, among others, could include:
capacity value vs. energy value; network upgrades, transmission, congestion or other integration-related costs; significant permitting or other
development costs, unless otherwise noted; and costs of complying with various environmental regulations (e.g., carbon emissions offsets or
emissions control systems). This analysis also does not address potential social and environmental externalities, including, for example, the
social costs and rate consequences for those who cannot afford distributed generation solutions, as well as the long-term residual and
societal consequences of various conventional generation technologies that are difficult to measure (e.g., nuclear waste disposal, airborne
pollutants, greenhouse gases, etc.).
19
Copyright 2019 Lazard
This study has been prepared by Lazard for general informational purposes only, and it is not intended to be, and should not be construed as, financial or
other advice. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of Lazard.