Residential and Commercial LCOE |  |  |  |

| This topic describes SAM 3.0 and has not been revised for SAM 2009 Beta. You may find useful information, especially if you are new to SAM, but some of the information may be inconsistent with the new version.

The LCOE for residential or commercial projects (except commercial projects with third party ownership financing) is the cost per unit of energy, that, when multiplied by the total energy produced and discounted to a base analysis year, is equivalent to the present value of the total life-cycle cost of the project:

Where Q n is the energy produced by the project in year n, N is the project life in years, C n is the project net cash flow in year n, and d is the discount rate. Solar Advisor calculates Q n based on the solar radiation and other climate data, and the parameters of the software's system performance models. The summation in the left hand term begins at n = 1, which is the first year that the project produces energy. The right hand summation starts at n = 0 to include first costs in the calculation, i.e., C 0 is equivalent to the project's capital costs.

Solving for LCOE gives:

The numerator is the total life cycle cost, and the denominator is can be thought of as the total discounted annual energy output.