Levelized cost of energy calculation

Hello everyone,
I'm a Master student at the University in Belgium and I am currently researching the impact of a new legislation regarding PV-installations on the LCOE of a Solar system in Belgium.
The problem:
The government is changing the legislation regarding the way you get compensated for having a PV-installation. In the old system there was a way where the electrical meter would be turning back so in case you consumed 3000 kwh and had an PV-installation of 3000 kwh you would have an invoice of 0 € at the end of the month.
Now they are changing the system as to where you can still keep the fact that your meter turns back but only for the price of the electricity firm. The distribution tariff you now still have to pay for the total amount you have taken from the grid for the total year. In this case the concept of self-consumption also starts to play an important part since that way you don't have to pay the distribution tariff since you did not take anything from the grid.
So my questions are:
- How can I integrate those revenue streams in my LCOE-model? Since LCOE is elektricity produced (Kwh) / Cost of electricity (€) I cannot seem those revenue streams at electricity produced since it's only a Kwh metric.
- Do I have to put the 384 distribution cost as a cost also?
- Can I model this in the System Advisor Model in any way?
I'm really at a turning point in my life where I think I'm going to give up on my thesis since I cannot seem to get it right. Any help would be more than appreciated and probably be saving my master degree. In case you want to help or know someone that has some knowledge about LCOE and Solar, you can also always contact met at tibovansnickt@gmail.com. Ofcourse I do not expect this to be free and I can reimburse you for the time put in helping my finding the correct LCOE-equation for my problem.

Thank you so much in advance !!

Hello,

You could model this situation in SAM using the residential or commercial financial model.

The LCOE is not affected by the electricity bill savings because LCOE is a measure of the cost of installing and operating the system, not a measure of the value of the electricity it produces. The net present value (NPV) accounts for both the cost of the system and the value of electricity it produces.

Best regards,
Paul.

I have traced back the formula for lcoe in an attempt to understand it.

Is there a reason the NPV formula is applied to the kWh production? I don't understand why energy production in kWh is treated as deflating in value in the same way money does.

To put another way, why isn't the NPV of the cost of the system simply divided by the sum of kWh generated over the analysis period?

Thanks,
Dave

Hi Dave,

The "Levelized cost" topic in SAM's Help system has a detailed discussion of how the LCOE equation is derived, and shows (at the very bottom of the page) why the energy term in the denominator is discounted.

Best regards,
Paul.