# Levelized Cost of Solar Plus Storage (Text Version)

This is the text version for a video—Levelized Cost of Solar Plus Storage (LCOSS)—about how to quantify or calculate LCOSS for photovoltaic (PV) systems.

It’s Part 5 of NREL’s Solar Techno-Economic Analysis (TEA) Tutorials video series.

*[Audio begins]*

## Quantifying the Levelized Cost of Solar Plus Storage

Hi. I'm David Feldman. In this section, we will discuss our new efforts to more comprehensively benchmark the cost of PV plus storage through a new metric, the levelized cost of solar plus storage.

## Levelized Cost of Solar Plus Storage

The intent of this area of research is to go beyond CAPEX when benchmarking the cost of solar plus storage, to better assess lifecycle costs, and to provide a better comparison to other energy generation technologies. It is important to remember that LCOSS does not necessarily tell us which option is the most economically viable. While LCOSS and LCOE provide benchmarks for comparison, they do not necessarily reflect the overall competitiveness of a technology and design within the marketplace. There are other tools, such as capacity expansion models, which provide a more robust assessment of economic viability. There are different ways to operate a solar plant with storage, and the intent of the operation will have an impact on how it is designed, built, and operated, and the associated costs with those.

On this screen, is the equation we formulated to calculate LCOSS, and we'll go over the variables briefly. In the numerator, we have the initial CAPEX, the cost associated with building the plant. Next, we have any follow-on CAPEX, so any capital expenditure that happened after the initial build of the project, which might include battery replacement or inverter replacement, or any other thing. Next, we have depreciation benefits, so the tax benefits of owning the plant. We also have O&M costs, and the cost of electricity bought from electric grid, so all the costs associated with operating and maintaining the plant, and any costs associated with purchasing electricity from the grid and storing it in the batteries. Finally, in the numerator, we have residual value, so this represents the value calculated beyond our initial financial time horizon.

In the denominator, we have the electricity produced by PV system and fed to the grid or demand source. We also have the electricity produced by the PV system and fed to the battery, which accounted for any losses from taking the electricity and putting it into the battery, and then eventually going to the grid or demand source. Finally, we have any electricity that's fed from the grid to the battery, and back to the grid again, or demand source, obviously, accounting for those losses, which may differ from the other losses we mentioned. It's also important to remember that all of these are discounted.

## 2019 Utility-Scale Results (PV Plus Storage)

In this slide, we see our 2018 and 2019 CAPEX benchmarks for a 100-megawatt PV system with four hours of storage. The left side is our DC-coupled design system, and the right side is our AC-coupled design system, again, with four hours of storage.

## 2019 Levelized Cost of Solar Plus Storage Assumptions

This table covers the remainder of the assumptions used in the LCOSS equation. I will touch upon the key variables we are benchmarking in addition to CAPEX, briefly. The first is battery lifetime. We assume that 20 percent of the battery capacity is degraded after ten years and, therefore, must be replaced. We assume that the cost of such replacement is 20 percent less than the original price in real dollars. In Year 20, we assume that another 20 percent of the battery capacity has degraded, and that cost is 40 percent less than the original price in real dollars. Integral to PV system design and cost is how the battery is intended to be used. We assume a 75 percent discharge rate of battery capacity per day for a four-hour, 60-megawatt battery. Now, the amount of electricity that's fed to the battery as a percentage of total generated from the PV system will vary depending on location, as sunnier locations will generate more electricity and, therefore, a lower percentage of that will go to the battery.

These different percentages reflect different places in the United States.

Next, we have battery losses, so we're calculating the roundtrip energy losses from feeding the electricity from the PV system to the battery, and then to the grid or demand source, or from the grid to the battery and back to the grid, which may differ.

Next, we have system configuration, so we are assuming that the system is designed and operated such that the majority, or in this case, all of the electricity that the battery uses comes from the PV system. This is done because in order for the battery to qualify for investment tax credit, the vast majority of electricity must come from the PV system. Therefore, we just assume that all of it does. This could change over time as, after five years, they could change uses, but this calculation contemplates sort of that initial five-year period where all of the electricity that the battery is using to be charged comes from the PV system itself. We also assume that in addition to the normal O&M cost of operating a PV system, that there is an additional $10.00 per kilowatt per year for operating and maintaining the battery above and beyond any battery replacement costs that we covered earlier.

## 2019 LCOSS Results

Here are our results. For LCOSS, we calculated that it varies from $55.00 per megawatt hour to $91.00 per megawatt hour without the ITC in the case of Phoenix and New York, and from $42.00 per megawatt hour to $69.00 per megawatt hour with the 30 percent ITC, again, from Phoenix to New York. These values are $23.00 per megawatt-hour to $39.00 per megawatt-hour higher than the standalone PV LCOE without the ITC, and $18.00 per megawatt-hour to $30.00 per megawatt-hour higher with that 30 percent ITC. How does this compare to the real world? Well, according to an LBL report published by Bollinger and Seel in 2018, they reported that storage premiums for a PV system in terms of the PPA add $5.00 to $15.00 per megawatt-hour to the price for systems built in 2017 and 2018, and obviously those systems would include a 30 percent ITC. Our numbers are a little bit higher than the market; although, we feel that they're reasonable in the sense that individual systems that were actually installed in 2017 and 2018 might have different system characteristics from the ones that we're modeling.

## Next Steps

Next steps. We plan on incorporating feedback from our initial production of these numbers. We plan on updating the values for 2020 to account for any changes in costs or system design, and we plan on expanding our LCOSS analysis to cover residential and commercial PV plus storage sectors. Thank you very much for your time, and goodbye.

*[Audio Ends]*

To start at the beginning of the Solar TEA Tutorials video series, see Basic Approach and Methodology for PV Module-Level TEA (Text Version).

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