Negative LCOE

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ajabbas
Negative LCOE

Dear SAM Community,

I'm using the commercial PV model with battery to study the economic feasibility of a 200kW PV system for a commercial building. I have the weather data, technical, and economic parameters input correctly. I'm getting reasonable values of NPW, payback, capacity factor=16%, but the LCOE is negative both nominal and real.

Could anybody please help me with the interpretation of this economic behavior of the system?

Thaks in advance,
Ahmed

Paul Gilman

Dear Ahmed,

The first place to look to investigate financial results is the project cash flow, which you can find on the Cash Flow tab of the Results page. Do you see anything unusual there? Be sure to review the installation and operating costs on the System Costs page, as well as the electricity rates and financial parameters.

If you still cannot find the cause of those results, feel free to email me your .sam file, and I'll see if I can help.

Best regards,
Paul.

Paul Gilman

Dear Ahmed,

The negative LCOE is being caused by a combination of factors. The negative value indicates that the project has a net benefit rather than cost. Your project uses 100% debt, so there is no cash outlay in Year 0 and annual debt interest payments are tax deductible. The battery replacement in Year 17 results in a large tax deduction in that year (SAM considers operating expenses to be tax-deductible). Also the 30% ITC results in a large after-tax net benefit in Year 1.

To better understand these factors, you can try making any the following changes to your assumptions to cause the LCOE to be positive:

  • Change the debt percent from 100% to 60%.
  • Remove the battery replacement cost.
  • Remove the Federal ITC incentive.

Best regards,
Paul.

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