What is Levelized Cost?

Solar and renewable energy systems "fix" your energy cost in time: Once installed, it will provide years of energy -- "Levelized cost" is the average cost of this renewable energy.

Levelized Cost = Net Cost to install a renewable energy system divided by its expected life-time energy output.

For example: If a solar energy system costs $10,000 to install (after all rebates) and it provides 100,000 kWh of electricity over its life, then the Levelized Cost of the solar energy system is $10,000 / 100,000 kWh = $0.10 per kWh

So, if you pay $0.10 today for your utility-supplied electricity, in this example, your solar electric cost is fixed at $0.10 / kWh -- all the while the utility electricity that you would have purchased (if you did not install solar) will likely escalate over time (due to price inflation).


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