Depreciation and Levelized COE

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Paul Gilman
Depreciation and Levelized COE

1. As far as I know, income tax does not form a part of lifetime costs while calculating Levelized COE but looking at the cash flow data it seems the levelized COE output of SAM includes income tax as well. It'll be helpful if you could explain the rationale, steps followed and inputs used for levelized COE calculations. 

SAM's LCOE is based on after-tax costs so that the LCOE can be used to compare different alternatives, accounting for all costs and incentives. To see how the metrics are calculated, you can click Send to Excel With Equations on the Cash flow tab of the Results page. 

2. In doing 20-yr straight line depreciation, I observed that in year one only 2.5% value gets depreciated unlike 5% in all other years. Just wanted to understand the reason behind that as it causes 97.5% value to depreciate till end of life (salvage value input is 0 only)

The depreciation schedule is described in the SAM help system (see the "Depreciation" topic under "Incentives and Depreciation" in the table of contents. The depreciation schedule for the 20-year straight line convention is from Table A-8 of IRS Publication 946 (PDF 3.1 MB).

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