Life-cycle cost

The life-cycle cost (LCC) of a project it the total amount of all costs incurred by the project from its initial design stages to its decommissioning.[1]

Some of these costs are:[2]

  • Research & Development (R&D) cost
  • Fuel cost
  • Construction cost
  • Financing
  • Operation and management cost
  • Cost of commissioning and decommissioning the project
  • Carbon costs (or other environmental costs relevant to the type of project)
  • Maintenance, retrofitting and replacement costs.

Life-Cycle Cost Analysis and Levelized Cost of Energy

To determine what the life-cycle cost of a project will be, firms carry out life-cycle cost analysis (LCCA). A LCCA takes into account all costs, from the cost of construction, cost of fuel or repairs to the cost imposed by emissions from the project. The analysis takes into account all known and projected costs. Costs such as the social cost from pollution are difficult to quantify and therefore the LCCA is not exact. The LCCA of a project allows firms to compare different projects to determine which is the cheapest in the long term.

The LCCA is usually presented in the form of the levelized cost of energy (LCOE) for a project. The LCOE measures these costs over the lifetime of a plant and determines how much it costs to produce an amount of energy (usually per MWh)[3] The LCCA of a project can be used to compare the lifetime costs of one project compared to another.

For Further Reading

References

  1. Washington State Department of Enterprise Services Engineering & Architectural Services. "Energy Life-Cycle Cost Analysis: Guidelines for Public Agencies in Washington State." [Online], Available: http://www.des.wa.gov/services/facilities/energy/elcca, April 2013 [July 13, 2016], pp. 5.
  2. The Economic Modeling Working Group Of the Generation IV International Forum. COST ESTIMATING GUIDELINES FOR GENERATION IV NUCLEAR ENERGY SYSTEMS. Printed by the OECD Nuclear Energy Agency for the Generation IV International Forum, 2007, pp. 64,67.
  3. A. Sayigh. Comprehensive Renewable Energy. Amsterdam: Elsevier Ltd., 2012, pp. 37.

Authors and Editors

Lyndon G., Celeste Pomerantz, Jason Donev
Last updated: July 21, 2018
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