Levelized Cost of Energy Calculation

The formula for Levelized Cost of Energy (Nominal) is:

-'Cash Flow'!B104-NPV(NominalDiscountRate/100,'Cash Flow'!C104:CX104))/NPV(NominalDiscountRate/100,'Cash Flow'!C5:CX5)*100

What is the rationale for applying NPV to the kWh production? It seems to me that NPV would apply to the after-tax Cash Flow but not the kWh of PV production. In fact, future PV kWh production is likely to be more valuable not less because of escalating utility rates.

Hello,
The discounting of the energy term in the denominator results from the derivation of the LCOE equation. For details see the section beginning on p 47 of Short (1995) "A Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies," available for download on the Financial Model Documentation page .
Another way to explore the question is to try the equation without discounting the energy term in the denoninator. You will see that the resulting LCOE is not correct.
Best regards,

Paul.